3 Reasons to Analyze Demographic Data Before Investing In Real Estate

Real Estate Investment Demographic Criteria

 

When it comes to real estate investment, there are many factors that should be considered before taking the leap. Investors often speak of the general economic conditions as their main impetus for investing or holding back. However, this should not be the only criteria that you work under. Demographics should also be very carefully considered. Here are three reasons to analyze demographic data before investing in real estate.

 

Age and Spending Habits:

You might think that a younger, more vibrant population is where the money is, but you may be wrong. Consider the fact that a twenty-something is likely to have student loans, very little savings, and less experience in making sound financial decisions. Not only that but, younger people are less likely to have the funds and stable career that it takes to buy a home.

 

Jobs and Population Growth:

According to the Bureau of Labor Statistics, the national unemployment rate was 5.8% in November of 2014. That’s down from 7% for the same period in 2013. That seems like good news, but don’t start celebrating just yet. The truth is, the local unemployment rate is a far better indicator of what’s going on in a specific area. The unemployment rate in a given area is as important, if not more important, than the average age of the population.

Simply put, if people cannot find a good job, they are not going to be able to buy or rent a home. That also means that the population in the area is likely to decline, rather than grow. Take a good, hard look at the trends in employment in and around the area you are thinking about investing in. Dig into those numbers and look for indicators that the population and job opportunities are changing.

 

Rentals vs. Owner Occupied:

Another important demographic that you need to take a look at is the percentage of rental homes versus those that are owner occupied. If you’re most interested in buying, remodeling and flipping houses, you’re going to want to look at areas where the owner occupancy is higher. Likewise, if you’re looking for an income property, a predominantly rental oriented area may be best.

Although you’ll get some indication of the viability of a rental or flip from that data, it doesn’t tell the whole story. You also want to know what the rental occupancy rate and average rental rate are so you can determine whether or not you can recoup your investment. If you’re flipping, you’ll want to know the average home sales price so that you can manage your investment to make a profit when you sell.

When considering a real estate investment rely on a trusted real estate investment pro and also consider getting in touch with California Private Money Lenders before purchasing a property. Realize that we have been through many varied scenarios over the years in making private money loans as a Sonoma County hard money lender and our input could be very valuable also. We are only a phone call away 707-315-1119 or fill out our contact form or short borrower’s form and one of our trained private money lending specialists will be in touch with shortly to answer your questions.

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Private Money Lender Checklist

Be Prepared So Your Loan Closes Swiftly

There is a sense of urgency with hard money loans or private money loans. For whatever reason, such as an interruption of funding or a quick take down of cheap property, a hard money loan usually needs to be acquired quickly. It is important to help a lender feel comfortable and to help a lender receive funds as soon as possible. To do that, here is the ultimate checklist for you and your Sonoma County hard money lender or private money lender.

Collateral:

The collateral being offered to secure the Sonoma County private money loan must be properly defined in terms of what the property is being classified as and what the value is. It is also important to know what the value is based on, whether it be an appraisal, a broker’s opinion, or something else. Both a borrower and lender should know if there are any liens on the property that might prevent it from being purchased, and who actually has the title of the investment property. Is it the bank, or a private owner?

Location:

The location of the investment property can make or break a hard money loan deal. An investment property located in a less than ideal location can send a red flag to lenders who many not feel the investment is safe in the neighborhood. When seeking a loan, it is useful to have pictures of not only the property one wishes to buy, but the surrounding area as well.

Have a Solid Plan:

So you want to buy an investment property. That’s great, but what do you plan to do with it? Not only do you need to have a plan, but the lenders want to know what the funds are being used for exactly and they need to know more than how much the property costs. It is useful to plan what the property will be used for and, if you plan on renovations, how much they will cost. Get a quote from contractors and show it to lenders.

Perhaps the most important thing to plan, though, is how the loan is going to be repaid. Hard money loans are short-term loans, so what is the plan for repaying at end of term?

Documentation:

Though Sonoma County hard money loans are secured by the value of the property and not usually on credit, there are certain documents that a lender will need to see. These include proof of income, what other assets you or your business have, and what your credit is like. Other documents that may be needed, depending on whether you are a solo investor or company, include: purchase contract, recent bank statements, proof of closing funds available, operating agreement, and property financials. Every lender is different and will require different documentation.

The Loan Application:

Don’t forget the loan application and to make sure to follow the lender’s submission guide to avoid being denied a loan. If your potential hard money lender calls you, don’t wait to call back, do so as soon as possible. Private money lenders want to feel their investment will be safe and secure. So, make them feel that way with this ultimate checklist and you will be on your way to a hard money loan. Being well prepared sends them the signal that you are a serious investor and have the capabilities to take on a hard money loan.

Call us today at 707-315-1119 to see how we can assist you with your next real estate deal with a private money loan or fill out our borrower form or contact form and one of our trained private money lending specialists will be in touch promptly to answer your questions.

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