BY ALBERT LOWRY— An old joke among real estate professionals is that when asked what the three most important factors are in establishing the value of a property, the answer is always “Location, location, and location!”
What that means to you as an investor is that your profitability and success will largely depend upon making well-informed choices in the location of the investment properties you choose. There are a number of factors that determine what makes a good location, both for yourself and for your future tenants.
This is just as true for multifamily dwellings as it is for single family homes, possibly even more so. Here’s why. It’s easier for apartment dwellers to seek a location they prefer, than it is for a homeowner to relocate. That means that if you want to keep your tenants and make a nice profit on your apartment building, it has to be in a desirable location.
We’re going to look at a number of questions to ask yourself when you’re choosing an investment property, pinpoint what you should check into, and finally, learn some insider tricks about where you can get the information you need.
First, what is it that makes a location good or bad? In some respects, what’s considered desirable depends upon the type of tenants you have. For example, if you are targeting working people for tenants, being close to public transit will be important to many of them, and they’ll want to be close to shopping.
Keeping that in mind, here are the typical factors that you should consider when you are determining whether a location is good for one of your real estate investments. First is nearby amenities, such as shopping centers, parks, churches, or public transit. Ideally, the shopping centers should be fully leased out, and the parks should not attract any nighttime criminal activity.
Next, observe who currently lives in the area and see whether they are a good fit with the tenant income level and general type of property you have in mind. Explore a 3-block radius all around the property you’re interested in.
You can learn a lot by just driving around to get a feel of things and seeing whether people take care of their properties in the area. Do you feel the charm and appeal of the neighborhood, or does it seem trashy and unsafe? Try to determine whether the neighborhood is in the process of improving, or whether it is deteriorating. You can find out by searching public records and by observing the economic climate. Vacancies in commercial spaces and lack of newer amenities can be indicators that the economic activity in the neighborhood is either stagnating or worsening.
You can get further insight into the future of a neighborhood by researching zoning permits and planned development for the area. Plans for a new shopping center would typically be a positive indicator. Plans for heavy industrial zoning would, on the other hand, be something to investigate further to find out how it could change the character of the area. Try to find out if there is anything–either presently or that’s in the planning stages–that would affect tenant enjoyment, such as heavy traffic or high noise levels. It would hurt you financially if some outside factor made your tenants pick up and leave en masse, so you need to be on the ball about what’s happening and what’s going to happen in the neighborhood.
Another important consideration is schools. Are there schools nearby and do they have a good reputation? This is an important consideration for attracting tenants. Many parents are strongly influenced in their choice of neighborhood by the quality of the school district in which they will live. A better school district means that you can charge higher rents on your property because it will be more desirable and more in-demand.
Once a property and neighborhood have passed your initial inspection, there are a number of pretty reliable ways that you can find out more about the neighborhood. These are some methods that have worked for me and for my students in the past, but you can use creative thinking to find even more that would suit your situation.
You can find out more about the area and its amenities through the Internet, local phone directories, the local library, and the local newspaper. The classified section of the paper will give you some insight into the availability of rental units and the prevailing rental rate.
A chat with local real estate professionals and people in associated industries (e.g., insurance agents and bankers) can give you the benefit of their experience and educated opinions. They have a good feel for the quality and future of a neighborhood because their livelihoods depend upon them knowing.
Also be sure to take advantage of the local government offices. You’ll have the benefit of the wisdom of people who know all about the community and what’s planned for the future. Some of the departments that can provide you with insight are the Public Works Department, the Planning Commission, Zoning Departments, the Police Department, and Parks & Recreation, to name just a few.
If you follow these suggestions, you will be well informed about the location of the multifamily property you are interested in, and you’ll be well positioned to attract many high-quality tenants. This will help you avoid costly mistakes and put you on the path to greater profitability and success.
I hope that you’ve found this informative. Please be sure to also check out RealEstatePropertyExpert.com, where I have even more tips and tricks to help you achieve wealth through multifamily real estate investing!
Your partner in prosperity,
Dr. Albert Lowry
About Dr. Lowry: Albert Lowry is the premier real estate expert in the world today, and he has mentored many other well-known gurus to establish their knowledge of property investing. Dr. Lowry has been featured in high-circulation newspapers such as the New York Times and on the covers of well-renowned publications such as Money magazine and People. He has also appeared on numerous national television and radio shows such as Wall Street Week, The Today Show, the Regis Philbin Show, Merv Griffin and Larry King Live.