the-abcs-of-real-estate-investing-ken LifeFeeling

including large apartment communities, and uncountable numbers of duplexes, condos, and
single-family homes seem to be everywhere. Many were purchased by hopeful investors.
And now they are competing head-on for a relatively small number of renters. The reasons
for this lopsided market state are no mystery. Rather they are totally explainable. Have you
figured them out yet?
The Three Drivers of Supply and Demand
Simply, there are three drivers of a market’s or submarket’s economics that come into
play. As an investor in real estate, you’ll want to keep each of these variables in the
forefront at all times. They are true indicators of supply and demand.
EMPLOYMENT
This is the first and possibly most important indicator of demand and for good reason. If
a market or submarket has lots of jobs, people will come to fill those jobs. Very basic stuff.
It is a fact that jobs drive residency, so with all things being equal, property that is near to
employment is in greater demand. That’s not to say that people won’t drive to live in a
highly desirable city or town or that people won’t drive to their job. But just be aware of the
market condition.
When you’re looking for indicators of supply and demand, look at employment. In the
case of Fountain Hills, Arizona, there is little to no employment base at all. Nearly everyone
who lives in the town, who is of working age, works elsewhere, like in neighboring
Scottsdale. Scottsdale, by contrast, has many employers. Both Fountain Hills and Scottsdale
are desirable places to live and both communities are beautiful places with excellent
qualities of life. But Scottsdale wins in terms of employment and therefore in terms of
demand.
People have to really want to live in Fountain Hills, and many do. But the lack of a large
employer or large office complex that brings workers to the town means that Fountain Hills
will find it difficult to balance the supply and demand for rental properties for many years to
come. This same theory is also true for the town’s retail businesses and restaurants.
Employment opportunities bring customers.
It is a fact that population follows employment.
The saying that people go where the jobs are is true. It’s what attracted people to
Houston, Texas, in the late 1970s and early 1980s and it’s what has been attracting people
to Phoenix, Arizona, for the last twenty years or so. Create jobs and people will come.
High employment can be beneficial for rental property investments, but be sure to look
at the whole picture. Even communities with lots of jobs can still be overbuilt, thus
throwing off the delicate balance of supply and demand. Scottsdale has been smart to limit
the supply of rental properties. That has helped keep the vacancies low and the rents high.
Fountain Hills, with its plentiful land by contrast, allowed the construction of too many
rental units and therefore vacancies are higher and rents are lower. Fountain Hills could
have been a premium rental community even without a strong employment base and once