Diversify and Expand Your Investing Locations
Welcome back to the Rent to Retirement blog!
Today, I’ll be writing about how to think about certain real estate markets and how they fit into both your life and real estate investing plans.
So recently, I was browsing the web and an article was suggested to me by Money.com. The title of the article was “The 10 Best Places to Retire in America”. I’ll link it in the description below so you can read it for yourself. https://money.com/best-places-to-retire-2020/
In the article, I noticed these places were ranked by factors like climate, diversity, and safety. It also factored in statistics like the population of residents aged 50+ and the number of days of sunshine per year.
Finding a great place to retire is a challenge, right?
This article would make you think they’re letting you in on some major retirement secrets. Is the area affordable? Is it safe? How often is it sunny? Etc etc. Boring… What if we didn’t have to follow money.com articles about finding that perfect place to retire and instead could retire anywhere we wanted to? Maybe we even split our time between a ski town and a beach town. How about Aspen and Nantucket? Sun Valley and Scottsdale? Chamonix and Maui? Now we’re talking!
How is this possible? Well instead of house hunting for yourself, let’s house hunt for other people! What I’m saying here is we need to buy income producing rental properties that will produce passive income month after month and put those proceeds into creating our perfect retirement or lifestyle scenario!
But we can’t just buy the prettiest homes in the prettiest places, we need to primarily consider the numbers because we only really care about the numbers coming back to us in the form of passive income. So what factors do we need to consider when picking a market to invest in?
FACTORS TO CONSIDER WHEN FINDING OUT WHERE TO INVEST
- Are we looking to buy single family homes or high rise apartment buildings?
- How would we rank the neighborhoods in the area?
- Are they run down or nicely kept?
- How many people in these neighborhoods own their homes and how many rent?
Average price range:
- Can we afford to buy large multifamily buildings or are we just looking to get started with a single family home or a duplex?
- The median home price is a good metric to use in this search.
- How many people live there?
- Would there be enough tenants to fill my properties?
- What is the population growth rate?
- A higher growth rate is usually a great sign for real estate as demand for housing increases proportionally.
Median household income:
- How much money do residents make per year?
- Can they afford to pay the rents you need to make your investment property work?
- A general rule of thumb is that most people will pay around 30% of their monthly income for housing.
- Find the median rent in an area to get an idea of what people are willing to pay.
Economic growth and stability:
- Are there a lot of companies in the area or just one or two big ones that employ everyone?
- Are there a bunch of different types of companies or are they all in the same industry?
- The more companies, and more diverse the better, to hedge against the risk of one company or industry being wiped out.
Now that we know which questions to ask when finding good areas to invest in real estate, do they seem like the same questions to ask when considering where we want to live? NO! The only things I care about when considering where to live and especially where to retire, is how much sunshine I’ll see, how beautiful the area is, and what my social life will look like, stuff like that!
This is why we must look to other markets outside of our immediate area and detach ourselves from wanting to be able to drive by our properties everyday. Instead, we should focus on the fundamentals including the economy, demographics, and prices. Let the numbers do the talking!
Andrew Carnegie once said, “Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate.”
Investing in real estate, especially in the markets with most favorable metrics will create a life for you that will allow you to take your pick at anywhere you want to retire whether it’s Malibu, Monaco, or Minneapolis. The point is, you don’t want to be limited by affordability indexes and other metrics telling you where you can or cannot afford to retire. Having options is freedom! Take a look at our inventory page to find valuable investing locations around the country: https://renttoretirement.com/inventory/
Now get out there and RENT TO RETIRE!