As real estate investors there are tons of items we need to analyze and digest to see if a deal is worthwhile. Some are more important than others.
For instance – with rentals calculating the expected cash flow is a very important indicator. For a flip knowing a good estimate of your rehab costs and after repair value are integral.
However, there is an indicator that applies to both…
The Important Indicator Real Estate Investors Forget
The indicator is: Population Growth
Let’s discuss why this is important for both flipping and buying rental properties.
When it comes to flipping your goal is to buy, renovate and sell in a reasonable time frame. During the time of buying and renovating the market will not stay still. The world still turns and markets fluctuate.
However, demand is something that can be ever present in areas with growing populations. More people means more families, means more home buyers which is good for your business.
As opposed to an area that is seeing a shrinking population, which means less people thus less buyers and softer demand.
The same impacts hold true for rentals. The worst thing for your rental property is having it empty. Vacancies cost money and a shrinking population puts you at a higher risk of soft demand which can lead to taking reduced rental rates to fill your units.
That is one thing “buying right” cannot save you from. Granted we factor in a month’s vacancy when running numbers in the property calculator to help us buy right, but multiple months of vacancy or a shrinking rental rate will quickly blow out your numbers.
This population thing sounds simplistic, I know. However, it is still very valuable and should be one of the key indicators you use when picking an area to invest in.
Please note – you don’t need to only invest in areas with a growing population. Finding an area that has a steady solid population is fine too.
If I see the population fluctuating up or down a percent I will still dive right in if there are good deals to be found in the area.
You mainly want to pay mind to areas that have a trend of shrinking population over the last few years. Then take a deeper look to see why. Is it a one-off event, such as a large business relocating? If so, how is the city handling that and how large an impact was it on the area’s employment rates?
Remember, nothing is ever black and white and doing just a little digging can often give you a clear picture on the state of a city or town.
With the internet information is at our fingertips these days so there is no excuse to not check out this data.
For population numbers I like to look use the city-data.com website. It’s pretty straightforward and simple to use and provides all sorts of data in addition to population info.
So there you have it – population growth. It’s a simple, but important data point to include when researching areas to invest in!
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