Real estate investors know that the key to success is buying real estate below market value. They can then rent the property or fix and flip it for a big profit.
It seems simple, but it’s definitely not easy. Zillow tried to do that with its iBuyer business, where algorithms pick undervalued real estate markets and properties.
The company lost nearly $1 billion and shut down that part of the business.
If a company as large as Zillow can’t find undervalued properties, how are you supposed to do that for yourself? Well, you’re about to learn.
Keep reading to discover how to find undervalued markets to build your real estate portfolio.
It seems like COVID sent real estate values through the roof. Some markets like Florida and Utah have jumped significantly, with home values going up by 30% and 26.8%, respectively.
Then there are markets like Louisiana. That real estate market ranks at the bottom for home value increases in the country.
By that measure, you’d pick Louisiana as an undervalued real estate market over Florida.
There’s more to it than that. You need to look at the causes of growth and decline. You also have to look at the future of the area.
There are markets within markets that are undervalued, too. For example, there are cities and neighborhoods within Florida that are undervalued real estate markets.
That’s why it helps to start with a broad view of a real estate market and then narrow your focus into one or two areas.
Finding Undervalued Real Estate Properties
Once you narrow your focus, you can look for investment properties that are undervalued.
Sellers sometimes find themselves in situations where they have to sell. They’re more motivated to get the property sold than get the highest offer.
These situations happen in divorces, relocations, and foreclosures. You can find these undervalued properties by partnering with family attorneys and financial advisors.
They’ll be the first to know if a property needs to sell quickly. That enables you to submit an offer before the property hits the market.
Novice real estate investors look for FSBO properties. Most sellers overvalue their properties, so you may want to think twice about going this route.
The Department of Housing and Urban Development forecloses on homes that have a government-backed loan in default. These homes get sold below market value, giving you an opportunity to build your real estate portfolio.
Capitalize on Undervalued Real Estate Markets
Investing in real estate is a matter of finding properties below market value and selling them for a profit. It’s difficult to do, which is why some real estate investment companies struggle.
You can find undervalued real estate markets by looking at the broad real estate market and narrowing your focus. You’ll be able to find a real estate market that suits your needs.
Do you want more real estate and financial tips? Check out the other articles on this site for the latest economic and investment news.