Emerging real estate markets offer both considerable opportunity and risk for investors. While the right investment at the right time can lead to significant returns, one small miscalculation or misreading of a market’s potential can leave investors worse off than before.
As experts, the members of Forbes Business Council have developed ways to reduce risk for newer real estate market investments. Below, 20 of them offer strategies for real estate investors to adequately assess risk versus reward when investing in an emerging real estate market.
1. Look At What’s Driving Demand
The best way to assess risk vs. reward in an emerging market is to look at what’s driving demand. Are businesses moving in? Is the population growing? Are there infrastructure improvements? These factors signal opportunity. If you pair that with research on potential risks, you’ll have a clear picture of whether the investment is worth pursuing. – Michael Ligon, The Ligon Group, LLC / LigonBrothers
2. Do A Data-Driven Market Analysis
Conduct a data-driven market analysis that focuses on high population growth, strong job growth, low vacancy rates and investments in infrastructure development. These factors will help you compare a market’s potential upside (e.g., property appreciation and rising rents) against the potential risks of an economic downturn or oversupply of housing. A healthy market is more likely to offset those risks. – Ryan Barone, RentRedi
3. Balance Immediate Returns With Long-Term Potential
Assessing emerging markets requires balancing immediate returns and long-term potential. Emerging markets often offer higher cash flow, reducing reliance on exit profits. However, limited investor interest and financing options can create challenges. These challenges can be overcome by structuring your capital stack with subsidies and incentives to help mitigate risk while maximizing returns. – Seth Gellis, Community Preservation Partners
4. Assess The Location
When investing in the real estate market, I focus on assessing the location, as I believe it’s the most crucial factor for future returns. I also consider changes in laws in the country where the investment is being made, since these can significantly impact the investment. This approach helps minimize risks and maximize potential returns. – Daniil Demchuk, Smart Flats 24
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5. Study Macroeconomic Trends And Local Market Fundamentals
One key strategy is analyzing macroeconomic trends alongside local market fundamentals like population growth, job creation and infrastructure investment. I pair this with risk mitigation practices, such as diversifying assets and stress-testing financial models. This balance of growth potential and downside protection ensures a data-driven, confident investment decision. – Chad Angle, Reputation Defender
6. Focus On Neighborhood Momentum
When investing in an emerging real estate market, I focus on neighborhood momentum to assess risk vs. reward. I also look beyond rising sales prices. Who is moving in? What new restaurants are opening? What permits are being filed? I analyze the demographics of the newcomers because understanding the reasons behind this momentum is crucial. What’s causing the change? How is this neighborhood a disruptor? – Dayssi Olarte de Kanavos, Flag Luxury
7. Appoint A Trusted Local Market Expert
One key strategy I recommend based on insights from my leading real estate client is to appoint a trusted local market expert. Make sure they actually own and invest in the market personally, and talk to other professionals on the ground, such as lawyers and developers. Do keep a laser focus on market insights and data to mitigate some of the risks and ensure a confident investment decision. – Kate Woodyatt Hudson, WH Communications Ltd
8. Conduct A Comparative Market Analysis
One strategy is conducting a comparative market analysis to evaluate property values, demand trends and economic indicators. This helps assess appreciation potential and risks like market volatility or oversupply. By comparing similar properties and local economic conditions, you can make a more confident, data-driven investment decision. – Raheel Sheikh, Acquisitions LLC
9. Prioritize Diversified Demand Drivers
To assess risk vs. reward in an emerging real estate market, I prioritize diversified demand drivers. A market reliant on a single employer poses high risk because if that employer falters, demand collapses. Instead, I seek markets with multiple demand sources (e.g., healthcare, education, tech, etc.). This diversification mitigates risk and allows for more confident, long-term investment decisions. – Joseph Edgar, Loca
10. Avoid Betting On Hype
The biggest mistake when investing in emerging markets is betting on hype instead of fundamentals. Follow the money. Where’s the new infrastructure? Which zip codes are seeing new permits and corporate investment? AI Sellability Scores are great for this. Speculators chase trends while smart investors track data. The reward isn’t in the trend, it’s in being ahead of it. – Greg Clement, Realeflow
11. Determine What You Can Bring To The Market
Every real estate market holds potential opportunities. Rather than simply focusing on what the market inherently has to offer, focus on what you can bring to the market. What do you see that other potential investors don’t yet see? How can you leverage these hidden assets to your advantage? – Kevin Markarian, Roopler
12. Decide Your Purpose And Ideal Purchase Price
Like many things in business, it comes down to purpose and purchase price. Buy at a price where you could resell the next day and at least break even after closing costs. Also, consider if the property has a purpose beyond just a cap rate return. Will it be owner-occupied and help reduce expenses? If its sole purpose is cap rate or equity growth, that’s a bigger risk that can lead to losses. – Deisell Donahoe, DIOSS LLC
13. Look To Investments With Potential
Working regularly with startups and entrepreneurs, I have had many opportunities to advise on establishing offices and storefronts for clients. The adage, “Always purchase the worst property in the best neighborhood,” applies to both commercial and residential real estate. I also advise following city and county community development investments to piggyback on those ventures. – Charles Stanton, Transient Consulting
14. Leverage POI Data
Use point-of-interest data to assess risk vs. reward with precision. POI data provides a real-time view of business activity, industry trends and surrounding risks, giving you a clear picture of market stability. It analyzes business longevity, consumer patterns and economic shifts to spot growth opportunities and red flags early. Rely on data, not guesswork, to make confident, high-return investments. – Geoff Michener, dataplor
15. Do A “Coffee Shop Test”
While others obsess over market data, I prefer the “coffee shop test.” Spend a few days in an area to observe traffic patterns, routines, commutes and development momentum. Quantitative analysis can be manipulated, but you can’t fake the energy of an area on the rise. This ground-level intelligence has helped me identify opportunities months before they appear in market report data. – Shayne Fitz-Coy, Sabot Family Companies
16. Lean On Other Professionals For Guidance
I work with a team of professionals who assess the real estate market, analyze the reputation of developers and evaluate potential buyers. I also stay connected with colleagues to exchange insights and real-world experiences. Thorough analysis and open communication are the foundation of a solid strategy. – Dmitrii Khasanov, Arrow Stars
17. Track Tech Growth And Policy Shifts
Emerging real estate markets thrive where tech hubs are forming and government policies support development. I track news on industry expansions, infrastructure projects and tax incentives to assess long-term demand. This strategy helps identify high-growth areas early, balancing risk with the potential for strong appreciation. – Shubham Nigam, Questera AI
18. Take Uncontrollable Factors Into Account
The risk-reward equation needs to go beyond the property itself to address the variables that are outside your control. Regulations, taxes, changing personal and business expectations by customers and changes in the general area are variables you need to take into account. Important economic trends, such as interest rates, access to capital for improvements and more are also key to consider. – Jerry Cahn, Age Brilliantly
19. Consider Shared Workspace Investments
Real estate is obviously a huge investment, especially for a small business. Rather than invest in brick-and-mortar locations, I prefer to invest in shared workspaces that offer my team flexibility and opportunities to collide with other businesses. Even this investment can be risky, but I make decisions based on data. Offering my team a workspace has resulted in measurably better deliverables, so it’s worth it. – Emily Reynolds Bergh, R Public Relations Firm
20. Analyze Long-Term Infrastructure And Development Plans
One effective strategy is to analyze long-term infrastructure and development plans in the area. If a region is seeing investments in transportation, schools or business hubs, it signals growth potential. This helps balance risk with future reward, giving you confidence that demand and property value are both likely to rise over time. – Asaad Hakeem, SARC MedIQ Inc.
