By: Kyle Spearin
With interest rates at record lows, perhaps you’re considering investing in the booming El Paso real estate market.
Despite economic hardship throughout the United States during the COVID-19 pandemic, the real estate market in El Paso has remained strong. El Paso is situated at the crossroads of Mexico, New Mexico, and Texas. It’s unique positioning and strong
housing market have made it an area of intrigue for both local and out-of-state investors.
As you begin your El Paso investing journey, you might be wondering where you should start. Although you might want to jump right in to property analysis and start making offers, it’s worth it to spend some time investigating the city and metropolitan
By researching El Paso, you’ll be able to identify your ideal location, understand the job market, and much more. Based on this information, you can then narrow your search criteria. Knowing the ins-and-outs of El Paso will make it far easier to spot
opportunity and value.
Whether you’re a real estate investment newbie or a seasoned vetern, asking these questions will help guide your decisions.
What’s the Local Economy Like?
As you begin to search for potential investment properties, you want to ensure that your tenants will be able to pay you. A great indicator of future success is the strength of the local economy.
There are a variety of factors that contribute to the strength of the economy in both the short and long term. Each region produces economic summaries that can help further gauge the current and future states of the economy in a given area.
As you examine El Paso’s economic summary, there are at least two factors that should stand out to you: unemployment rate and industry specific employment.
Understanding unemployment in comparison to the national average can give you insight that there are opportunities in the community. Although unemployment across the United States is high amidst a pandemic, you may also want to look at previous years to see how things compare. The past is not necessarily
an indicator of future performance, but it will show you what El Paso was like compared to other cities.
Industry specific employment also plays a huge role in economic performance in the short and long term. Diversity in this area can be viewed as a good thing, because it means the city isn’t entirely reliant on one specific industry to thrive. Researching
industries can also show you growth patterns. People tend to move where there are employment opportunities.
Pay attention to the local economy.
Which Part of the City Should I Invest In?
Location, Location, Location.
Not all locations are created equal. Even within the city of El Paso, you will find that some areas are better for others for investment. This comes down to the strategy you decide to employ: will you target up and coming neighborhoods? Look for areas
with steady appreciation? The list of questions goes on.
As you begin your search, it’s important to come up with a system to determine whether you would invest in a given neighborhood or not. This section won’t actually discuss neighborhoods in El Paso (more on that later). Instead, it will give you a
way to rate different areas within the city limits.
In general, investors break down neighborhoods into “classes.”
Just like school, the higher the letter value, the “better” the neighborhood.
This type of neighborhood tends to be most desirable and (as a result) most expensive. It usually has close proximity to entertainment, has newly built developments, and the best schools.
The next highest rated neighborhoods are Class B. These areas are second highest in terms of price, schools, and proximity to entertainment. Buildings will tend to be older than class A neighborhoods, but still be highly desirable. Class B neighborhoods
are also commonly up-and-coming areas.
At this point, neighborhoods are more affordable. They usually consist of a mix of homeowners and tenants, in contrast to primarily owner occupied class A and B neighborhoods.
These are neighborhoods with high poverty and crime rates. In addition, there will be far fewer if any updates in these locations.
These are general descriptors to help guide your rankings, but ultimately it’s up to you to decide where to invest. Keep in mind that the highest rated area might not always be the best place to invest, it all depends on your individual strategy.
A last note on neighborhood rankings--it’s all subjective. What you view as an investable area might be off limits to another investor. You may also rate areas differently than another investor, that’s totally fine.
All that matters is that you have a system for ranking these areas.
What are the Crime Rates?
In the last section, you learned how to rank neighborhoods by class. One contributing factor that may change your ranking is the crime rate.
Oftentimes, living in an unsafe neighborhood is a necessity, not a choice. People want to feel safe in their homes, so you need to consider this when looking into areas. If you wouldn’t want to live in a certain area, your tenants probably
won’t want to either.
Crime is a broad term. You should consider looking into sub categories of crime such as violent crime for example. Not to say that crime is ever a good thing, but there is certainly a hierarchy of what people will and will not tolerate. Be
sure to do your due diligence here.
How are the Schools?
For home sale and rental purposes,
school districts matter.
If your ideal tenant has children, they’ll probably be considering school districts (if they can afford to) when choosing an area to settle. The same goes for when you sell your property down the line--being closer to a “good” school district
will entice families to consider your house.
Look into school rankings and school boundaries within El Paso. Most likely, you will notice a relationship between purchase price, rent price, and school district.
The key to any successful real estate investment is proper research. Be sure to ask these 4 questions as you delve into El Paso’s real estate market.