04 Apr PICKING THE BEST LOCATIONS FOR A REAL ESTATE INVESTMENT
For real estate investors one of the most difficult and complicated decisions is to decide where to locate a real estate investment.
We all have to consider the costs of the project, the location, the attractiveness for the end market and having the right amenities to please our target market.
Some investors will go in and create their own neighborhood with a very big and expensive building and call it done, but not all investors can afford this approach.
So how do you choose the right location and make a good return on investment?
In big cities it can get pretty complicated.
Investors want to keep costs reasonable, pick an area where end users, renters or buyers will want to buy or rent, have a perception of a safe area for potential customers, and they want to attract the kinds of customers who will pay a good price to be in a particular location.
But what if you mess up?
Contractors mess up all the time. They think they have it right and then the properties don’t sell. Is it because it’s on the wrong end of town, or is the structure unappealing, or the master baths don’t work?
Then you dither. We should have bought property 1 block west or east. You think it will work and then it doesn’t.
In this kind of context you have to check off a lot of boxes, not just one or two, and you have to check them all.
Investor instincts may help you pick locations and projects, especially if you have a lot of local knowledge about an area, but anyone can mess up and lose big money on a mistake.
A house or building can have vastly different values in locations that may be only a short distance apart. What might sell for a certain price in one location might be worth five times (or more) as much somewhere else.
Location always rules real estate but there are always a number of other factors to consider.
Interestingly an article published today in science news on Yahoo (AI Vision can Determine Why Neighborhoods Thrive, by Jon Fingas, Engadget, MIT News at discusses research into finding improving or declining neighborhoods using a combination of Google Street View and snapshots taken over a number of years to predict outcomes with AI instead of hoping you can predict the future of the value of a particular location.
It’s not ready for prime time yet but the whole thing is interesting.
Some results seem to work for investors and residents, though not 100%.
- Educated residents.
- Access to business districts or other “pretty” neighborhoods.
- Good safety scores in the early research.
According to the research, renovations on buildings are not enough.
However, for many people the impression of personal safety is very important, maybe more so than anything else.
What a great tool this could be for investors.