mathiverse wrote: ↑
Thu Jan 14, 2021 10:06 pm
How'd you find this niche in your area? If someone wanted to find a niche in their area, where would you suggest they turn? Realtors? Real estate investors? Other sources of information?
I am familiar with the town because I have friends and family that live there. I have 3 friends that own new condos they purchased in the past 5 years and other friends that live in newly constructed apartments. I also have done some research into real estate investing in the area and talked to friends who work closely with builders or other real estate folks.
If you're starting from zero knowledge, I would look for threads on Bigger Pockets forums that talk about real estate investment strategies in your area. Try to go to a local real estate investor meetup and also talk to any people you know in your area that are landlords or property managers. You should be able to get an idea of housing stock and demographic trends just from sitting in and listening to the discussions happening. Also just look around your area and see what kind of new construction is taking place, what types of properties sell quickly on the market, and what kind of properties stay on the market for extended periods of times. That should help you to get an idea of what is "desirable" housing stock in your area.
For example, I know that Philadelphia has had a new construction boom in certain neighborhoods over the last 5-10 years because of a combination of 10 year city tax abatement on new properties and federal tax incentives from the Opportunity Zones program (check if your city has any of these zones). I suspect, just by looking around at the amount of new housing stock, that there is probably an oversupply of new properties. COVID and long term economic trends are stratifying the city into the haves and the have nots; the well off white collar workers who can afford to buy the shiny new construction, and the lower class workers who are facing high unemployment/low earnings so they are forced to rent. These trends in combination mean that older single family homes (~100 years old but not the quaint 150-200+ year old historical houses) are likely not in high demand, especially when they are in neighborhoods in the early stage of gentrification. Just a cursory look at prices right now tells me this is the case.
Having an understanding of how your own preferences diverge from the typical buyer (or renter) in your area can also help you to take advantage of cheaper opportunities. For example, my permaculture design incorporates a garden roof, split air AC unit, tankless water heater, and wood stove/masonry heater that vents through the existing chimney stack. This means I don't really care if the water heater needs to be replaced, the house doesn't have any ducting or central air/heat, the roof needs to be replaced, the kitchen is outdated, the walls are ugly, etc. Of course, I would still do my due diligence with inspections and such to make sure there aren't serious structural issues and my modifications are feasible. I also care a lot about which direction the house faces for purposes of rooftop garden and passive solar heating, but a typical buyer is not concerned about such things. On the other hand, a buyer might want a kitchen with modern appliances and quartz countertops that are in vogue today, but I really don't care about any of those things. Etc etc.
Edit: As 7WB5 pointed out, understanding the history of your local area and when/why housing was built is another useful tool.
Edit 2: Housing materials are another thing to understand. In many areas, it is often the case that the new construction looks nice but is pretty shoddily constructed because the developer is trying to flip it for maximum profit, which means there are often quality control or long term durability issues. On the other hand, a 100 year old rowhome has demonstrated it is quite hardy just by the fact that it is still standing, along with the fact that the external walls are made of masonry brick as opposed to 2x4's covered in siding.