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Why Choosing an Out-Performing Market is Important, and how to do It

5 April 2013

Choosing the right housing market is of the utmost importance when you’re investing in any kind of real estate. But unlike other types such as income property ownership, selecting your market is even more important when you’re investing in private mortgages. And in fact, it’s even more important than choosing based on home prices in the area – something that sits at the top of the priority list when you’re about to become a landlord.

This is because property values don’t really come into consideration at all with private mortgage investments. Unlike flipping houses or renting properties out, property value has nothing to do with the return you will see with private mortgage investing because the returns comes from the interest on the mortgage, and not the return you’ll make by selling or renting out the property.

However, what might not be so important with property investing becomes crucial when choosing private mortgage investing. That’s making sure you choose the right market, preferably an out-performing one.

Choosing the right market with private mortgage investing becomes so important because that’s where the demand is, and that’s where the majority of people looking for private mortgages are likely to be. You’ll be able to get the best returns, across a broader spectrum, and that always make good investing sense.

Derek Burleton, vice-president and deputy chief economist with TD Economics, explains what an out-performing market is, and what to look for when trying to find one.

“To me,” he says, “an ‘out-performing market’ happens in neighbourhoods which have either not yet hit their peak or in neighbourhoods set to ‘take off’ during a rebirth. In addition, proximity to highly rated schools, churches/synagogues, landmarks, or new ‘positive’ slated developments in the area can have an impact on perceived value – sparking buyer interest which can contribute to an out-performing market.

“Ultimately, investors should be considering the factors they would look for their own primary residence when looking at a residential investment. You want to pay attention to school zones, access to shopping, churches, transit, etc. and have a look at the neighbourhood, too.”

Luckily, you don’t need to worry about things such as upkeep or property values when you invest in mortgages – that’s one of the biggest benefits this investment vehicle has to bring. But you should pay attention to the market you choose, and have an idea of their current and future performance factors.

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