Location is all-important when it comes to property investment. Real estate values can vary wildly based solely on their whereabouts. Identical properties in even slightly different locations may be valued at near-opposite ends of the real estate market.
This simple fact is, of course, consequential for anyone buying a property. But it’s critical for those looking to invest in the real estate market. Get the location wrong, and an investment may be doomed to fail or otherwise underperform from the outset.
JF Real Estate Investment Group president Destiny Davis specializes in determining optimum locations and markets for investors. Accordingly, she’s in the ideal position to offer an expert, first-hand insight into the topic. With that, what follows is a closer look at location’s role in achieving real estate investment success in 2023 and beyond.
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Right Property, Wrong Location
Despite what some may say, purchasing the right property in the wrong location is entirely possible. By contrast, there’s a much smaller likelihood of buying the wrong property in the right location. That’s because location is, by all accounts, paramount, often coming far ahead of a property itself, particularly from an investment-only standpoint.
According to Destiny Davis, an investor can completely overhaul almost any property looking to turn a profit. But if its location isn’t optimal, no amount of remodeling—nor even a complete ground-up rebuild, in some cases—will overcome where it’s based, should that prove problematic.
Choosing a Market
Within real estate investment, location and market are routinely used interchangeably. Either way, choosing the right market or location will underpin any property investor’s chances of success or failure. At the same time, the term ‘market’ can also refer simply to, for example, commercial versus residential or rental versus resale rather than being directly linked to location.
Yet, one common theme throughout is that whichever location or market an investor chooses, it must meet several carefully considered criteria for a successful outcome. Among these criteria are a positively trending local economy and excellent transport links. That’s in addition to a thriving job market and, in the case of family homes, access to top-rated schools.
Furthermore, pinning down a specific market within a location is similarly crucial, such as long-term rental market opportunities versus rapidly flipping and selling properties for a quick profit. Pinning these criteria down early helps promote the best chances of long-term profitability.
So, what then makes a poor choice of market or location? In Destiny Davis’s experience, examples of bad options for property investors are pieces of real estate in economically depressed areas, those with high crime figures, and, again, in the case of family homes, properties with nearby commercial or industrial operations.
Shortlisting Locations
One of the best ways to identify the right market or markets for real estate investment involves shortlisting a number of favored locations, property expert and JF Real Estate Investment Group president Destiny Davis reports. Shortlisting potential areas in this manner is a valuable technique and one still routinely used by even the most seasoned real estate investors.
It involves researching potential markets on numerous fronts, including access to local amenities, historical property values, rental rates, and current demand for real estate. These broad-ranging factors, when combined, provide invaluable insight into different markets and their stability and growth potential.
Meanwhile, and having likely shortlisted several favored locations, it’s imperative that first-time real estate investors, in particular, trust the figures. It’s essentially a case of trusting one’s head over one’s heart and listening to the numbers. Where it’s necessary to whittle down a shortlist further, investors can also use economic indicators—such as population growth—and the state of the local regulatory landscape.
That includes any government policies liable to impact the real estate market, such as zoning laws, tax rates, and development restrictions. Discounting any shortlisted markets that score less than favorably, this ‘whittle down’ process is an excellent way to settle on a location that’s demonstrated as highly likely to yield favorable returns.
Conducting a Final Risk Assessment
Before finalizing any real estate investment and briefly taking location out of the equation, all involved parties must conduct the necessary risk assessments and evaluations. For an investor, that means further research and analysis, including addressing any recent or newly forecast market fluctuations.
According to real estate expert Destiny Davis, investors must also ensure that their own finances are 100 percent in order before proceeding. That includes having up-to-date balance sheets and cash flow statements to hand.
It’s also advisable to consider the importance of maintaining a diverse portfolio, regardless of the nature of individual investments. A diverse portfolio ensures the likelihood of a return on almost any broader portfolio, and real estate investments are no exception. Ultimately, just remember: ‘Location, location, location.”
