Hello, ianjohnson-ga!
Real estate investment is certainly a risky venture that can have
both tremendous rewards and gut-wrenching losses. Performing some
thorough background research before you invest is extremely prudent.
Unfortunately, there is no "single" best source that will provide all
the data necessary to point a definitive finger toward the hottest
real estate investment markets. Since different types of real estate
ventures (vacant land, commercial, single family homes, condos,
apartments, etc) are often best suited to particular types of markets,
you will have to perform ongoing research through a number of sources,
looking at several factors in combination to get a good feel for the
potential of a community and the investment rental market. Good
speculation comes down to reading, investigating, determining what
amount you can afford to invest, how much risk you can realistically
carry, how long you can stay in the investment should an unexpected
disaster strike, and what financial return you hope to realize.
While there are economic indicators and forecasts for various
locations, these numbers are simply variables that can "help" make a
decision. Since forecasts are issued based on the analysis of past
data and potential for what "might" occur, they are speculative in
their own right. For this reason, I think you need to consider a
variety of resources when conducting your research, including general
news and your own observations when you travel around the country.
As a partner in a general contracting business revolving around
purchasing land and building and selling spec houses for the past 15
years, I am always looking, listening and reading with a "potential
investor's hat". While building and selling is a bit different from
buying and renting, many of the same principles apply, since every
speculative builder or buyer/seller hopes to make a profit off their
investment. There is always a certain amount of risk, even in the best
of markets. An unexpected, major downturn in the market or a
catastrophic event can make the wisest investment spiral downward.
With that said, I am all for real estate investment and it can
certainly provide good returns when all goes well!
==
I have outlined some strategies and sources that may help you
formulate some opinions about the best areas of the country for
residential rental investments. I will put the steps here and then
follow up with examples and sources.
1. Start your research with general news sources which contain recent
information on communities experiencing economic and residential
growth. You will often discover potential investment communities that
you might overlook when performing the "drier" research.
2. Funnel down to sites offering deeper research with more economic
indicators and projections. Forbes and CNN Money are just two examples
of comprehensive sites that incorporate proprietary research into
their articles concerning hot real estate and growth markets.
3. Begin to select areas of the country and communities that pique
your interest, and start more targeted, in-depth research by ordering
customized research reports and contacting individual realtors for
personal insights into the local rental market. Don't ignore online
websites for the Chamber of Commerce and area newspapers to get a more
personal feel for the community.
1. GENERAL NEWS SEARCHES
**************************
Google News ( http://news.google.com/ ) is a good way to use various
search strings to uncover recent articles on potential investment
markets that you might want to research in further detail.
Consider the following examples:
* Typing in the words "hottest growth areas" brings up some interesting articles:
"Banks riding profitable real estate wave. New residents feed bank
success," by DAVID SEDORE. Palm Beach Post. August 22, 2005
http://www.palmbeachpost.com/business/content/business/epaper/2005/08/22/c1bz_banks_0822.html
"Home Resales Down from Record, Price Gains Continue." August 24, 2005.
http://www.consumeraffairs.com/news04/2005/home_sales_july.html
"Inside the bubble Paint by numbers," By RUSS MILLER. Bigfork Eagle.
Aug 18, 2005. http://bigforkeagle.com/articles/2005/08/18/news/news01.txt
==
* Typing in the words "hot housing rental markets" brings up these examples:
"Changing middle class turns to condominiums," by Kemba J. Dunham and
Ray A. Smith, The Wall Street Journal. August 19, 2005.
http://www.post-gazette.com/pg/05231/556712.stm
"Don't Believe The Hype," by Scott Reeves. Forbes 8/22/2005
http://www.forbes.com/personalfinance/2005/08/22/investing-realestate-flipping-cx_sr_0822reflipping.html
"Real estate is appreciating in most markets throughout the country..."
==
* Typing in the words "best rental investment markets" brings up the following:
"Do math before becoming landlord," by ADAM SHELL. USA Today. 08/01/2005
http://www.delawareonline.com/apps/pbcs.dll/article?AID=/20050801/BUSINESS/508010315/1003
"Most real estate investors would jump at the chance to buy a condo
with water views along Florida's Gulf Coast. Or a leafy estate in
Greenwich, Conn. Or a Manhattan brownstone dating back to the Gilded
Age."
