Think location doesn’t matter in real estate investing? Location impacts the rents you can get, the tenants you attract, and the problems you can encounter. It also impacts the appreciation of your property and the opportunities you may have in the future.
Ozzie Jurock tells his readers to Forget about Location, Location, Location that it’s actually about value, value, value. Other experts have said to buy the worst house on a block regardless of where that block is located. We think it’s best to combine the search for value with the search for a location that will help you achieve your goals.
It’s still about location, location, location! Finding the location that is right for you and your goals
I would rather own a well built home that requires little to no work in a slightly rougher area, then the worst built home in a good neighbourhood. That doesn’t mean location isn’t important, it just means location isn’t everything in a purchase.
Last month we went over why knowing your real estate investing goals is a key step before choosing and locating your property type, and this month those same goals will come into play as you consider location for your investment.
If your goal is to “flip” a property (buy it cheap, renovate it, and resell) then you really do want to find that beat up house in a great neighbourhood. If your goal is to have a lower maintenance property that will attract good tenants, appreciate over the years, and you aren’t as worried about the amount you have to invest today, then you are looking for a great location and a good house. If you want good cashflow without putting much money down, you are likely going to have to look in the lower demand areas to find the motivated sellers.
You see how goals are important in your choice of location? Your personality and risk tolerance also come into play. If you need to see your real estate investment on a regular basis then you will want to look in your neighbourhood. If you prefer not to be involved at all, then you may want something further away from you.
If you aren’t sure where to look to find the properties that meet your goals, it’s time to begin your research. If there is one thing I know, it is researching real estate. Another day we can talk about my addiction to the Multiple Listing Service (Realtor.com and Realtor.ca), but for nowhere is how I find properties to buy:
- Go to open houses (usually 2 – 4pm on Saturday and/or Sunday)
- Look at local listings in your newspaper and at MLS or CLS (for more than four units)
- Drive by your desired areas regularily, or better, go for walks along the streets you want to buy on
- Speak to neighbours (walk by on a sunny day and people will be in their yards) or ask questions of the agents at the open houses.
Once you determine what properties are selling for and if they are within your price range and goal objectives, your next task is to figure out rents. To do this I usually:
- Browse online classifieds offered by newspapers across the country
- Review Viewit.ca on a regular basis as they take photos of each listing as part of their service
- Read CMHC published information
- Speak to the real estate agents at open houses and ask them what they think their listing would get in rent, and ask about other properties in the area.
Quickly you will identify areas where you can buy something and rent it out at prices that meet your goals. And, if you have done your research well, you will be able to act quickly and confidently on opportunities when they do arise. You also may be able to grab them before they get on the market, like we did in our most recent purchase in Vancouver. We have to save some stories though, so I will tell you more about that another month.
Now, you have found your location, and maybe you have even been lucky enough to find a property that meets your goals. Are you sure it is the right one?
June 15, 2006
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