Real Estate Investment is as diverse as it comes. Just like any other market out there, the Real Estate market has a lot of factors backing it up. There are both up’s and down’s involved in this niche. Hence, knowing the factors influencing Real Estate investment, can not only give you a one up but also give you the knowledge you need to make a fortune for yourself.
Let’s have a look at the various factors influencing Real Estate investment and how you can use them to your advantage.
Demographics Of The Region Of Interest
Demographics refers to the set of data about a particular region that focuses on the age, gender, population density and the population distribution and the income of the people who inhabit the particular region. The one main thing that any Real Estate property depends upon is the location of the property. If the location of the said property is a popular one, then the property will have a higher demand. Higher demand entails higher price.
Population growth is one such demographic parameter. China, in particular, is one such country where a major demographic change can be seen. Due to the implementation of one child per couple, china is facing a steady decrease in it’s population. This will not only affect the current population density of the country but also the economic, political and social situations of the country. Well, even-though there have been reports that the world population growth will stop by 2100, we are still 80 years away. Best make haste and use the next 80 years for ourselves.
This is just one of the examples to help you understand the importance of demographics. These are statistics that most Realtors forget to use. Based on the trend, any investor can make the right decision. You just need to ask the right questions. For example,
- Who are the people who live in these areas?
- What do they have to do in this region? Their professions?
- What is the collective income?
- How many people are to retire in the following months and how will this affect the demand for better homes?
The above questions are just an example of what your wonderful mind can give birth to. Because, each of us think differently and it is this difference that give birth to a better answer. You can ask questions like these to get an idea about the trends in that particular region and plan your next best move. You can even guess what trend is going to start even before it has even started. This allows demographics to be at the top in our list of the factors Influencing Real Estate Investment.
Government Policies That Might Affect You
Knowing how the government in the particular region will not only allow you to evade tax crisis but also give you an idea about how things roll in that particular region. Awareness of how the government manages out it’s incentives will allow you to have a better approach in identifying trends that are not in place. You can also figure out what trends are in place and what are functioning.
This will allow you to find out what sort of demand is swelling up in the region and if the supply is sufficient or not. Based on that you can also get a good guess in the increment of housing prices. It all started when the first zoning code was created in the year 1916. Since then, the local bodies of the various regions have set out to set the rules and regulations for various departments. Such as parking regulations, zoning codes, tax abatements so on and so forth. Real Estate is no different. Every Governing body in any region or start will have a pre-defined set of regulations that every Investor should follow.
Economy Of The Area
There are a lot of sub-categories that make up the Economy of a particular country or region. The GDP, employment rate, career opportunities, the average salary of the households present in the region and the price of goods and their cost of production. A Stable Economy paves the path for a good RE investment opportunity. But the inverse is also true where an Economy that drags, can also drag Real Estate with it.
Economy has a lot of other affects as well. For example, hotels are on the more sensitive side to an economic downturn than other Real Estate properties like office buildings. This is because the hotels are more of a short term investment and the office buildings are a form of long term investments. At the same time, when things like airbnb are taken into consideration a long term investments can be a lucrative prospect considering the waves of changes we are currently going through.
The Perfect Investment Equals Maximum Returns
There is no such thing as perfection. But there is perfect investigation. A Good Real Estate investor takes all possible information into consideration before making a move. The Demographics, economy of a country, the people who are living there, the government and it’s policies all of which are parameters that a Good Investor takes into account. Investigation, observation of the various factors present and the budget on investment, these are the things that pave the way for the path of success.
I hope you now know about the major factors influencing Real Estate Investment. Should you need anything or if you need to ask a question, feel free to leave a comment down below.
Frequently Asked Questions
Following are some of the major factors that have a hand in affecting Real Estate.
1. Economy.
The Economy of a particular region can greatly influence the Real Estate market. Demand and supply. In a region where there is a huge demand and the supply is less, then the prices will increase. When there is less demand and supply is more, then the prices will drop.
2. Demographics.
Much like Info-graphics which attract visitors to a particular YouTube video, the Real Estate Market is influenced by the demographics of the region. A demographic is the data about a particular region such as the population distribution, average income, age, gender and so on.
3. Policies of the Ruling Government.
Not only does the land change from place to place but so does the Policies of the Government. You should be prepared to meet their standards and their rules and regulations in order to proceed further in Real Estate Investment.
4. Interest Rates.
Banks are not the only ones that have an interest rate. Real Estate also has interest rates that can offer a great deal of profit during times like inflation. But the interest rates greatly depend on both the buyer’s budget as well as the seller’s expectations. A good trade is something that is often affordable by both the parties.
The law of demand and supply does it’s work here more than any other niche out there. When there is a huge demand for a particular property, with less supply, then there will be an increase in the value of the property.
Inflation is one such case where there is excess money in circulation. As a result the value of money decreases and the property prices go up.
Having poor decorations or management is a sure fire way to have a negative impact in your home appraisals. This, if your home is located in a forest region, in addition to the excessive amounts of weed, tall grass, untrimmed trees that appear to block paths are sure to decrease your home appraisal.
1. Observing the quality of the neighborhood.
2. Getting to know the original listing price.
3. Estimating the overall worth of the property.
4. Creating a preliminary CMA.
5. Getting an average of the prices of listings that can be compared with one another.
6. Observing the quality offered by the home by yourself in person.
The Economy of the area has a direct impact in Real Estate. But for how does Real Estate affect Economy, the answer lies in the question. If the economy of a country prospers, then you can expect the Real Estate Properties to have considerable prices in their listings.
But the adverse is also true.