Real estate is one of the best investments you can make, but the 2008 crisis made many people afraid of it. The risk of investing in real estate isn’t as high as many people think it is, but if you don’t invest wisely, you can lose a lot of money. That is why I host bi-annual real estate workshops. I want you all to experience the financial freedom real estate can bring, but I want you to invest with the proper knowledge and understanding.
I’m getting a lot of questions right now because Colorado is a really hot market. There is a lower supply of houses and apartments, and a growing demand for housing. This causes prices for properties to increase, which I normally encourage people to not invest in at this time. You can still make money, but it’s not for beginners typically. However, in today’s blog post, I’m going to give you some ways you can still make money in a hot real estate market.
Investing in a Hot Real Estate Market
Look at Other Growth Factors
The first thing you should do when looking in a hot market is to see if other areas of the market are growing. Right now, Denver has the 3rd hottest job market in the country. That means a lot of companies are moving or opening in Denver, and there are a lot of potential jobs. The unemployment level in Denver is at a record low right now as well. People have jobs, and they are willing to move to Denver for them.
This is important because it means there will be a certain amount of demand for renters to find housing. Though you may be paying more to own a house, you can ask for more in rent because Denverites will likely pay it. I abide by the formula that you should always be getting at least 1% of the purchase price of the home per month in rent. If rent in the area you’re looking to buy in fits that formula, then you could be in a place to make some cash flow.
Fix and Flip
A hot market is also what is called a seller’s market. This means that it is the best time to sell your property because the average prices for houses are higher. I don’t fix and flip houses because I prefer to buy and hold, but if you can provide enough value to increase the selling price of a home, then you can make a lot of money in a hot market.
The secret to real estate is to always buy low and sell high. Buying low in hot markets is difficult. However, if you can turn a $300,000 into a $400,000 home, or even half a million-dollar home by adding a certain amount of value, it will have been worth it for you.
In order to fix and flip successfully, you will need to keep your renovation budget low and on-time, and you need to keep track of your credit score. If you get into buying too many houses at the same time, your credit will take a hit and there will be fewer loan options for you. Be mindful of that
Look in Smaller Markets
In a hot market, it’s more difficult for buyers or renters to find housing close to city centers. For example, the Denver job market is hot right now, but most people can’t afford to live in Denver. This means they’re willing to commute a little bit to their job in order to have affordable housing. As an investor, you can look into smaller markets surrounding Denver that will have cheaper houses. You can still make a good amount of cash flow because you’re benefitting off the job market of Denver without having to be in Denver city limits.
I hope this post helped you understand that you can find good investment properties in hot real estate markets, you just have to be smart about it. If you want to learn more about investing in real estate, I am hosting a workshop just for you! Whether you’re a beginner or a seasoned investor, I encourage you to join us. Get your tickets today before they sell out!