Often the optimal property buying strategy involves first narrowing down the property type you’re looking for. The next step is determining where to invest. This is arguably the most important factor determining if your investment will succeed. Investing in property is one of the most profitable investment strategies, but if the location you’re looking at is less than desirable, your investment may not be as profitable as you expect.
We asked buyers agent Search Party Property what are six objective factors that should be researched before coming to a decision to buy.
The Importance of Location
Buying property on the cheap might seem like a good strategy for a first-time buyer, but if you are buying in a location with poor job opportunities, a high crime rate, and no public transport, you’re not likely to yield any gains. You may lose money in the long term as the area becomes more undesirable and your property value goes down.
However, an investment can become profitable if you have researched an area and found out for example that there are plans for mass governmental and industrial investment. As this location becomes more desirable, your property value may skyrocket. The more people move to a particular area, the higher the property values will go. This is a fundamental supply and demand factor.
It is important to remember that you are not just buying a property. You are buying the location too, which impacts the value significantly.
1. Market Growth
Ideally, you want to find a property in an area with a stable economy and high potential for future growth. A stable economy means greater job security and low levels of unemployment – both good indicators of a location’s future value.
You should look for areas where property values have appreciated and with a strong demand for rental properties. This will help indicate whether you’re making a wise long-term investment.
You should also know what new development plans there are for the area you’re buying – if there are any new schools, hospitals, transport improvements, or public infrastructure investment. Any area that is being improved, alongside a steady increase in population, is likely an area with prime real estate. Property values are sure to increase as these new developments materialise.
2. Public Transport
Transportation hubs and areas with easy access to public transport are desirable areas. People are more likely to move to neighbourhoods that have a well-serviced transportation system, making travel to work or school more convenient.
Public transport infrastructure should reduce commute times, attract more commuters, and raise property values.
People will be willing to pay more rent if your investment property is in an area with good transport hubs. For many renters, the ideal location is one with easy access to public transport. Investors taking this into account will likely result in high yields.
3. Crime Rates
Crime rates are a significant indicator of how successful your investment will be and are one of the most important things to consider when deciding on an investment location.
Most types of property in areas with a high crime rate are undesirable and you’ll struggle to find tenants or would-be buyers. It is also hard to rent commercial units to businesses in these areas.
When choosing an investment location, you should compare the area’s crime rates with other local areas and other cities. This will help you determine whether you’re making a sound evaluation.
Reputation should be considered too. Often suburbs have a good or bad reputation regardless of their actual crime rates and this can impact property values.
4. Job Opportunities
Developing areas with new job opportunities and areas with low unemployment rates are indicators of a good investment location. More employment opportunities mean more people moving to that area, and low unemployment statistics indicate that the area has had steady long-term job growth.
Low unemployment rates correlate with a robust local economy and high property demand. They can also indicate gentrification, which can yield significant returns if you invest in a property at the right time.
An active job market is one of the main factors behind a thriving real estate market. By researching current and past trends in the job market, you’ll be able to tell if you should invest in an area or avoid it entirely.
Depending on the type of property you’re looking to buy and the type of people you’re looking to sell or rent to, schools can be a huge factor in determining whether a property investment will be profitable.
For families, an area with quality schools is a high priority. These areas are some of the most popular to live in – with some of the most expensive rental rates and high property values.
6. Local Amenities
It is important that you factor in the local amenities when choosing an investment location. Families are less likely to move to a neighbourhood if there are no retail stores or hospitals within the area.
People like to be able to access recreational facilities even if they don’t necessarily use them – they prefer to have the choice. A family with a young child won’t want to move to an area without parks or playgrounds nearby. Likewise, students are less likely to rent somewhere if there are no restaurants, cafes, or libraries in the area.
Deciding on location can be a tricky part of the research process. Each of these factors are extremely important in deciding on a property locale. Ignoring even one of the above factors can impact property investment results. In-depth market research before investing is crucial to avoid disappointment and ensure you yield a profit in the long term.
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