Have you ever wondered what it takes to become successful at real estate investing? Based on my experience, jobs and job creation are the life blood of any real estate market.
Jobs and Real Estate – So What?
Jobs and job creation are the life blood of any real estate market. Jobs provide the money to pay rents and mortgages. If you are looking to increase your cash flow from your real estate properties and increase appreciation, you had better pay attention to jobs in the area. It’s really a matter of supply and demand.
At any given point in time all real estate markets have a fixed supply of units. This includes all types of properties – single family, condominiums, apartments, etc. The number of unit’s only changes over time as it takes time for new units to arrive on the market. You can determine how many units are currently vacant through a realtor or look at local vacancy rates. Future units can be determined by reviewing the number and types of permits the local government has issued. Single family housing generally comes available in three to nine months after permitting. Apartments and larger projects often take up to two years. Now you’ve determined the current supply of housing and the intermediate future supply.
So when new jobs are created, there is an increase in demand for the housing units as families move into an area. The more jobs the better. Employment statistics can be found on the Bureau of Labor and Statistics. This provides current and predicted jobs for many markets throughout the United States. If the area you are researching isn’t listed you can use the nearest large city as a proxy. As always follow up with the local Chamber of Commerce, Economic Development Committee, and review local sources. You’re looking for markets that are experiences a positive change – stabilization after decline or increasing employment.
The types of jobs are also very important. First, look for a market where there is a diverse mixture of employers. One only needs to look at Detroit to realize the housing impact when a market is supported by one industry. Second, review the local newspapers (often online) or set up Google Alerts for new employers or employers adding jobs. For example, Toyota opened a plant in Princeton, Indiana and many jobs were created. Fortunes were made for those first in that market and this is one of the ways to become successful at real estate investing. Manufacturing jobs bring many different jobs: white collar, blue collar, suppliers, and services to support the new population.
Job growth increases the demand for housing putting pressure on prices; both rents and housing prices. Finding a market poised for growth is a good way to make fast money regardless of the types of real estate. Next time you are looking for a place to invest, check out the employment situation to increase your odds of success
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