Absorption rate and why it is important for your investment

Chances are, if you’re new to real estate investing, you’re feeling a bit overwhelmed with all the terminology you’re dealing with. After all, when he was making his initial investment in his residence, he doesn’t remember hearing terms like takeover fees.

You may be thinking that it’s not really something you want to be interested in with this potential real estate investment, but you have to change your mindset here. Real estate investing is a business, whether you are investing in one property or multiple properties. So you have to treat it as such and look at it from all different directions. This means paying attention to the absorption rate because it can have a direct effect on your investment.

It’s really not difficult to understand, and in fact, you may find it quite interesting. It simply means how long it will take to sell the property on the market in a given area.

Let’s say there are 500 houses in an area and 50 of these houses are sold each month. This means that it would take 10 months to sell all the houses. So you can assume that if you are the seller, you are looking at an average of 10 months to sell your home. If, on the other hand, you wanted to sell faster, it would mean lowering your price.

This all sounds like relevant seller news, but to what advantage can you as a buyer use it? If the takeover rate is high in the area you’re considering buying, it means there are more homes on the market, and this means sellers will face more competition. Your potentially lowest offer may seem like a good offer based on this.

The absorption rate is just one of many areas of importance when contemplating a real estate investment. If you apply the same careful research tactics when setting up your financing, then you are beginning to cover both ends of your investment.

For example, you’re being shrewd about your potential purchase, but on the other end of the spectrum you’re weighing your options on investment cost. When you put your full potential into these two areas, you are making your potential investment that much stronger.

By having the opportunity to take advantage of various real estate tactics when investing, it gives you more leverage as a viable investment compared to other types of investments that you don’t have the same amount of control over.