A lot of thought goes into real estate investing, and rightly so, to make informed investment decisions. There is a long list of critical factors you need to include to decide which rental property to purchase; arguably, chief among those is location. Many aspects of your real estate success may rely on that one detail.
Key Highlights:
- The location of a rental property significantly influences its rental demand, tenant satisfaction, and potential income, making it a vital factor in real estate investing.
- Access to public transportation, schools, shopping centers, and entertainment enhances a property's appeal. However, understanding your target market, urban vs. suburban renters, is essential.
- Strong local economies, low crime rates, and promising environmental conditions (like land suitability and population growth potential) all contribute to long-term investment value and rental stability.
- Planned infrastructure and commercial growth nearby can increase rental demand and property appreciation. Align property types (e.g., apartments, single-family homes) with the development trend in the area.
- Even without ideal surroundings, investors can add value by providing parking, installing security features, offering vending machines, or giving tenants incentives to enhance appeal and retention.
Why Is It Important?
Buying in a prime location can immediately increase your investment potential. Rental demand will be higher, and tenant satisfaction will be easier to achieve. With strategic management and the right local market conditions, your investment property can earn potentially higher rental income. Let's dive into what makes a particular location appealing to potential tenants.
What a Good Location Looks Like
Proximity to Amenities
Tenants would prefer a rental property that's close to key amenities that provide goods and services such as public transportation, shopping centers, grocery stores, good schools, or entertainment venues.
Of course, you have to consider who your target market is. Some properties are understandably distant on purpose, such as suburban homes built away from the noise of a bustling city.
Economic Factors
The local economy also plays a part in the importance of location. Economic factors, such as job growth, can drive young professionals to find rental units within the area. Even economic growth can determine how high your rental rates can go.
You may also use economic indicators to assess potential rental demand, such as employment rates and GDP growth. Above all, economic stability will help you attract tenants and retain your property value, if not increase it.
Environmental Factors
A seasoned investor would also look into environmental factors to determine the potential for property appreciation, as well as population growth prospects. The natural surroundings of a property can reveal its long-term potential.
A large flat land can lead to infrastructure projects like essential amenities. You can also tell whether it's a bad location for property investments. For instance, purchasing beach homes in a location with known coastal erosion will be unwise, as property value will decrease over time.
Future Development
The future growth potential of a location partly depends on the planned developments in the area. New residential and commercial properties will boost economic growth with the boom of job markets, as well as property value, as nearby amenities are built.
Future developments can also be suburban, which can be beneficial for properties that house families. Your investment strategy can heavily rely on the surroundings. Apartment buildings would fare better around office buildings and universities, whereas single-family homes would be preferred in suburban areas.
Crime Rates
Property demand can plummet when crime rates are high in an area, as this is considered a key factor for families with young children. Your real estate investment could suffer if you ignore this factor when considering the home's location, seeing as rental yields could be low.
Research the economic health of the area, as it plays a significant role in crime rates. Typically, strong economic growth can lead to lower crime rates, while downturns that cause poverty and unemployment can be associated with higher crime rates.
How You Can Stay Ahead Without These Advantages
Property value and tenant prospects can be affected by the lack of the mentioned advantages, but as the property owner, there are things you can do to make your real estate investment thrive without them.
- Parking Spaces: Providing easy access for parking can balance the lack of nearby public transportation, since you can still appeal to tenants with their own vehicles.
- Vending Machines: Proximity to grocery stores and shopping centers gives your property investment a significant advantage, but they don't necessarily deter tenants. You can make up for this by adding vending machines to your property.
- Security Measures: If your property is in a relatively unsafe neighborhood, installing strong security measures is not just a way to attract tenants, but a must. Surveillance cameras, strong locks, and even keyless entry features could be great selling points.
- Incentives: When there are few commercial properties nearby for access to goods and services, you can instead offer incentives like discounts for groceries or food items. Offer them when tenants renew leases or have good track records.
Rental Property Location FAQs
How do I choose the best location for a rental property?
- Look for areas with strong demand, low vacancy rates, good job growth, schools, public transport, and amenities. Research crime rates and future developments.
Is it better to invest in urban or suburban areas?
- Urban areas may offer higher rents and demand, but suburban areas can provide more stable, long-term tenants and lower purchase prices. It depends on your investment goals.
How does location affect rental income potential?
- High-demand locations (near schools, transit, or job hubs) can command higher rents and reduce vacancy periods. Poor locations may require lower rents to increase demand.
What neighborhood features attract tenants the most?
- Tenants value safety, good schools, access to shopping, public transportation, and short commutes to major employers or universities.
How can I find out if a real estate property is in the right location?
- Check local vacancy rates, rent growth trends, online rental platforms, and talk to local real estate agents or property managers. Do your due diligence first to make informed decisions.
Do properties located in a good area have higher purchase prices?
- Property prices tend to be higher when they're in the right location, but the market value is high for a reason. You can attract more tenants and charge a higher rent price.
Leave the Rest to PMI Georgia
Investing in a property in a prime location is only the beginning of your rental business journey. There's a lot more work to be done to make it as profitable as possible.
Your property management duties will be waiting for you, but you don't have to handle them yourself. With professional management, you can be a completely hands-free landlord, and that's what PMI Georgia can provide you.
Discover how our expertise and resources can help you. Contact us today!
