Location, Location, Location: Tips to Know Your Local Market
Location, Location, Location: Tips to Know Your Local Market
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If you want to make the most of your real estate investments, it pays to pick a location and pay attention to it. This is true regardless of whether you’re interested in residential or commercial real estate. If you are just starting out, pick a one-square-mile area of city in your local area and familiarize yourself with all of the properties in that area, whether or not they are for sale. The better you know your area, the easier it will be to recognize good deals or undervalued properties when they pop up. Even if you’re an experienced investor, this can be a good strategy for learning a new area, especially if it is in a different city or state than the one you live in. Real estate brokers and local property management companies will often be willing to provide answers to questions that will help you with your due diligence.
Here are some questions to ask yourself about the area:
1. Is it easily accessible by car or public transit? The importance of this factor will vary depending on the type of property that you’re planning to invest in. Office buildings, retail properties, and multi-family units need to be more accessible than a warehouse.
2. Is public infrastructure being re-developed? If the municipality is investing funds into the area, then it’s often a sign that it’s improving in other ways.
3. Is there investment by large private sector retailers? If big box retailers are investing in the area, then it can be a good sign for other commercial enterprises. Also, larger companies typically have access to better research on community growth.
4. Are employment rates steady or on the rise? Keep track of which industries are moving into the area or expanding their workforce.
5. What kind of population growth is the area experiencing? This is usually closely linked to employment in the area, but there can be some differences in the trends.
These questions not only help you decide whether to choose that area of town, but also help you determine strategies for acquiring your investments as well as for getting rid of them. If employment rates or population growth declines, then you’ll need a different exit strategy than when they are on the rise and a property is easy to resell.
Once you have your location scoped out, the final key to keep in mind is price. Knowing your area should help you spot properties that will give you the ROI (return on investment) that you need and avoid those that will end up costing you.