How To Analyze Demographic Data Before Investing

When it comes to real estate investment, there are many factors that should be considered before taking the leap. Investors often speak of the general economic conditions as their main impetus for investing or holding back.

However, this should not be the only criteria that you work under. Demographics should also be very carefully considered. Here are three reasons to analyze demographic data before investing in real estate.

Age and Spending Habits

You might think that a younger, more vibrant population is where the money is, but you may be wrong.

Consider the fact that a twenty-something is likely to have student loans, very little savings, and less experience in making sound financial decisions. Not only that but, younger people are less likely to have the funds and stable career that it takes to buy a home.

Financial newsletter writer, Harry S. Dent, Jr. has done some impressive research that reveals that human spending habits follow a predictable path.

Most notably, spending on homes hits its peak between the ages of 46 and 50. Therefore, if the demographics show a population in that range, it may be a good indicator of a viable market should you be interested in flipping an investment property.

Jobs and Population Growth

Simply put, if people cannot find a good job, they are not going to be able to buy or rent a home. That also means that the population in the area is likely to decline, rather than grow.

Take a good, hard look at the trends in employment in and around the area you are thinking about investing in. Dig into those numbers and look for indicators that the population and job opportunities are changing.

Rentals vs. Owner Occupied

Another important demographic that you need to take a look at is the percentage of rental homes versus those that are owner occupied.

If you’re most interested in buying, remodeling and flipping houses, you’re going to want to look at areas where the owner occupancy is higher. Likewise, if you’re looking for an income property, a predominantly rental oriented area may be best.

Although you’ll get some indication of the viability of a rental or flip from that data, it doesn’t tell the whole story. You also want to know what the rental occupancy rate and average rental rate are so you can determine whether or not you can recoup your investment.

If you’re flipping, you’ll want to know the average home sales price so that you can manage your investment to make a profit when you sell.

If you’re a real estate investor with questions about using demographic data, investing in properties, or you’re looking for an investment partner, contact us. We’re experts at helping investors find the money they need to invest in properties with promise.

How to Get Involved in Real Estate Investing in Your 20s

About 85% of millennials believe real estate is a good financial investment — and they aren’t wrong. Unlike the stock market, real estate investing allows you to collect cash flow — or immediate financial returns. Plus, there are tax benefits, the possible appreciation of your property and equity paydown. At the very least, your profits will help you pay the mortgage — and even your own bills.

Here are a few ways to enter the industry and start investing in your 20s.

1. Educate Yourself

Investing in real estate doesn’t require formal training or a college degree. However, if you want to succeed, you must educate yourself. Read articles and books about basic concepts, terminology and strategies. Listen to podcasts and talk radio and learn how to analyze properties and invest with little to no money.

Be sure to gather information from a variety of sources to explore different approaches and perspectives.

2. Start Saving

Once you have a working knowledge of investing in real estate, it’s time to start saving your pennies. In most cases, you’ll need a relatively large sum of money to make your first down payment. Skip that morning coffee run and pass up that new pair of boots and prioritize your investment instead.

Additionally, continue to pay down debt. Doing so will help you save money and establish good credit, which you’ll also need to purchase your first property.

3. Make Connections

Build a network as soon as possible by making connections with others in the real estate industry. Join an investor group, follow blogs, attend meetings and completely immerse yourself in this new world of buying and selling. Learn from others’ mistakes and listen to any advice they have to give.

Connecting with professionals will ensure you start off on the right foot and may even help you find a partner or mentor.

4. Research Financing Options

Generally, financial experts recommend gathering cash upfront or making a standard down payment to avoid private mortgage insurance. You want to save as much as you can and put 20% down to kick off an initial property investment. However, if you can’t afford a conventional mortgage, you may investigate alternative financing options.

Hard money loans, private lenders and even Federal Housing Administration loans may offer possible solutions. Research the requirements as well as the pros and cons of each option to understand which ones are best for your particular situation.

5. Consider House-Hacking

Recently, millennials have made house-hacking one of the more popular real estate investment strategies. This creative method entails renting out portions of your primary residence and using the income to pay for your personal expenses.

House-hacking can lower your taxable income and help you earn. Multifamily properties, additional dwelling units and multiple bedroom houses typically make for lucrative hacking.

6. Rethink Your Strategy

You might also consider a few other popular strategies if you don’t have the means to make a conventional entrance into the real estate market. For instance, you might try wholesaling or flipping homes. These investments are short term and usually more affordable.

Crowdfunding may be a profitable option, too. This method is similar to real estate investment trusts, but now you can invest online with just a few hundred dollars.

Real Estate Investing is Possible in Your 20s

When it comes to making a profit in real estate, the sooner you invest, the better. When you’re in your 20s, there’s truly no limit to how much you can make. However, to be successful, you must start now. Homes are long-term investments, so waiting won’t do you any favors.

Write down a plan and stick to it. Set deadlines and create a feasible timeline. Then, spend time learning all there is to know about the industry. With a little luck and a whole lot of dedication, your investment will prove to be more than worth the time and effort you put into it.

Did You Know – Pre-Qualification and Pre-Approval Mean Different Things?

Although the terms Pre-Qualification and Pre-Approval are often used interchangeably, the two differ greatly in the process involved in obtaining them and in the benefits, they provide when. Here’s what you need to know about each of them:

Pre-Qualification:

This is a lender’s informal way of estimating how much you may be able to borrow. It is based on the information you provide (often by phone), none of which needs to be verified or documented. Since a letter of pre-qualification gives you an idea of how much house and the amount of mortgage payments you can afford, the best time to get pre-qualified is as soon as you decide you want to buy a home.

You supply to the lender unverified information about your income, assets, debts, and possible amount of a down payment. There is no cost involved in obtaining pre-qualification, and there is no commitment for either party. Understand, however, that a letter of pre-qualification does not mean you will get a loan; it is simply a ballpark figure of the amount you can afford to spend on your home and an indication that you might qualify for a mortgage in that amount.

Pre-Approval:

This designation is a firmer commitment on the part of the lender and requires a more detailed and formal process which includes a credit check and employment verification. You will need to provide W2’s, pay stubs (tax returns if you are self-employed), and bank and investment statements to verify your assets.

While this process is more detailed and complex, it is definitely worth your time and effort! Not only does it allow you to shop for Jersey Shore homes with more financial confidence, but pre-approval also shortens the actual loan application process and often allows for quicker settlement. In addition, sellers appreciate the fact that pre-approved house hunters are serious about buying their property and that financing should not be a problem. This was shared by a East Coast Broker and Lending Firm.

In Summary:

Pre-qualification:

1. Informal collection of data

2. No documentation required

3. Verification not done by lender

4. An estimate of the amount you might be able to borrow.

5. Not an entitlement to a loan; simply the first step in the home buying process.

Pre-approval:

1. Comprehensive collection of data

2. Documentation required

3. Verification is done by lender

4. Certification of how much money the lender would most likely be willing to loan you

5. Not an absolute guarantee of financing. Funding won’t be given until after the property appraisal, title search, and any other items needing verification have been completed.