"Not Jonas Lee. He is a fan of row houses in urban areas. Lee, 38,
who buys houses from landlords and rents them out, avoids pricey
upscale properties coveted in today's booming housing market. The 1993
Harvard Business School grad prefers to invest in humble row houses
located in working-class neighborhoods in gritty Northeast cities such
as Philadelphia, Baltimore and Trenton."
"It's not that Lee, managing partner of Redbrick Partners, a firm
that runs the only U.S. investment fund dedicated to single-family
housing, is unaware that the Florida and New York markets are "hot."
It's just that for a landlord in search of rental income, it doesn't
make financial sense to purchase fancy properties that generate skimpy
monthly rents relative to sky-high purchase prices, he says. Price
appreciation also is important to Redbrick, which zeros in on areas
that are expected to see at least 3 percent annual price gains the
next 10 years. Scooping up properties at a discount of 10 percent or
more also increases the chances of making money."
(Read further....)
==
A search string for "expects to see real estate boom" finds another
interesting angle:
"U.S. housing bubble floats past Triangle market. Construction boom
holds prices down," by By FRANK NORTON. The News Observer. Aug. 24,
2005
http://newsobserver.com/news/story/2728758p-9166363c.html
An excerpt from one forecasters take on this area:
"Lawrence Yun, a forecaster for the National Association of Realtors,
said the Triangle is among his top picks nationally for faster home
appreciation next year due to population growth and a strengthening
technology sector. "The Raleigh area may be in the early stages of the
big-city effect," Yun said. "When land supplies eventually diminish,
prices will surge."
===
Some general searches on Google bring up other interesting
possibilities to consider:
"Housing Bubble Is A Local Matter," by Ray Martin. The Early Show.
Aug. 17, 2005. http://www.cbsnews.com/stories/2005/08/17/earlyshow/contributors/raymartin/main781958.shtml
"University towns: hot job markets," by Ron Scherer. The Christian
Science Monitor, March 27, 2005.
http://www.csmonitor.com/2005/0307/p01s01-usec.html
"Business 2.0 Ranking of Top 20 US Boom Towns."
http://www.don-iannone.com/edfutures/2004/02/business-20-ranking-of-top-20-us-boom.html
(Requires subscription to read full article)
Also read "Prospects for a Boom Town.: Tampa Bay Business Journal.
April 2, 2004. http://www.bizjournals.com/tampabay/stories/2004/04/05/editorial1.html
"But the ranking of the top 20 cities does point out the importance of
a highly skilled and educated workforce, sometimes dubbed "knowledge
workers" or "the creative class." All the cities on the list had
strong universities; cities like Raleigh-Durham, San Jose, Austin and
Boston were in the top 10. The magazine article, written by senior
writer Paul Kaihla, noted that Raleigh-Durham owed its No. 1 ranking
to a halo effect from Duke University and the other universities in
the area. "Thanks to them, the region is studded with little startups
like Biolex, a biotech incubated in 1998 from a recombinant protein
technology discovered at North Carolina State," Kaihla wrote."
==
"Top 25 Cities for Doing Business in America - If you're looking for
cities large, medium, and small where job growth is robust and
economies are strong, head to the ones on this year's Top Cities list.
Fort Lauderdale, anyone?" From: Inc. Magazine, March 2004
http://www.inc.com/magazine/20040301/top25.html
Excerpt: "How did Inc. arrive at these conclusions? Not by subjective
criteria, such as proximity to research universities or a hospitable
climate. The central premise behind the Top Cities rankings is that
current and historical job growth is the most objective indicator of a
region's economic vitality for entrepreneurs..."A strong history of
creating new jobs means that regional businesses have expanded,
created new demand, and pushed up areawide disposable incomes. In
contrast, companies don't form or hire new workers when a region's
regulatory climate, costs, or work force capabilities aren't conducive
to expansion."
"Regions that consistently generate jobs in a broad range of
industries rank at the top of the list. Those with poor and worsening
job growth and increasingly undiversified economies do less well in
the rankings....Inc. measured current-year employment growth in more
than 250 regions (as defined by the Bureau of Labor Statistics) as
well as current trends in the annual average growth over the past
three years, and compared employment expansion in the first half
versus the second half of the last decade. Job growth factors account
for approximately two-thirds of the final score for each city and the
balance among industries accounts for approximately one-third of the
final score."
