Are people really ‘lucky’ when it comes to spotting and taking advantage of investment opportunities? Or is there a degree of knowledge and skill that comes into it? Whilst it may appear to come easily to some individuals, the truth is that behind the scenes, these people are working incredibly hard to make their dream a reality. Plenty of research is needed to find those opportunities that offer a good return on investment, with one area of research being particularly crucial to the success of your venture – location.
It doesn’t matter how fantastic property could be if it is in the wrong place. Nevertheless, uncovering gems in hidden locations takes a lot of work. Whether your next investment is a condo in a big city the other side of the country or a single-family home in your very own neighborhood, the options are endless. So, how do you find the best places to buy rental properties? Realistically, you have two options.
Unsurprisingly, one of the best ways to snag a great investment property is to choose one that is in an area where there is a strong and steady housing market. Two identifying features of a location with this include high rents and high demand for homes.
When you invest in an area where the market is strong, the risks are much lower, but this does mean that you will almost certainly need a larger investment. House prices won’t be cheap, even if the property needs work. However, typically the bigger the investment you make, the higher the return will be. This means that if you can stretch to investing in an established market, you can relax a little, knowing that your property will be in demand and you can command a great rental price, giving you the security of steady cash flow.
This is trickier since you may not have a lot of information to go on, and there is a definite degree of risk involved. However, there are also some very real benefits. The main one is that the properties will be low cost in comparison to those which you would buy in an established market, particularly if you buy a fixer-upper. This could allow you to secure more property for your money, or even to invest in a couple of places rather than a single dwelling. This will maximize your opportunity to receive a great return on your investment.
Whether you choose to invest in an established market or an up-and-coming area, there are still a number of different considerations that you will need to make to ensure that you get the right city and neighborhood. Some elements that will help you decide on the strength of the economy in your chosen location include:
The population growth
The employment growth rate
Whether home values are steadily increasing
What the current rental yield is and how it has changed over the last 5 years
You will also have to consider how desirable the area is to renters. High demand for a location pushes rental prices up and gives you greater security in your investment. Some of the factors to consider when thinking about whether an area is or will be popular include:
Are there good public transportation links
Is it close to a good school district?
Is there a major university or research hospital?
Are many people currently relocating to the area to live and work?
What big businesses are already in the area?
Are there any plans for big corporations to relocate to the area?
Is unemployment low?
If you can answer ‘yes’ to these questions, then it is highly likely that the area will continue to flourish, and investing in property here is a wise move.
If you would like more advice on how to spot the best places to buy rental properties, or about any aspect of the investment process, don’t hesitate to speak to our expert team who will be happy to assist you.