Real estate is one of the most expensive investments most people make in their lifetimes. Therefore, it is vital you make the right purchasing decisions. These purchases should be seen as investments, whether you are purchasing your first home or buying rental properties, so they require significant research and knowledge about the local market. If you plan to invest in residential real estate, these are things you need to know.

Employment Statistics

Before you invest in residential property, you should research local employment statistics. Solid employment gives individuals the income to purchase or rent homes, and most people want to live near where they work. Therefore, you need to know about the employment opportunities, unemployment rate, and employment trends in any area you hope to invest in.

Look into local businesses. Are they doing well, or do their sales seem to have stagnated? Do you anticipate a layoff or an increase in staff? Also research possible business growth. Are new companies looking to invest in the area through new stores, warehouses, or offices?

Economic Factors

As you consider purchasing real estate, you should research the local and national economies. You have already researched the local employment environment, which helps, but learn about the local average income, retail, and manufacturing environments and cost of goods.

You also need to evaluate national economic factors, such as the national unemployment rate, job openings, manufacturing, GDP, inflation, and cost of goods. Economic downturns or sluggishness impacts real estate investments negatively, including reducing value and the rent you can charge on a residential investment property.

Housing Supply

Your next step is to review the housing supply, or the total number of available houses, in your area. Compare the employment trends you found with the available housing in the area. Is there enough, too much or not enough? If there is enough, the market may stay steady, but if there are too many homes on the market, the value of any property you purchase is likely to fall. However, if you don’t think there will be enough housing as new businesses enter the market, it is likely that any property you have will increase in value.

If you live in a large city, you may choose to segment this research into price ranges. For example, you may search for the number of residential spaces with a value between $200,000 and $450,000. Look for pricing that best fits the average wage of the market. However, don’t hesitate to look into the luxury market if higher-paying jobs are likely to increase in the area. You can also compare the availability in each of these markets to determine if any segment may experience a shortage. For example, if builders are focusing on high-end housing, you may find shortages in the mid- or low-income range, presenting a positive investment opportunity.

Demographics

Demographics include age, race, gender, socioeconomic status, and population growth in specific areas. This factor has a significant impact on real estate pricing and demand. Major shifts, such as increased migration, can significantly impact these trends. For example, an aging population may be looking to downsize their homes, resulting in shortages in smaller homes. Also, they may consider moving further south or purchasing vacation homes. Use demographic data to narrow your property research and identify key markets.

Government Intervention

Government regulation affects every industry and market, including the real estate market. When the government provides tax deductions and credits or subsidies, they change the current demand for real estate. However, this demand increase is often temporary. Therefore, it is important you closely watch the legislation that your government is pursuing. If it considers or starts to implement policies that change the supply of property on the market, you will know whether the market trends you are seeing are temporary or permanent.

Mortgage Interest Rates

Real estate sales are significantly impacted by interest rates. When interest rates are low, you will see an increase in demand, while high rates may result in low demand because it will be more expensive to purchase a property. When there is high demand, home sale prices increase, and if you can catch this before the market levels out, you can make a significant profit or get a great deal on your home. However, if an unexpected increase in interest rates occurs, the value of your property could significantly and quickly decrease.

As you complete your research, you will understand the outlook of your local residential real estate market. You can determine whether the housing is priced right, affordable, in demand, and a good investment.