==
"Residential Building Permits Double in Copperas Cove," By Jennifer Clampett.
(Excerpted from the Killeen Daily Herald, February 27, 2005
http://www.copperascove-edc.com/CCEDC_News.htm#Permits
2. STARTING TO DIG A BIT DEEPER
**********************************
POLICOM STRENGTH RANKINGS
==========================
Read "Economic Strength Rankings," by William Fruth. Policom Corporation
http://www.policom.com/EconomicStrength2004.pdf
FORBES
======
Fobes list of best large and small metros can be sorted by Rank, Name,
Cost of Doing Business, Job Growth, Educational Attainment and
Population:
Best Metros sorted by Job Growth (click on all pages)
http://www.forbes.com/lists/2005/1/Job_1.shtml
Best Small Metros sorted by Job Growth (click on all pages)
http://www.forbes.com/lists/2005/5/Job_1.shtml
Also see "Best Places For Business And Careers."
http://www.forbes.com/2005/05/05/05bestplaces.html
About the numbers in the study
"http://www.forbes.com/free_forbes/2005/0523/152.html
CNN MONEY
==========
* Overpriced and Underpriced Housing Markets *
"Least overpriced housing markets: In new rankings of market
valuations, Texas cities give more home for the buck," by Les
Christie. August 23, 2005
http://money.cnn.com/2005/08/18/real_estate/buying_selling/overvalued_housing_markets/index.htm
Also see "Most overpriced home markets: Even as real estate as a whole
stays strong, some once red-hot markets have cooled. Which is next?"
By Les Christie, CNN/Money. August 17, 2005
http://money.cnn.com/2005/08/15/real_estate/buying_selling/markets_set_to_fizzle/index.htm
EMERGING TRENDS IN REAL ESTATE
===============================
"Emerging Trends in Real Estate, which is recognized as the real
estate industry's most respected annual forecast, is now in its 26th
year. This publication is published jointly by PricewaterhouseCoopers
LLP and ULI - the Urban Land Insitute. To buy the 2005 "Emerging
Trends in Real Estate" - http://www.pwcreval.com/survey/ethome.asp
An article about the 2005 report may be found below:
"Emerging Trends in Real Estate® 2005: "The Race is on Between
Improving Fundamentals and Rising Interest Rates."
http://www.uli.org/AM/Template.cfm?Section=Home&CONTENTID=8152&TEMPLATE=/CM/ContentDisplay.cfm
See the 2003 Report for free:
** Scroll down to "Markets to Watch" (pg 32.) **
http://www.lendlease.com/llweb/llc/main.nsf/images/pdf_2003emergingtrends.pdf/$file/pdf_2003emergingtrends.pdf
U.S CENSUS - Population Projections
=====================================
http://www.census.gov/population/www/projections/popproj.html
See "100 fastest growing counties."
http://www.census.gov/popest/counties/CO-EST2004-09.html
NATIONAL ASSOCIATION OF REALTORS
=================================
http://www.realtor.org/
See Latest Economic Indicators
http://www.realtor.org/research.nsf/pages/EcoIndicator?OpenDocument
Order Real Estate Intelligence Online
http://www.realtor.org/prodser.nsf/openprod?openform&IN=E187-175#desc
The organization should also be coming out with an Economic Insights
newsletter this month
http://realtor.org/reioutlook.nsf/pages/reiannounce?OpenDocument
REALTY TIMES
==============
State by state market insight from local realtors:
"Buyer's market? Seller's market? Get a snapshot of current conditions
in your area from local real estate experts. Click on your state or
province below
http://realtytimes.com/rtmktc/home.htm
LOCAL MARKET MONITOR
=====================
"National Review of Real Estate Markets
http://www.localmarketmonitor.com/
"Investing in real estate is risky, even in favorable markets. The
Reviews give our best estimate of the current and future economic
circumstances in local markets, but we could easily be wrong. The
Reviews are not investment advice concerning any particular property."
Click on the following links for free reports:
National Summary of economic conditions.
