7/8/12: Analyzing Real Estate Markets in a Changing Economy

We know that the recession formally “ended” in June of 2009, but it seems like someone forgot to tell the economy. Oops.

So since we haven’t been in a “throw a dart at a map and buy a property” market for quite some time, the notion of strategic market selection has come back in fashion.  The only problem is that so few people really understand how to look at a real estate market from an investors perspective.

Not to worry!  Your friendly neighborhood real estate guys are here to help.

Swinging into action for this amazing episode:

  • Your dynamic disher of diligence dialog, host Robert Helms
  • His mild mannered sidekick, co-host Russell Gray
  • The ever effervescent Godfather of Real Estate, Bob Helms

We’re busy prepping for our upcoming seminar, Analyzing Markets and Properties – The Due Diligence Process (yawn….catchy title, we know), so we have due diligence on the brain.

But more than that, we see lots of people getting interested in real estate again – and who can blame them?  Low prices, growing rental demand, no new inventory, dirt cheap (pun intended) interest rates and cash flows that just make you smile. And with anemic interest rates on bonds and savings accounts and a bi-polar stock market, folks just need someplace to put their money.

The bottom line is that investors are getting back into real estate in a big way – which is good and bad.

It’s good when resources rally to heal a hurting housing market.  But it can be bad when “dumb” money…we know, that’s condescending…how about “inexperienced” money gets into the market.  We guess if you’re a seller and a greater fool shows up and overpays, you make a little extra, but in the grand scheme of things, it isn’t good when people get into markets and properties they don’t understand.

So, in the interest of public service, we offer this episode as a pre-emptive strike against irrational real estate exuberance.

See, a bad market can doom a “great” deal.  Conversely, a strong market can make a mediocre deal a winner.

Here’s the catch:  You might be able to buy a distressed property and pretty it up, but what can you do to prop up a limp market?  And if it’s true that a rising tide lift all boats, it’s all true that when the tide goes out everyone can see who’s been swimming naked.

Please don’t swim naked.

We think it’s smart to start your quest for real estate nirvana by getting in touch with your inner investor. Once you know who you are, what you want and what you’re willing to do to get it, then you can go out in search of real estate markets most likely to produce the desired results.

Yes it’s true.  Real estate markets have personalities, just like people.  Some are very conservative, predictable, safe (and a tad boring), while others are wild, carefree and sometimes seductive.  The key is hooking up with one that fits your style.

But how do you know?

There a lot of factors which influence a market’s behavior.  Demographics, geographic features, strategic location and yes, politics too.  Anyone who was in Phoenix when they changed the way they policed illegals, heard a giant sucking sound as low end tenants vacated their residences in mass numbers.

We’re not here to say whether the policy was good or bad. It happened and it affected the real estate values and for our purposes, that’s what matters. What we learned is that you’d better pay attention to such things.

Other things to pay attention to are net migration, employment, business environment, types and diversity of economic drivers, infrastructure, building permits, land prices and the list goes on and on.

Feeling overwhelmed?  That’s okay.  We understand.  Maybe that’s why you don’t see too many people really delve into market due diligence.  It’s kind of a rally killer when the goal is to get the property sold fast.

But if you’re a buy and hold investor (as opposed to a turn and burn flipper), then even if you’re not marrying the market, you are probably going to be in a fairly committed relationship – so before you move in together, you should do a little homework.

So listen into this episode as we share precious and practical pearls of prescient wisdom which can help you peer into the perils of property market sand pick places prone to perform positively.  Phew!

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