We are currently in the midst of a mini technological boom in the real estate investing world. It is becoming increasingly more popular to rely on technology and formulas to make your investing decisions. While it can certainly be helpful, they will be for naught if you don’t remember the most important piece of investing criteria-location. We have all heard the overused phrase “location, location, location.” In fact, it is widely believed to be the single most important aspect about investing in real estate. However, it has been used so frequently that the importance has started to become watered down. The reality is that without a good location the best numbers and the best data will quickly become irrelevant when buyers or renters show no interest in the property.
Price and location often times will go hand and hand with buyers. Think about what is the most important factor for you when you look to buy. Sure, price is nice, but location is always better. It will dictate everything else in the transaction and with the property. If the property is located in a nicer area, your property will be in greater demand and can seek a higher selling price. The same property located in a diminishing area will not have nearly the same appeal and won’t create nearly as much demand. You may pay a little more when you buy, but to buy in a better location means you have many more profitable options down the road.
It is easy to buy the best houses in the best areas, but it is not that easy when you are investing. You need to have a good mix of value and upside in your portfolio. The location in which you invest will dictate how you invest and what your goals are. By focusing on properties located near a university, you are committing to hold onto the property long term and do all of the work that landlording to college students entails. If you focus on properties in worse neighborhoods you may see a greater return but you will constantly struggle with finding demand for your property. Eventually, this lack of demand will come back to bite you in the way of lower rents or a lower sales price.
Traveling just a few miles in most towns could paint a completely different picture. This is where it is critical to make sure you know everything about the location you are buying in and are paying for the best location. Do your homework to find out if there are any changes coming to the area, the mill rate, employment rates and new housing starts. There are times when a location may seem ideal only to undergo sweeping changes in the near future. Before you buy, you need to know everything about the location you are buying in.
If you are stuck evaluating a property, go back to basics and look at the location. This is a tried and true evaluator that seems simple enough, but it still is the most important factor in real estate.