STEP #2: IT’S ALL ABOUT THE LOCATION SILLY

IT’S ALL ABOUT THE LOCATION SILLY

Over the past 30+ years, I have purchased seventeen investment properties.  Some HORRIBLE (I sold) and some great (Still Own).  Here are my lessons to help you find a great location that generates high rents and above average long-term returns.

FINDING GREAT RENTAL PROPERTY LOCATIONS 

WOULD YOU LIVE THERE?

 

WOULD YOU LIVE THERE?

 I made the mistake of buying five properties, I would never voluntarily live.  Yep, I sold those five, AT A LOSS or at best breakeven!  If you would not live in your rental property, why should a tenant!  

CAN TENANTS FIND A GOOD JOB?

CAN TENANTS FIND A GOOD JOB?

Tenants need jobs/earnings to pay your rent.   Ideally you want tenants with good salaries, so you have a steady and increasing rental income.  An area with high tech jobs is desirable. You need the ability to increase the rent periodically as your cost will increase (insurance, taxes, etc.)   Diversified jobs with multiple industries also make a good location. 

Below example job sites can be utilized to search for key factors including: City; Industry; Zip code; Etc. 

IS THE POPULATION GROWING?

IS THE POPULATION GROWING?

The best place to invest in real estate will have population growth. This is closely tied to the state of jobs and the economy. 

Click below link to see population data.

Population and Housing Unit Estimates Datasets

WHAT IS THE PRICE TO RENT RATIO? 

WHAT IS THE PRICE TO RENT RATIO?

Price to rent ratio is found by taking the median price of houses in the location and dividing by the median annual rent. The best place to invest in real estate will have a lower price to rent ratio, meaning that whatever you paid for the investment property, you can charge rent that covers all cost and provides a good return 

IS THE NEIGHBORHOOD WALKABLE, DOES IT HAVE GOOD PUBLIC TRANSPORTATION? 

IS THE NEIGHBORHOOD WALKABLE?

People enjoy locations where they can walk to major conveniences, such as parks, stores, etc.  In addition, some Americans prefer public transportation versus the thousands of dollars in annual costs to own a car. Your tenants will need convenient access to the freeways.  Just as you would if this were your home, test drive from the potential property to the freeway and determine how many miles and the time.  This can be added to the rental advertisement. 

WHAT ABOUT THE CRIME STATS?

DOES THIS LOCATION HAVE LOW CRIME STATS?

In 2020, we have seen increasing violence in major US cities.  Many people are looking to escape. Investigate the crime rate of the area you are looking. Drive around the areas and look for signs such as bars on windows or gas stations with protective cages. I advise you to pass on properties in those areas.   Stop by the Police Station and ask an officer their opinion. You want your tenants and their family to be safe!

ARE THE SCHOOLS PERFORMING? 

DOES THE AREA HAVE GOOD SCHOOLS?

A good school district is critical to adults with children looking to rent or future buyers of your investment property. Most families cannot afford to pay rent and send their kids to private school!

You can find school and other location data using below links:

http://www.zillow.com/

http://www.realtor.com

IS THIS A GOOD LOCATION FOR LANDLORDS? 

IS THIS A GOOD STATE/COUNTY FOR LANDLORDS? 

 Look at states and cities where the laws favor the landlord.  Review the eviction laws prior to making an investment. Chicago, can take several months to evict and during the winter months you legally cannot evict when temperatures drop below ~32 F (Potentially four or more months!). 

ARE RETIREES MOVING IN OR OUT?

The Best Places to Retire in America Are All College Towns

https://flip.it/nzJvIF

Some town attract retirees, which means population growth.  “For North Carolina seniors, ages 65 and over, NC State University, located in Raleigh, NC, offers a tuition-free waiver for college class audits. And for retirees who are into the food scene, Raleigh has much to offer in the way of bakeries, breweries and restaurants. In 2018, area chefs received three different James Beard nominations — one of the highest honors in the food industry. First-class healthcare is also available as \nearby Duke University Hospital ranks as one of the top hospitals in America, according to U.S. News & World Report.”

CONCLUSION

IT’S ALL ABOUT THE LOCATION SILLY

Some other items to consider regarding location – 1) Access to Quality Healthcare; 2) Near community and/or 4-year college/university.

The best location to start your rental property business is your own backyard or reasonable driving distance from where you live.  

