There are seven basic fundamentals that takes the guesswork out of investing:

1. Know the Market

Whatever you do, don’t guess the market!! Ignore those hot tips from family and friends and avoid predictions from people who are purchasing real estate purely on speculation. Investing without knowing what economically is supporting the value of real estate is speculation – not investing. Your job is to understand the local economy inside out. Any investment decision should be based on two factors – the economic fundamentals and the property’s ability to cash flow (that is the amount of income less expenses). Investigate and research your target region to understand the demographics in detail.

2. Is The Average Income Increasing?

In order to further understand the economics of an area, look at the wealth of its residents. Identify the average income for the city or town you are looking to invest in and compare this to the provincial average. All of this information can usually be obtained from Stats Canada or local government sites. If your target areas income is increasing faster than the rest of the province, this is generally a good indication that real estate values will move upward. Without an increase in incomes, any increase in real estate values will not be sustainable.

3. Population Growth

The next factor to look at is population growth. Identify your target region population growth and again, compare the figure to the provincial average. If there is in-migration of people to an area, you can almost predict the real estate market over the next few years. Statistics show that once people move into a region for the first time, they will rent for the first 2 to 3 years, after that, 50% will buy while 40% will continue to rent and 10% will leave. Learn everything you can about the businesses and industry for your target area and familiarize yourself with the local government’s plans for attracting jobs into the area.

4. Is the Growth Sustainable?

So you’ve identified that the average income of your target region is increasing and there are people moving into the area, now you need to look at the industry and education of the area to find out if it is sustainable. If you are investing in an area with one major industry, you could experience falling real estate values if layoffs are made. Look at areas that are supported by more than one industry and enough businesses and post secondary institutions.

5. Infrastructure Improvements:

Look at areas where local government is making investments into improving transportation links, such as highway improvements, new roads, light rail transit. These improvements have a direct effect on the real estate market, because people in general want to live closer to transit, making it easier to attract renters.

6. Political culture of the area:

Ideally the best areas to invest in are those with a forward thinking- dynamic leadership -the kind of government that is focused on bringing jobs to the area which in turn bring in people, leading to an increase in average income and a growth and developed infrastructure. For example, Hamilton Economic Department have been instrumental in transforming the city from a sleepy steel town into the number 1 city to invest in within Ontario. And of course, securing the Ships contract for NS has lead to pro-active leadership improvements too.

7. Transitional areas:

It will take a bit of digging but it is possible to uncover undervalued gems. Certain neighbourhoods are labelled no go zones but with a little digging they could prove profitable up and coming areas. Check with the local government to see whether there are any redevelopment plans in place for the neighbourhood you’re looking to buy. You should visit the area many times, both day and night to see for yourself what it happening. Investments in these areas typically take a little longer to appreciate but they are certainly worth checking out. Be cautious however – and don’t buy on speculation. Research the area and see for yourself.

Success in real estate investing is not a guessing game and there are no secrets. Follow this step by step process and you will buy confidently and intelligently.

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Jane Killeen-Payne is co-owner of Invicta Property Investments, a Canadian Real Estate Investing Company. Jane works with everyday people to purchase positive cash flow real estate in areas of tremendous growth and opportunity. For more information, please contact her at http://www.invictaproperties.ca