What makes a location great and what should you watch out for or avoid in your next investment property location? 5arch Funding explores what makes an investment property location great.
It’s vitally important to seek out favorable attributes, according to 5arch. There are several attributes to take into consideration including good school districts, access to public transportation, favorable tax rates, rising property values, fast turnaround of home sales, and low crime.
“Not all locations need all those attributes,” said 5arch. “It comes back to the one cardinal rule that every successful real estate investor must follow: know your market.”
If you’re developing properties such as New York or Chicago, you need to factor in public transportation. If you’re investing in other cities that rely less on public transportation and require more travel more by car, however, then you’ll need to assess how roadways affect travel to and from your property’s location, and whether or not tenants will view the proximity to major roads a positive or negative aspect of the property.
This will include a deeper assessment of the surrounding infrastructure. Are the roadways and bridges well-maintained? Is there easy access to major roads and interstates? Are there significant options for access to the internet and cable TV? Pay attention to public utilities, especially in rural areas and new developments. Consider if there are recreational opportunities offered in nearby parks. What types of public resources are available such as libraries, hospitals, and health facilities?
“All of these amenities make an area more desirable and will make your property more attractive to potential renters and also improve [the] resale value,” said 5arch.
Knowing your demographic is equally important when assessing the attributes of your location.
“If your target renters are younger millennials or coming-of-age members of Generation Z, they likely won’t have an interest in how good the schools are when renting in urban areas,” said 5arch. “They’ll be much more focused on great coffee shops, restaurants, and trendy shops that are a leisurely walk or short drive away.”
It’s also important to be aware of attributes that can potentially make properties less desirable. For some renters, a home located on a busy street may not be as desirable as a home of similar quality located in a suburban cul-de-sac setting.
Homes located near airports or railroad tracks can be problematic as the constant loud sounds of these areas can deter potential renters. “Try sitting in your car at different times of day,” said 5arch, “to confirm that aircraft noise will not be a problem.” Weather can affect these sound elements so it might be a good idea to verify during different types of weather - sunny skies, overcast skies, windy days, etc. - to confirm if those sound qualities change or dissipate at all.
While locations that appear to be old or run down may cause you to hesitate, 5arch reassures that some of the best investments are “hidden gems” in these types of areas. “Just make sure you do your homework so that any investment you make will reap the returns you need and expect,” said 5arch.
Every effort made to guarantee a quality property will result in a sound investment. Know the qualities that attribute to a good or even great location rather than settling for something that could have been better with a well-spent deeper evaluation.