Annual Home Prices for 330 markets, based on OFHEO repeat home sales index.
Home Value Ratings for 100 markets.
Risk Return Ratings for 100 markets.
BUREAU OF ECONOMIC AFFAIRS
============================
You might want to dig around a bit on this site.
http://www.bea.doc.gov/
** See Local Area Bear Facts **
http://www.bea.doc.gov/bea/regional/bearfacts/countybf.cfm?areatype=MSA&sublist=next
BUYING CUSTOMIZED OR SPECIALTY REPORTS
***************************************
Most of the forcasting data you want will come at a price if you want
detailed projections.
REAL FACTS
===========
http://realfacts.com/
Track Rental Trends with customized reports:
"Currently we have over 11,000 apartment communities in our database.
You can produce sixteen different reports that range from individual
Property Profiles, Rental Comps and Sales Comps to aggregated Market
Overviews, Rental Trends, Sales Trends and Market Comparisons.
Depending on the report, you are able to track average rents,
occupancies, nine-quarter histories, nine-year histories, unit
inventories, age of housing stock, sales, loan and ownership and
management information. The easy-to-use searching filters enable you
to produce custom analysis of any market or sub-market in your data
subscription area." http://realfacts.com/services.html
ECONOMY.COM
============
Economy.com provides detailed job growth forcasts and other forecast
data. They are the company that compiled the job growth date for the
Forbes "Best places for business and careers, 2005".
You can see a sample of their Metro forecast here:
http://www.economy.com/home/products/metroforecast_doc.asp#2
Listing of the company's forcast data reports:
http://www.economy.com/home/products/databases.asp?type=1&pid=30-00003-00#30-00003-00
Housing market monitor
http://www.economy.com/home/products/products.asp?pid=82-00000-01
"Economy.com's Housing Market Monitor assesses the near-term
prospects for single-family homebuilding in the nation's largest
metropolitan areas. It provides a framework for studying the
demand-supply balance in distinct regions on a historical basis and
provides analysis of house-price imbalances and the potential for
bubbles."
DODGE CONSTRUCTION REPORTS
=============================
An increase pull in building permits in a particular location is one
indicator of a healthy local economy.
http://dodge.construction.com/Reports/default.asp
NATIONAL ASSOCIATION OF REALTORS
=================================
You can also order customized research for markets of your choosing.
"NAR?s Research Division works with some of the nation?s leading
research institutions to offer national, regional and local economic
and housing forecasts. Leverage the power of existing models to find
the answers you need about your market."
http://realtor.org/Research.nsf/CA2DAE5FA466338D862567E6004AD5FF/EC29E935E0CAC9D586256D1100749EF6?OpenDocument
Hanley Wood - Maret Intelligence division
==========================================
http://www.hanleywood.com/default.aspx?page=midivision
Also see: http://www.meyersgroup.com/homebuilding/homebuilding.asp
GENERAL ARTICLES
*****************
Bankrate.com 10 biggest mistakes of novice investors
http://biz.yahoo.com/brn/050721/16104.html
"Tracking Trends To Buy, Sell," by Broderick Perkins. Realty Times
http://realtytimes.com/rtcpages/20000707_trends.htm
BOOKS
******
"Timing the Real Estate Market : How to Buy Low and Sell High in Real
Estate," by Craig Hall.
http://www.amazon.com/exec/obidos/tg/detail/-/0071421955/ref=pd_rhf_p_2/104-0564944-5187903?v=glance&s=books&no=*
"Cities Ranked and Rated: More than 400 Metropolitan Areas Evaluated
in the U.S. and Canada, 1st Edition," by Bert Sperling, Peter Sander
(March 2004)
http://www.amazon.com/gp/product/product-description/076452562X/ref=dp_proddesc_0/104-0564944-5187903?%5Fencoding=UTF8&n=283155
===
I hope my answer helps you on your way to identifying some future
potential areas for investment.
I do have one tip! If I was ready to invest in a "hot" market right
now, I would look into Wilmington, North Carolina. I recently visited
the area and was absolutely amazed at the spiraling construction in
all directions and at all levels - commercial buildings, large
vacation homes, residential homes, condos, etc. I have not seen such a
booming market in a long, long time!
Sincerely,
umiat
Search Strategy
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