Real estate investing is all about awareness. Your understanding of where the market is going, combined with where it is going. The objective, as always, is to buy low and sell high.
You want to buy cheap junk and sell high-value developed real estate after it appreciates enough to make a tidy profit. Selling your property is an art in itself.
Buying a litter box offers some solid logical guidelines:
First, look at trend lines for housing prices in your area. While most housing markets are declining (and the housing markets in Florida and California are recovering from more than a decade of overvaluation), there are markets where housing prices are rising. This is a good indicator that there is an expansion market.
Second, look for work-related news. Home purchases require a steady source of income. New employers moving into town or the opening of a government branch office are strong indications that good, well-paying jobs are coming. When good paying jobs are created, home purchases will follow.
In this regard, talk to your local city planning office. Are there any recent “right-of-way” purchases to install sewer lines? The local telephone company plans to eliminate fiber optic lines – a “must have” trend in new home construction. These things indicate areas where indoor growth is inevitable. Other great tips are school bond issues (found in your local newspaper) and new parks opening.
Before looking at the land, look at the commercial real estate use nearby. Look for “family-friendly” or “residential-friendly” commercial properties: Homes closer to grocery and clothing stores fetch more value than those farther away. If a movie theater is nearby, or there are plans for an elementary or middle school, consider the size and amenities of the homes you’re building. Buyers looking for those features are looking for “top mover” homes — a little more floor space and two (or three) bedrooms for the kids. Other desirable locations are anchor stores such as Wal-Mart and Best Buy. These companies spend millions on purchasing patterns before purchasing a store location. If you’re buying land, you have about a year to a year and a half window to look at nearby real estate for single-family residential and rental properties.
You can even turn this around – if you can talk to a group of commercial real estate investors, building a shopping center as the core of a housing development is also an effective integrated strategy. This also applies to higher urban areas. Many abandoned commercial downtown areas are likely to be converted into apartment buildings, and some older housing projects are being demolished for mixed commercial and residential areas. In particular, you can often get block grants to help fund projects like this, and there are programs from HUD that can help a lot with “urban renewal.”
Another source to examine is the demographics of your area. See US Census figures (and local county figures) for average age and average birth rate per capita. They want to invest in areas where the population is growing. Peaks in the 40s and 50s indicate that you have more people retiring soon, and retirees are more likely to sell assets. Areas to watch out for are most urban parts of California and large areas of the rural Midwest, where demographic trends are changing entire cities as the nation’s population has moved to cities since the 1950s.
If there is a local planning council, or urban development council, make it a point to get all the meeting minutes from the previous year. The municipal offices of the city will be registered in the public register. Also try entering the next meeting area as an observer. Discuss housing and construction trends with city and county administrators. What you want is a real estate that you want in two to three years; View road plan atlases, and search all data. Also look for real estate with a view – lakefront property is about as close to a sure bet as you can get in real estate investing, especially if there’s a lake at the “far end” of the development axis. Similarly, if the city wants to acquire land for parks, buying existing lots means they can sell them later.
Finally, talk to professionals in your communities. Talk to architects who can tell you they are not busy. Maintain professional relationships with engineers, bankers and lawyers. They are usually very public about projects. Also, make a habit of reading the business section of your local newspaper. Often, the first clue that a business may be entering your area is buried at the bottom of the column on page 8.
Using the above guidelines will help you find “sleeping” raw land properties. These “dormant” properties are the buy low, sell high strategy used by successful commercial real estate investors.