With worldwide confidence in real estate markets down, it's no surprise that investors are looking for safe, long term investments at the moment. But what makes for a "safe" real estate investment? Do they exist at all?
There is risk involved in any investment, from stocks to commodities to real estate to bonds. But, there are certain trends that can be observed among long term real estate investments, that can help you identify strong investment opportunities. Here are a few of those trends to keep an eye out for, and why they make sense.
Population Growth
It's not cerebellum surgery to figure out that growing populations create growing demand for housing, which will in turn increase real estate values. Start looking at long term population projections for a particular town or neighborhood, and look particularly at desirable locations with no further room for development (fixed supply). And here's a BIG hint: the fastest vector for population growth isn't breeding, especially in America. Immigration accounts for the fastest growth, so consider investing in neighborhoods with strong roots for a specific immigrant group, and one that's still arriving in droves.
Urban Planning & Sprawl
It's shocking how little attention we in this country pay to urban planning, and the price we pay as a result. Consider for a moment what happens to a town without organized and well-conceived urban planning: developers build further and further outward, wherever they feel they can sell for the highest price, and continue to sprawl outward until they can no longer earn their minimal return. Aside from heinously unattractive stretches of strip malls and cloned two-story housing developments, this creates a virtually limitless supply of real estate, which means (duh!) that values will stagnate or decline in the face of limited demand and unlimited supply.
Water
The whole world wants to be near water, whether it's a bay, a river, an ocean, a strait, a sound, or an alligator-infested bayou. But guess what? There's a finite supply of water-access property in the world, and an ever-growing population desperate to fish, boat, and swim, which means rapidly increasing values due to the growing demand and fixed supply. Beware, however, of certain pitfalls of owning property near water, including flooding, hurricanes, and difficulty to insure.
Stable Institutions and Employment Providers
There are certain employers who are so large, and so stable over time, that they create their own economic center of gravity. Housing, along with all the commercial and support industries that accompany human habitation, will pop into orbit around these behemoths, but certain neighborhoods will always be more attractive to these institutional employees than others. First, identify some of these institutions near you that might make strong candidates; examples may be large government complexes, university campuses, long term military bases, or large medical campuses. Second, research that institution's long term plans regarding relocation or expansion, and third, find out where the employees there prefer to live. These neighborhoods can become increasingly desirable real estate, as that institution expands, and the alternative housing becomes farther and with fewer commercial resources.
This list is by no means exhaustive, but should help grease the gears and offer a few ideas. The bottom line is to evaluate long term changes in supply and demand, and to think in terms of a neighborhood's long term demographic changes. Good luck, and happy investing!