What Makes an Investment Property Location Great?

Posted by Michael Miller on July 23, 2019

As a residential real estate investor, you’ve heard the “location, location, location” mantra so much you can recite it in your sleep. But what exactly makes a location great? And just as important, what are the red flags that signal investment property locations you should avoid?

Look at Favorable Attributes

The most favorable locations for real estate investments have multiple positive attributes in their favor—things like good school districts, access to public transportation, favorable tax rates, rising property values, fast turnaround of home sales, and low crime rates.

However, not all locations need all those attributes. It comes back to the one cardinal rule that every successful real estate investor must follow: Know your market. For example, access to publication transportation is far more important in New York and Chicago, where subways and trains are integral to the daily commute, than in cities like Houston or St. Louis, where suburbanites are accustomed to traveling everywhere by car.

In assessing what attributes are important, also make sure you know your demographic. If your target renters are younger millennials or coming-of-age members of Generation Z, they likely won’t have an interest in how good the schools are when renting in an urban area. They’ll be much more focused on great coffee shops, restaurants, and trendy shops that are a leisurely walk or short drive away.

Pay Attention to Infrastructure

You can also judge a great real estate investment location by assessing the surrounding infrastructure. Are the roads and bridges well maintained? Is there easy access to major roads and interstates? Also pay attention to public utilities, especially in rural areas and new developments. Is there ample choice for internet access and cable TV?

In addition, does the surrounding area offer parks and recreational opportunities? Are there also nearby public resources, such as libraries, hospitals and health facilities? All of these amenities make an area more desirable and will make your property more attractive to potential renters and also improve resale value.

What to Avoid

To find the best location, avoid certain attributes that make properties less desirable. For instance, a home located on a busy street won’t be as desirable as a similar home on a quieter cul-de-sac.

The same can be said for homes located near airports or railroad tracks. If you are unsure if proximity to the airport is a problem, try sitting in your car at different times of day and during different types of weather—sunny skies, overcast skies, windy days, etc.—to confirm that aircraft noise will not be a problem.

You do not necessarily have to avoid an investment because the neighborhood where it is located appears old or rundown. Sometimes the best investments are hidden gems in neighborhoods such as these. Just make sure you do your homework so that any investment you make will reap the returns you need and expect.

Knowing the difference between a bad location and a good location is important to your real estate investment prospects. Why settle for good when, with a little deeper evaluation, you can find something great?

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