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What Are The Best Real Estate Markets For Making Large Profits?

When most people try and determine the "best real estate markets" to invest in, their focus is typically on what cities or towns possess the greatest potential for population growth and hence upward movement in prices.

However, I'd like to shift the focus for a moment onto a different type of real estate market. In addition to (and within) geographical real estate markets, there also exists markets for different types of real estate. For example. Within a particular geographic area, (cities, parts of cities, small towns, etc.) there are markets for single family homes and markets for apartment properties. There are real estate markets for strip malls and raw land. And of course, the list goes on.

You could even "drill down" further into these markets if you wish and uncover "sub-markets". An example of a sub-market might be the foreclosure market within the single family home market.

Let's take this a step further.

The Best Real Estate Markets Are The Most Inefficient Ones

For a market to be considered "efficient", all the participants in that market must have equal access to all of the existing information (both public and private) that will affect the price of that market's assets. Many people believe that the stock market is an efficient market. In other words, all of the publicly available information is incorporated into the price of a security at any given point in time. People that believe this contend that if the stock markets are efficient, there is no way to "beat" the market by uncovering "undervalued" securities and buying them at a bargain price.

Of course, there are many people, Warren Buffett for one, who do not believe that stock markets are efficient in this way. As you probably know, Buffett built his fortune on the theory of value investing. Value investing involves identifying undervalued assets and buying them for a bargain. Buffett is quoted as saying "I'd be a bum on the street with a tin cup if the markets were always efficient."

Unfortunately, you and I are not Warren Buffett. The fact is that finding undervalued assets in the stock market is an extremely difficult thing to do. Real estate markets, on the other hand, are another story.

Compared to the stock markets, real estate markets are much more inefficient. And this is especially true for the "sub-markets" that we discussed earlier. Information, both private and public is not as easy to come by. Participants often hold their information "close to the vest" as they say.

Both the quantity and quality of information available to participants in many real estate markets can vary tremendously.

And this is the main reason that the best real estate markets to make extraordinary profits in are the ones that are the most inefficient. Inefficient real estate markets allow individuals to gain an advantage over other market participants through greater knowledge, and access to better and more information. In other words, "the better" you know your target market "the better".

That's why I always instruct people to pick a target market and learn as much as you can about that market. If you know more than the "next guy" (or gal), including the sellers themselves, you stand a great chance of finding deals that you can pick up at below market value prices.

The best real estate markets are the ones that you can gain a competitive edge over the other market participants through superior access to information. If you can turn that advantage into the ability to purchase real estate assets at below market prices you will be well on your way to earning extraordinary profits in this business.

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