Location, Location, Location: What to Look for in an Area Before Investing in Real Estate
Real estate investment involves a lot of tough choices. One of the first major decisions that most people must make when choosing an investment real estate property is the location. A good location is one that will meet the needs of the customers and sell or rent for a profitable price. Deciding which locations are best can be a challenge. These tips will help.
Consider the Needs of Your Customers
Customers have needs. Whether you’re leasing your property to a business or renting a home to tenants, it’s important for your rental property to meet the needs of your tenants. These needs will vary based on the type of property you’re looking to obtain—something aimed toward vacationers will be far different than a property that will be leased to a business. The more suitable the location of your rental property, the more money you’ll be able to make when you rent or lease it to others. Below are some of the needs to consider when choosing a location.
Job Growth and Industry
Job growth is an especially important factor to consider when purchasing an investment/rental home. Jobs are a draw for working tenants. When researching job growth in an area, consider the industries in that area, the health of those industries and fall-back industries. Diverse economies give tenants somewhere to turn if their job is lost, so ideally, jobs will be abundant and industries will be varied in the area.
A steady population or population growth is best for most areas, when considering purchase of an investment property. Population decline means reduced tenant pool over time. Population decline also means less demand for property and thus, declining rents. Over time, population decline can make it harder and harder to find tenants for your investment property, which can lead to loss of profits.
Proximity to Public Services
Especially in a rental home, public services are very important. Public services like parks, schools and government agencies provide convenience to occupants. When considering an investment property, consider the home’s proximity to public services and the quality of those public services. The quality of the schools, for example, will affect the rental rates of your property, as tenants will pay more for better quality schools.
Access and Transportation
Access and transportation are critical for investment properties. Typically, homes and commercial buildings that are within easy reach will attract tenants more easily than those that are not. To determine the level of access to an area, identify the location of bus stops, major thoroughfares, subway stops and the walkability of each location. The fewer access points a location has, the less attractive that area becomes to most tenants.
Before buying an investment property, walk around the neighborhood to make small observations. While you walk, gauge your feelings about that property. What businesses do you see? Are the homes, streets and sidewalks in good condition? Is there parking? Noting these small details can help you decide once and for all whether or not an investment property is right for you.
Work With a Real Estate Agent
Working with a real estate agent is helpful when choosing an investment property. Your real estate agent can help you identify the advantages and disadvantages of each potential location. To find out more about an investment property location, talk to a reputable real estate agent before making your purchase.