Making money grow is considered an essential investment objective for everyone. Different investors have diverse ways of accomplishing this objective as the risk tolerance varies from one person to another. Growth markets are sectors of the economy that experience higher growth rates than other sectors. On the other hand, growth investing is simply investing in sectors such as real estate, industries, and companies currently experiencing faster growth with continued growth expectations due to the existing demand for the company's products or population growth due to new migration patterns or job creation. High growth markets may provide investors returns significantly higher than the average profits from investing in other assets such as stocks from publicly traded companies or regions where population growth is minimal.
High growth implies potential capital appreciation for existing real estate in the region while also the creation of new supply to meet the rapidly growing demand for new housing. This usually occurs when cities states or town either offer lucrative tax incentives to companies looking to move locations or add manufacturing facilities to their company. They seek locations that will be less expensive compared to cities that may be densely populated causing pricing to be much more expensive. In states such as Phoenix Arizona, land is unbelievable cheap and companies such as Red Bull, White Claw, Boeing, Amazon, Chewy and various other brands have recently setup factories there. Both the land prices and economic incentives and in the west and east valley have proven to create a high growth commercial and residential real estate market. Goodyear, Glendale, Chandler, Mesa, Avondale and Surprise top the list. The sector has seen its return on investments gradually increase every year, drawing lots of attention from Investors. Though a viable high growth sector, it is vital that every investor conducts due diligence that includes proper market research.
According to a new survey from Zillow, the sunbelt is anticipated to heat up faster then many larger coastal markets providing for fantastic investment opportunities:
Jaf Glazer is a real estate entrepreneur, investor and developer who is the founder of Conquest and principal of Gallium. Gallium has made strategic investments in high growth markets such as Phoenix Arizona and is looking to other sunbelt markets. His advisory firm Conquest Advisors has advised family offices and high net worth individuals on various real estate strategies including investing in high growth domestic and international frontier markets.
He shares his input-on investing in High growth markets to enlighten investors on the Dos and Don'ts. Glazer has a great deal of experience in the real estate industry that has seen him become the Co-Chair of one of the most significant associations in New York City, Real Estate Board of New York (REBNY) Downtown Residential Committee. Giving his advice on investing in the High growth rated real estate market, Glazer highlights the following as the essential factors to consider:
- Property valuation
Glazer places more emphasis on property valuation. Factors such as listing price, investment analysis, purchase, taxation, and insurance will depend on the initial valuation report. He advises investors to approach all investment opportunities from the cost, selling price, and income approach to gain a clear picture of possible future returns.
- Location of the Property
A property's location plays a vital role in determining the investment's viability as it directly impacts the property's profitability. Accessibility to social amenities, green spaces, transport hubs, and the surrounding neighborhood impacts the property value. Glazer advises investors observe the prospective location and patterns, before deciding on a short- or long-term investment plan.
- Reason for investment
Understanding the purpose of investment helps balance the low liquidity and high-value investment nature of the real estate sector. The industry provides investors with various ways of earning revenues from rentals, buy and selling, or buying for personal use while gaining value appreciation. As a result, every investor should know exactly how they intend to gain returns from their investments.
- New versus existing property
Glazer advises investors focus on what works for them and understand the various challenges that come with the choices. Buying an existing property gives the investor a shortcut to owning a property with established improvements and in a more convenient manner. On the other side, constructing a building from scratch allows the investor to customize it and incorporate features with modern amenities, a unique feature for high-growth markets.
Finally, high growth markets are increasingly competitive and you must be wary of how your properties will compete should there be an oversupply giving tenants more optionality. Players, especially in the commercial real estate space, need to keep up to speed to safeguard their investment, something that Glazer highlights to investors on a regular basis.