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 wrote a book called Forget about Location, Location, Location and said 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 (you have taken the time to write down your goals haven't you?).
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.
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 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. Here's how we start our research:
1. Go to open houses (usually 2 - 4pm on Saturday and/or Sunday) and ask the agents lots of questions about sales in the area and prices in the area
2. Look at local listings in your newspaper and at MLS. ca (or realtor.com if you live in the U. S. )
3. Drive by your desired areas regularily, or better, go for walks along the streets you want to buy on
4. Speak to neighbours (walk by on a sunny day and people will be in their yards) about the houses in the area, what they like and don't like about their area.
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:
1. Browse online classifieds offered by newspapers across the country
2. Review Viewit. ca on a regular basis as they take photos of each listing as part of their service
3. Read CMHC published information
4. 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.
At the end of the day it's still about location, but for us, it's about finding the best location for your goals.
Julie and Dave are passionate about real estate investing. Together they've built a multi-million dollar portfolio of properties in Canada in their spare time. They like to share their experiences with other investors and help others achieve their real estate investing goals. You can check out their stories and subscribe to their free monthly newsletter at their website http://www.revnyou.com