Location is one of the most important factors when it comes to real estate investment. Location determines the availability, affordability and demand for housing. A house in a desirable location will usually have higher prices than similar homes in less desirable locations.
Just because a property is in a high-priced area or is expensive does not always mean it will be a profitable investment. Similarly, low-priced properties in fairly-priced regions are not necessarily a bad investment. Real estate is very location specific. One neighbourhood of a city may be a great place to invest while another may be a place you should avoid putting your money in.
Here’s how you can analyse a location and decide whether it’s a good place to invest or not:
Pick the Right Market
The first thing you have to do is find the right market for real estate investment. This is the best way to find profitable investment opportunities. Before you begin looking for specific properties, you need to find a market where there are higher chances for profit generation.
There are four things you must keep in consideration while choosing an area to invest:
- Home Values
Even if your aim is to buy a property to rent, it is important that your investment increases in value over the years. So, make sure the property you are purchasing is worth its price. You also need to consider other costs like costs for renovation, maintenance, insurance, and property taxes.
- Market Growth
You need to find a market that has potential for future growth. You can narrow down your list by researching whether an area has witnessed an increase or decrease in population in recent times or is projected to witness any such changes in future. You want to invest in a market where population is increasing rather than one in which residents are moving out.
- Rental Rates
You must analyse a region and check if it produces rental rates that are beneficial for you and would bring a positive cash flow. An area may look like a good place to invest, but if it does not support good rents, then it may make it difficult for you to reach your desired return.
- Job Market
People usually move into regions that have good employment opportunities. The more the job opportunities, the better. A good way to figure out which areas have a strong job market is to check their past and present unemployment rates. Job stability and growth and important indicators for future demand for rental houses.
The neighbourhoods that look appealing to you will largely be a matter of personal preference. However, truly great neighbourhoods will have a few factors in common, such as appearance, amenities, and accessibility. Your neighbourhood may also influence the size of the area on which your house is constructed.
When it comes to accessibility, you must look for a neighbourhood that is located near the city’s main transit routes and has more than one entry point. The appearance of the neighbourhood is also very important. Quality landscaping, community spaces, and nearby parks tend to be desirable. You can also check the popularity of the neighbourhood based on how long houses in that area stay on the market. A quick turnover means you are not the only person who thinks this is a desirable place to invest or live.
The Property Itself
This is the aspect of house hunting that usually surprises people. If you manage to narrow down your choices to two houses in the same neighbourhood and one of them needs repairs but is built on a larger area and the other one is in good shape but built on half the area size. The prices of the two houses are also similar. Then which one would you choose? Usually, the house that needs repairs is the better investment. So, if you get a chance, choose a bigger house built on a better-situated area over a nicer house. Remember that a house that is less attractive can always be renovated, but the plot size can’t be changed.