Have you ever heard the often-mentioned advice that investing in real estate boils down to investing in the right location?
In fact many real estate gurus say that buying at the right location is the most important thing if you to build wealth from real estate investing
I am sure you’ve heard it numerous times:
Location, location, location is the only thing you need …And all else is trivial when you invest in rental properties
The idea that investing in real estate at the right location has become common thinking so much so that…
there is a real estate TV program called location
Two question to ask when looking at location as a factor in investing in real estate is:
- How important is the location of a property to making the right buying decision?
- Would your buying a property in a location affect your returns on investment in real estate?
The answer to these questions is: It depends.
The site of a property is not the only factor you should consider when you want to invest in real estate.
I believe it’s important to invest in a good location when you are investing in rental properties.
However, I disagree that the location of a property alone should be the only consideration for making a buying decision
The real secret to investing in real estate profitably is to consider… many other factors that are… related to the location of a property- in order to invest in real estate.
Why? Because that’s the only way you can earn good returns from investing in real estate without losing money.
Here are the reasons why I think location is not the only important reason for investing in real estate:
The local real estate market differs city to city:
Why? Because It’s possible for example to find-the right location in a city like Miami -and not be able to invest in the real estate market.
Because the average selling price of houses in Miami are so expensive-that you are unlikely to get cash flow from them
On the other hand you can find properties that are cheap in a city like Buffalo New York. And still struggle to get cash flow from them because of a downturn in the local economy
The moral of my examples: you cannot compare apples to pears when it comes to investing in real estate
Your long-term goal of investing in real estate is more important than the location of the real estate.
Why? Because you still have to make a decision that will support your long-term real estate investing goals.
For example if your investing goal is to buy and flip properties, you’ll not buy a property in a real estate market that is on a downtrend.
On the other hand if your investing goal is to buy and hold real estate you’ll buy in that location for cash flow.
You make money in real estate investing when you buy not when you sell
The secret to creating wealth through real estate investing is buying right.
You must make sure you buy properties at a price that the income you earn will cover your carrying costs.
You must stick with this rule if you are buying single-family homes.
Because your carrying costs such as: mortgage payments, insurance and property taxes are expenses-you start paying for as soon as you close on buying the property.
So if your rental income does not cover your expenses-you’ll end up losing money
The type of property you buy is important.
In cities like New York and most of the properties on the market are condos and apartments.
When you buy a condominium in many cities you have to pay for other expenses…
This may not been obvious to you when initially bought them.
As a result I have seen many investors lose money because of having to pay high expenses to property management companies for these types of properties
The attitude of prospects in the local real estate market is important rather than the location of a property.
Many cities have good locations for investing in real estate. However many people prefer owning a home to renting.
Because the cost of renting a property compared to home ownership is nearly the same.
On the other hand in some cities, because of the high cost of owning a home many people prefer to rent.
So the location of a property as well as the barrier to home ownership in a local real estate market is important when you are making-your investing decision
In summary, the location of a property is not the sole factor investing when it comes to making a decision to invest in real estate.
There are many other factors that are also important as the location of a property when you are investing in real estate:
You have to assess the real estate market condition.
You have to look at your own long-term real estate investing goals.
You have to make sure that the property you are buying, can earn enough rental income- to support the expenses you’ll incur-when property investing
The next time someone tells you that the location of real estate is the only important factor in real estate investing-you now know they are not telling you the whole truth