Knowing which advice to listen to is perhaps one of the best attributes an investor can have. If you have been in the business long enough, you will have already discovered that every investor has an opinion. A lot of opinions are centered around investing locations. There are certain areas and neighborhoods that some investors will avoid at all cost. Other investors, however, will see opportunity in that which others deemed unfavorable. If you take any one person’s advice blindly without doing your own due diligence, it can end up costing you a deal and leaving you unsure of how and where you really want to invest. More importantly, evaluate every property on its own merit, as deals can be found anywhere.
Without trying to sound repetitive,”location, location, location” remains a very valuable concept. Even the worst neighborhoods can hold great value if you buy in the right location at the right time. Before dismissing a potential deal based on its location, dig in and do your own research. What happened to the market that made it lose its appeal? Was this a short term unemployment issue? Was the area hit by a rash of short sales and foreclosures? Did something happen in the town that caused homeowners to leave? Only when you find the reason for the change in the market can you assess the true value of the property.
A lot can change in just a few miles. There are many investors who will omit a property simply based on its zip code without looking at anything else. To get a true feel of the property, you need to see it with your own eyes. There are many great web sites that will supply pictures and data about the property, but will fail to tell you what the neighborhood is like only four houses away. The beginning of the street may not be as bad as the middle and the end of the street may be have a school or high way entrance just a block away. Never cross a property off your buy list without looking at the house and getting a good idea of what the neighborhood is all about.
A bad neighborhood could be one that is overcome by crime, poverty or has an abundance of older properties. With every investment, you need to evaluate your risk vs. reward. You may be able to get the property at a severe discount, but at what cost? Are you going to be able to rehab and sell in a short period of time? Is there going to be a market for your property? If so, at what price point? Getting something below market value does not automatically make it a great deal. The market could be trending lower and what you perceive to be a good deal may be nothing more than fool’s gold. Look at the big picture and always think about your exit strategy before investing in any area.
You can make money as an investor in most areas and with most strategies. The most important thing to remember is to evaluate every property on its own merit and always get eyes on every potential deal. Just because there are plenty of opinions out there, it does not mean you have to listen to them.