The real estate investor’s mantra—”location, location, location”—becomes even more important for those with a limited real estate portfolio. Let’s say you have just one—or possibly two—single-family rentals (SFR). Picking the best location for your single-family rental should be your number one focus.
Here are some suggestions for accessing the right SFR location for you.
Define Your Goals
First determine what type of neighborhood you’d like to invest in, which requires you to define your goals. Do you want to be in a “hot” trending urban neighborhood where upwardly mobile millennials are clamoring to live? Would you rather be in a new suburban tract where mostly twenty- and thirty-somethings are raising their young families? How about a quiet, older neighborhood with an eclectic mix of residents from young professionals to retirees?
You’d have good reason for investing in any of these neighborhoods. Weigh the stability of the neighborhood as well as such factors as income potential, growth potential, and attractiveness to potential tenants.
Intensify Your Research
Do a thorough job researching your potential SFR locations. Use websites such as Zillow, Trulia, RedFin, and Realtor.com to familiarize yourself with real estate and rental income trends for specific zip codes. In addition, consider signing up for a member-based analytics site such as HouseCanary, RealQuest and Tableau to gain access to market forecasts that can further inform your decision.
Don’t limit your research to online sources exclusively, however…
- Take a drive through potential neighborhoods at different times and on different days of the week. This will allow you to get a feel for the “vibe” and quality of the neighborhood.
- Eat at the restaurants and shop in the stores around your prospective rental property. This will allow you to evaluate the business environment of the surrounding area and the livability of the community.
- Check out schools, churches, and local transportation options—all key reasons that people might move into the area.
- Drive around to get a sense of how much new construction (both residential and commercial) is occurring in the area. Robust activity is a good sign.
- Forge a good relationship with a real estate agent who can show you properties that are most compatible with your investment objectives.
Broaden Your Search
Are you willing to invest outside the market in which you live? If so, a long-distance investment opens up a much broader scope of possibilities.
Do online searches for “best U.S. markets/cities/places to invest in residential real estate.” Read voraciously for insights about markets that could be a good fit for you. If the returns on investment are strong, then your income potential will more than offset the fees charged by a local firm to manage the property for you.
Once you have purchased and found tenants for your property, don’t become complacent. Keep an eye on trend lines in property values and rental prices to ensure that your analysis of the area was spot-on. You want to ensure that the investment you made today will continue to be a good investment for you tomorrow.
Found the perfect location for your single-family rental? Turn to 5 Arch, and Borrow Better!