Learn How Location Affects Your Real Estate Profits

Learn How Location Affects Your Real Estate Profits

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You’ve probably heard it a thousand times, but it’s important to always remember that location matters when it comes to investing in real estate. This is because a property’s location can affect your profits in a number of ways. Buying a property in a more expensive area, for example, might cost more—but it also allows you to charge your tenants higher rent. This often results in higher profits, depending on your own expenses.

Table of Contents - Learn How Location Affects Your Real Estate Profits

Location is the most important factor in determining a property’s value, so choosing the right location is key to staying within your budget. It also determines how you’ll go about marketing and renovating to your property. It’s smart to learn all the ways that location can affect your profits before looking for investment opportunities. This can prevent you from making a long-term investment mistake.

The location’s average property cost

Cost is usually the first thing you’ll think about after deciding to invest in real estate property. You might be thinking about investing in a property in your city’s downtown area, where there’s sure to be plenty of foot traffic and potential renters. While this is a great option for some, downtown properties are usually quite expensive and may have a lot of other investors interested in buying.

For new investors, it might be better to buy in a cheaper neighbourhood with quick access to a nearby city or other local amenities. You’ll be able to charge less rent because you won’t owe an insane amount for the property. This will likely make your property look more appealing to potential renters.

That said, even if you do find a good-looking property in a lower-cost area, it’s important to do plenty of research. Even if costs are higher, you’ll usually want to invest in a property with some popularity among potential renters.

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What amenities are located nearby?

Potential renters and buyers consider a number of factors when looking for their new home with nearby amenities being a major one. New home buyers with families, for example, will probably want to find a home near schools or local parks. Other nearby amenities that renters often look for include local restaurants, grocery stores, nightlife and more.

Investing in a neighbourhood away from the city might also be a good choice, but it could take you longer to sell. Some people do prefer living away from the city noise and are happy as long as they have a few amenities nearby. In this case, it’s usually a good idea to look from properties with nearby highways and major road access. 

Make sure the property you’re looking at isn’t in the middle of nowhere, as most renters won’t want the hassle of living far from certain amenities. It’s usually even better if your renters can walk to these services.

Are you marketing to families?

As mentioned above, people with families often look for homes with certain nearby facilities, including schools, playgrounds and parks. If you want to invest in a property for families to rent or buy, then think like a parent. Is it a safe neighbourhood where families can walk together on nice days? Do the roads and sidewalks look safe to walk on? What’s the speed limit in the area?

You’ll also want to consider how many other families are already living in the neighbourhood. Most of the time, families want to move into a neighbourhood with other families. This can help assure potential buyers that their children have other kids to play with and that the neighbourhood is safe.

Does the location show potential for growth?

If a property shows growth potential, then you might eventually be able to sell it for more money than you paid. When considering potential economic growth, ask to see the property’s records over the last few years. Check how much property prices and demand have gone up or down in that particular neighbourhood. This will give you a good idea about the area’s economic potential and your property’s resale value. 

A good way to tell if the neighbourhood will gain popularity is by noticing how many new businesses have been added to the area or nearby in the last few years. Certain types of businesses moving to a neighbourhood could mean that more people will show interest in moving there. Areas adding breweries and music venues, for example, might attract plenty of younger renters over time.

Choosing the right neighbourhood

Depending on the area in which you live, there could be plenty of great neighbourhoods with excellent investment opportunities. Trying to focus on just one area can be a bit challenging, which is why you should devise a plan beforehand. Decide on how much money you want to invest in a property, then stick to that price. Use this budget to narrow down potential neighbourhoods, then do research on each one.

When it comes to investing, it’s usually best to have a real estate agent on your side. They have plenty of information on the market and local neighbourhoods. A savvy real estate professional can help save time and prevent you from making any major investment mistakes. 

The importance of visiting a location before investing

One of the best things you can do to assure that you’re making a good investment is to visit all the properties you’re considering. This will give you a better idea of the neighbourhood and its nearby amenities. You can also determine what renovations might need to be done after looking inside the property. Seeing it in person might also spark landscaping and renovation ideas that can make your property stand out.

The profits you make from your real estate investment are all based on people buying or renting out your property. To ensure you find potential tenants or buyers, location is key. It determines not only how much you pay, but how much you can charge tenants or buyers, who is likely to move in and how you market your property. Do the proper research on every location you’re considering to ensure that you’re making the right decision.

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Scott Dillingham

Scott Dillingham

I have been investing and lending to real estate investors for nearly 10 years now. After thousands of successful deals between flips, rent to owns, student properties and commercial assets I have developed a deep knowledge of real estate investments and have a passion of sharing this information with the world! If your looking for a lender who specializes in rental property financing you're going to want to connect with me at team@lendcity.ca.