Are you unsure how to make the right real estate investment? Do you wonder how successful investors decide where to make their next buy? We’ve got all the answers. Many savvy property owners rely on the advice of a professional property management company when it comes to how to choose a rental investment.
This article reveals some of the experts’ secrets. We’ll discuss the top factors of a good location and the benefits of investing in an up-and-coming neighborhood. If any of that sounds appealing to you, stick till the end to find out how to choose the best location for real estate investment.
Factors of a Good Location
One of the most apparent benefits of a good location is a higher property value. Hot areas guarantee their owners more returns. However, it’s essential to note that not all houses are worth significantly more than the average market cap initially. As an investor, you need to identify which properties tend to appreciate. Of course, you often have to be willing to spend money on the right upgrades and renovations to achieve that result. Hence, it would help to work with a property manager that can handle your investment property needs.
Besides the property, the neighborhood also plays a significant role in determining its value. For instance, a single-family unit in New York City is worth more than an identical one in Kansas City. Access to industrial or commercial hubs boosts the attractiveness of a neighborhood. Security is another factor that influences a neighborhood’s value within the same city. Areas with a higher crime rate usually have higher vacancies, as tenants would rather pay more for safety.
Proximity to Amenities
Convenience is a significant factor to consider in choosing a good location. Proximity to amenities refers to the distance from social places like restaurants, gyms, schools, work, etc. The closer a site is to these essential services, the more appealing it becomes to prospective tenants looking for a new home. On the other hand, if an area is far away, you’re less likely to find traction unless the rent is cheap.
Easy commute ties in closely with proximity to amenities, but not always. For non-mobile tenants, buses, trains, and other public means of transportation are essential. A great location is not only close to social areas, but it’s also easily accessible. In other words, metro and bus connectivity are within the region.
Benefits of Investing in an Up-and-Coming Neighborhood
An up-and-coming neighborhood is a location that is not yet considered prime property, although it shows promise. Since these areas haven’t reached their peak, many property owners are wary about investing in such places. Here are some of the benefits of doing so:
The great thing about up-and-coming neighborhoods is that they’re not quite hot spots yet. Thus, it’s much easier for investors to buy houses at cheaper rates. In most instances, development is still ongoing, and you can strike a deal with the developers. Instead of investing $400,000 to get a studio apartment in an already established part of the city, you can get a three-bedroom single-family unit for the same price in a starter area.
When you buy in at a cheaper rate, that often leaves you with more capital to spend on renovations. Whether you’re buying a luxurious beach house or a modest townhouse, you can always spruce things up with an upgrade. The correct update can yield as much as 80% ROI, so it’s worth considering.
Lower Vacancy Rates
Cheaper housing often translates to lower rents, which appeals to many renters. Many tenants would be willing to cut rental costs by moving into your property, knowing their neighborhood will likely become more convenient. Besides, you can always increase the rent as the area becomes more valuable.
Higher Resale Value
Since these locations tend to appreciate, if you ever want to resell your property, you can do so quickly and at fantastic rates. This tip is handy for investors that are into fix-and-flips.
Investing in rental property is a brilliant strategy if you know how to pick a winner. Unfortunately, too many investors don’t know how to choose the best location for real estate investment. If you want to run a successful rental business, you should prioritize seeking out good sites that can turn larger profits. Factors of such an area include property value, the neighborhood, proximity to amenities, and easy commute.
Also, it would help if you considered investing in an up-and-coming neighborhood because it means you can buy at a cheaper rate, sell when it appreciates, and deal with fewer vacancies. Of course, you have to put in the work, so you might need the help of an expert property manager to maximize your location’s potential.