  • You are familiar with the area.
  • Understand the market value of properties as well as average rents.
  • Can manage the property yourself (saving 7-10% of the monthly rent).
  • Can maintain and make minor repairs.

ADDITIONAL DATA RESOURCES

There are several free and paid resources to help you conduct market research on various areas of the country. Use them for information on the economic growth, housing demand, vacancy rates, average income, and average housing prices in different areas.

To gather more data request the information from your real estate agent and utilize google search.

PREVIOUS RENTAL INVESTMENTS BLOGS

REAL ESTATE INVESTMENTS – THE BEST WAY TO BUILD YOUR WEALTH!

HOW TO GROW POSITIVE CASH FLOWS FROM RENTAL PROPERTY INVESTMENTS

THE BEST INVESTMENT TO MAKE BY AGE 30 – REAL ESTATE

I am starting a new series on Rental Properties.  IF YOU HAVE OTHER TOPIC SUGGESTIONS, PLEASE SEND ME A NOTE USING THE COMMENTS SECTION.

Upcoming Tentative Topics Include:

  1. IDEAL LOCATIONS
  2. FINDING HIGH ROI PROPERTIES
  3. FINDING A GREAT REAL ESTATE AGENT AND PROPERTY MANAGEMENT FIRM
  4. A WIN-WIN STRTAEGY FOR NEGIOTIATING THE PURCHASE CONTRACT 
  5. HOW TO INVEST IN LONG DISTANCE PROPERTIES 
  6. SCREENING AND SIGNING A GREAT TENANT. TAKE YOUR TIME FINDING A GOOD TENANT AND EVICT FAST WHEN YOU HAVE A BAD TENANT
  7. WHAT IS BETTER? CONDO, TOWNHOME, SINGLE FAMILY VERSUS MULTI FAMILY UNITS?
  8. PROS AND CONS OF PAYNG HOMEOWNERS ASSOCIATION FEES
  9. MANDATORY- YOU HAVE TO GET THE PROPERTY PROFESIONALLY INSPECTED
  10. ADVNATGES AND DISADVANTAGES OF BUYING A TURNKEY PROPERTY VERSUS ONE THAT NEEDS WORK 
  11. FINDING FOOD LICENSED AND INSURED CONTRATORS 
  12. USING OTHER PEOPLE’S MONEY
  13. INSURANCE NEEDS – INCLUDING LOSS OF RENT, LIABILITY AND UMBRELLA POLICY
  14. HOW TO EVALUATE YOUR RETURN ON INVESTMENT (CASH FLOW AND LONG TERM APPFECIATION)
  15. TAXES – THE GOOD; THE BAD; THE UGLY
  16. LLC OR OTHER PROTECTIVE STRUCTURES
  17. BUILDING AND IMPLEMENTING YOUR STRATEGY INCLUDING AN EXIT PLAN
  18. PROS AND CONS OF HAVING PARTNERS
  19. REFERENCES: WEB SITES, BLOGS, BOOKS, ETC.

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ABOUT ME

I am a proud nerd (as my beautiful wife and daughter have told me) investment and finance blogger, with a NC State, Chemical Engineering, University Rutgers, MBA and Harvard University, Advanced Management education.

I left a corporate career because I had a desire for making a difference as a speaker and writer, to help others. I was blessed to be coached and mentored by strong women and men in both my family and professional life.  It is my time to serve and give back.

DISCLAIMER

I started my first business at ~13 years of age (small but brilliantly created plant nursery). I am a successful investor in stocks, options, real estate and happy to share my personal finance and investment lessons learned with you.

However, I am NOT a licensed financial advisor.  Please do not construe my suggestions on this blog, as recommendations for your personal situation.  For individual finance advice please seek your own licensed CPA or fiduciary financial advisors.  

I write this weekly blog to make an impact by reaching an audience and demonstrating the need for financial literacy. I will help you get there.

Powers Investments Management, LLC

This blog will provide, information and simple strategies, that will assist you to achieve YOUR financial objectives and long term targets. For over 30 years, I solved multi-million dollar problems, for Fortune 10-250, companies. My formal education includes: Business, Finance and Chemical Engineering {Problem Solving} at: Harvard, Rutgers and North Carolina State. And an additional 30+ years, managing my family’s investment decisions. I currently manage/advise people with net-worths ranging from the tens of thousands to several million dollars.

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