I am trying to convince someone to put his money into real estate investments instead of the stock market. The raise in the value of the property is analogous to the raise in price of the stock and the rental income made along the way is analogous to the dividend.
How can I find areas that are likely to grow at the highest rates over the next 20 - 30 years? Long term trends, so… should I just assume that if the area is growing (like Florida in general), that the property will be worth a lot more in 30 years than it is now. Is there a way to fine tune what areas I select?
Basically, I’m trying to convince my investor to put his money into real estate investments rather than the stock market. The S&P averages something like 10% per year, so how could I find areas that the value of the real estate would be likely to go up by as much or more?
One interesting theory I’ve followed over the past 25 years is to look where municipalities are building new elementary schools in communities…likely the values will grow in that school district.
Having said that, I never paid attention too much to trends like this over the past 400 transactions…I simply sell a home with credit check financing…not just a home…not just financing…but a packaged deal with both. This allows me to make my own market value.
In addition, I like lower priced homes…the lower the price, the larger the number of buyers you have that can afford your payments. This keeps you in the game in all economic trends.
Another interesting practice I’ve used is something I learned from watching what builders and developers do in their business model. They will buy a certain number of acres in a neighborhood of (say) $200k average priced homes…they develop a new subdivision of 40 homes and put the price mark at $300-350k…because of the fact that all the homes in that new neighborhood are going to be $300-350k, the banks loan the money and the appraisers give you the numbers you need because the comps are all self contained in the new subdivision.
What I’ve done is find a location where I can purchase 3 homes at a discount in an area of interest…then, I clean them up, re-sell them with private owner financing and raise the bar on the pricing to meet my objectives. With the house and private no credit check financing as a package, and using private money, I get my 3 deals sold and recorded with the new higher prices in the county records…then the 4th house and after, I can get the appraisals at my new price because the 3 most recent comps are the ones I did with private financing…later I can go back and get the original 3 refinanced through FHA or private pension funds or sell the notes at a discount to get my money (or my investor money) returned.
Why be concerned with markets fluctuating over decades…just make your own market…use what others have done successfully, repeat what they do often…and benefit from the same results…I’ve done it for 25+ years…you can too.
As I mentioned earlier, in the single family residence market, look for where the cities/counties are building new elementary schools…invest in that school district and you will make money.
Also, in the multi family market, look for industry moving in to create jobs…a couple of good examples would be in Columbus Georgia / Phenix City Alabama Area, there was a billion dollar plant built for Kia Car Company to manufacturer cars. In North Chattanooga, Tennessee, there were two billion dollar plants recently built; one was a Volkswagen Manufacturing Plant and the other was a German Solar Energy Company.
In these two areas where big companies built billion dollar plants for manufacturing, you have high level executive jobs created as well as labor jobs created…with jobs created, people migrate to those areas for employment…with the mass migration, you have mass needs for multifamily residential property as well as single family residents needed for these new employees and their families…this is a great way to increase your income and net worth…by investing in these areas to fulfill the need.