Real estate investing is one of the proven paths to financial independence. Most people start investing in real estate by buying single-family residential properties.
Anyone can start investing in real estate… provided you have a good credit score …and a commitment to learn.
The easiest way to start investing in real estate is by starting with investing in single-family homes.
Investing in single family home is a low risk way to learn the skills for investing in real estate.
There are 7 tips to invest in real estate and become wealthy. One of the tips is that you should invest for value and avoid speculation.
That is why one of your first step to find value in buying single family homes is – look at the demand for renting in your chosen market.
Why rental demand important in real estate investing
Rental demand is important because the strength of the rental market measure how the possibility of making money in rental real estate market.
I want you to imagine that the single-family residential home you are buying is a business venture.
The product your business offers is accommodation.
Which means your customers are offering you money in exchange for a roof over their head.
The more customers you have to rent your home the less likely that you’ll have vacancies on your property.
On the flip side when you have less demand for renting your property…
you are going to have more vacancies on the property and earn less money
Cash flow is what makes a business grow.
When a business is not making enough money then it’s going to fold up.
That is why you need to do proper research on the rental demand for single-family properties in your chosen real estate market
You also need to know the rents to find out if the properties you are buying will cash flow.
And to gauge if the property market is in a bubble…or ripe for investing
How do you assess rental demand?
You can assess rental demand by checking the classified ad in the local area’s newspaper. You can also check online real estate websites
Some popular real estate websites in the United States are:
Trulia.com and Zillow.com have a comprehensive database of rent prices and homes for sale. There are other smaller sites you can check out.
Real estate agents are also important for checking the true market value.
In fact they are valuable sources of getting an accurate record of rental values in your chosen area.
In the United Kingdom you can find rents for many areas on rightmove.co.uk and zoopla.co.uk
Local real estate investing clubs are also useful resource for finding out more about rental demand in an area.
Real estate investing clubs and landlord associations are important for networking, finding local teams and keeping up to date
The key to success in doing your research is looking at getting an average rental price for the type of single-family property price you intend to buy.
Why? Because when it comes to buying single-family properties you need to compare apple to apple.
Which means that when you are doing your analysis… you should make the parameters you are assessing uniform
For example, you should assess the rents for only 3 bed 2 baths single-family homes that are 1500 square foot to 1800 square foot.
You should not compare the rent of 4 bed 3 baths Single family homes to 3 bed 2 bath properties… do you get it?
Knowing your rental demands means…knowing how much you can afford to pay
This brings me to a final point on rental demand: you need the average rental price to do your quick analysis of future profitability
For example, if you find out that the average rent for the single-family homes is $1500 …
this means your gross rental multiplier is $18000. Which means you know have benchmark to measure how expensive or affordable the properties in an area
By knowing the gross rent multiplier…you’ll be able to separate overpriced properties from the bargain properties.
Now you know why you need to know the rents in an area…
What are you waiting for? Go buy a property and get wealthy!