The opinions expressed by the collaborators of Emprenderos are their own.
Everyone knows that location is a critical factor when investing in real estate. Buying any property requires a litany of considerations and due diligence before any asset or resource can change hands, but location is paramount.
Neighborhoods with low crime rates, excellent school systems, and up-and-coming communities are the regions where property values tend to increase at the highest rates. When you’re investing in a new part of town or a city that offers stability and growth, these neighborhoods are much more attractive, and both sales and rental prices tend to reflect the high desirability of these locations.
Location is not just about the home itself, but about the positive growth of the environments where your property is located and the trends that demonstrate an increase in the contributions of the community at large that make the area more desirable. Hopefully, these trends continue on an upward trajectory to make your investment profitable.
Related: 5 Proven Steps to Becoming a Real Estate Millionaire, According to an Investor
Value enhancement
Whether you’re buying a detached home or buying a rental property, you want the value to increase over time. When this happens, you can sell the home for more than you originally paid, and rental prices can increase as homes in the area become more valuable. This return on investment is the goal for home buyers and homeowners looking to develop some passive income channels.
But the important thing to remember is that your value is not determined by the physical home in which you or your tenants reside. Buildings depreciate over time and renovations require more capital investment. The biggest impact on improving property value is the cost of the land and the surrounding community.
That’s right, the lot you’ve built that house or apartment complex on is where the value really lies. A beautiful home or new building in an otherwise depressed or run-down community tends to suffer in resale or rental pricing. Why that?
It’s because of the very simple and obvious fact that people don’t want to live in a neighborhood that doesn’t have much to offer in terms of a safe, functional and welcoming community. In big cities there are so-called “good” and “bad” blocks. One area may be safe, while another just a few blocks away may be infamous due to a higher crime rate and an abundance of empty storefronts with “For Rent” signs in the windows. It makes you wonder why these businesses have left the area and buyers and renters alike may decide it’s time to look elsewhere when choosing a place to call home.
Related: Market knowledge is vital to making efficient real estate investment decisions
The importance of community
When a region becomes more attractive to landlords and potential tenants, the value of your real estate increases. Some locations offer stability in terms of increased value because they are in a community that is not likely to see any major changes in the future.
A good example of this is a university town. It is highly unlikely that the institution around which these neighborhoods are located will move, close, or undergo real significant negative change in the future. This is especially true in cities where the college or university has existed since the 1700s. We know that the school will not suddenly move, we know that the school will offer admission to a limited number of applicants, and students, faculty and administrators will need a place to live, eat, work and play when classes are not in session. in session Therefore, these communities will be busy and popular, security will be a priority, and homes and apartments will be in demand.
The only thing to keep in mind that can be negative is the seasonal aspect of buying real estate in or near a college town. Students and faculty can leave in the summer. But it’s only a three-month shift and when everyone returns in the fall, the community returns.
Real estate and renovations
Don’t get me wrong, it is important to maintain the asset that is on the plot of your property. A shoddy apartment building or a crumbling house are depreciating assets that can also reduce the value of the neighborhood as a whole. Buyers and renters know they can find somewhere else to go. If enough homes and buildings begin to look dilapidated or abandoned and in desperate need of repair, people tend to migrate from those areas.
A vital way to prevent the value of your investment from falling is to make the repairs you need to make as soon as you can. A highly desirable location can cause some potential buyers or renters to overlook the home’s less-than-perfect condition because they can live, work and play in a hot neighborhood. But location is key to getting them to do the deal. Depressed areas will keep them away. It is more difficult to move an area of land than to demolish a dilapidated house or dwelling.
So you can do your part by maintaining your property value and helping the neighborhood thrive by maintaining what you have. New homes and businesses move into the area and the cost of your home and the land it sits on increases.
Related: 7 Tips for Running Your Real Estate Business Like a Pro
wrapping
Land can become a premium commodity when there isn’t enough to go around. The choice of a desirable, fully developed location means space is prime, with prices to match when people want to live in this area. This is true in large metropolitan cities and even smaller, rural towns. When there is room to expand, prices tend to be lower. Location is important, and when there’s less to go around, people are willing to pay for what’s available because it might not be available for a long time.