Real Estate Investing Tip: Monitor Sales and Rental Trends

Sales trends and rental trends are proven indicators of rising or falling investment property prices.

It would be a good idea, therefore, to create a system for tracking and recording trend data such as the number of listings, new housing starts, selling prices, time on market, rent levels, and vacancy rates when you begin real estate investing.

You might be surprised. As you watch these sales and rental trends, you will be able to detect fluctuations in the market as they occur and could, as a result, make a profitable short-term gain.

Sales Trends

Watch for the time properties are sitting on the market. In slow markets, properties can sit unsold for months, and the result could mean price decreases. Likewise, as the average time on the market falls, say, from 270 days to 180 days to 120 days, prices are undoubtedly ready to go up.

Watch for the number of properties for sale. Real estate prices result from supply and demand. As the number of "for sale" properties increases, thereby inventory increases, which could mean that sellers will lower their prices to attract buyers. Similarly, a minimal number of "for sale" properties signal a lesser inventory and points the way to what could be rapid advances in property prices.

Rental Market Trends

Watch for and review these four important rental market trends for the past 1 to 2 years: (1) vacancy rates (2) time on market (3) annual rent increases and rental concession

Okay, now ask yourself. Are vacancy rates droping or increasing? How long does it take to fill vacant apartments or rental houses? What types of units rent the quickest, i.e., one or two bedrooms, one or two baths, with or without covered parking or community center? How do vacancy rates differ among various neighborhoods and communities? Do some types of buildings or units have waiting lists? If so, what are their features and locations?

What about rents, are they steady or increasing? What about rent concessions, are property owners giving concessions to attract tenants, and if so, what are they giving away?

Watch for foreclosures in your area. Homeowners who lose their homes become renters, in turn causing a shortage of rentable units that results in increased rents; thus, higher property prices.

What about interest rates, keep in mind that low interest rates means that many tenants will buy a home and vacate the rentals, and vice versa. Of course, in our current economy, with lenders tightening their loan qualifications, this rise and fall in interest rates might be less telling. Nonetheless, interest rates should be monitored.

It's all just a barometer. But it's a smart real estate investing procedure to track and record real estate sales and rental trends. Whether you're a rental property investor or current owner, understanding how sales and rental trends affect property prices and then making yourself ready to react quickly can mean you score big.

Here's to your real estate investing success.

James Kobzeff is the developer of ProAPOD - superior real estate investor software solutions since 2000. Create a cash flow analysis on any rental property in minutes! Preview at => www.proapod.com