Investing In Undervalued Real Estate Markets: You Need To Know


In real estate investing, everyone wants to buy low and sell high. There are several ways to achieve this goal, such as buying distressed properties and returning them to market value or buying fairly valued properties and performing value-added improvements to increase the real estate price.

Of course, finding undervalued housing markets can be challenging. Doing so requires comprehensive knowledge of what makes a market undervalued.

What Is an Undervalued Housing Market?


There isn’t necessarily a formal, scientific definition. However, the housing market is generally undervalued based on the home price-to-income ratio.

If home prices are low but income is high, you will have a lower percentage. The lower the ratio, the more affordable the housing.

An undervalued housing market can be defined as areas where the median housing payment to family income ratio is lower than 30%.

The 30% number fits in well with the 50/30/20 budget template, which stipulates that one should spend at most 50% of the income on needs, including housing.

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