Is there any aspect more important than location? Would you pay more for a prime location? Real estate agents consider location to be the most important factor that determines the selection of a property. But choosing the right location is a difficult task that requires consideration of several factors.
The most important concern is the scope of growth in a location. If you buy a property for investment purpose, appreciation in value is what you consider. In case you decide to live there, several other reasons influence your decision to buy. Comfort, convenience, safety, and budget are what you take into account.
Choosing a location for investment
Real estate investment is a business. Supply and demand determine bottom line profits. An ideal business has a product or service that everyone wants. It also has a product or service that is difficult to replicate. New construction and future growth cannot replicate what you possess. Most growth occurs on the perimeter of towns or cities. Invest in the heart of an area. Once you own properties in a location that the end customer loves, the economics benefit you. Command the highest rents or prices and enjoy the lowest vacancy rates because your tenants will stay longer, and increase your prices the most over time.
Real estate investments click if the customers who live in them have good, stable jobs. If you own an investment in an industrial town and the factory relocates, your investment will suffer. Rents plummet, vacancies increase, and you lose your ability to sell at a premium. Study the job market in your location first. Look for a well-diversified source of jobs, a solid mix of worker types, a rising median salary, and a low unemployment rate. Follow the initiatives of the local government to attract jobs in the area.
Closely related to the jobs and economics of a region is the population. People move towards regions with better job prospects. In order to invest in real estate, prefer a region with an increasing population because this will increase the demand for housing. A higher demand and limited supply lead to higher rents and higher values. It is one of the ways to make money in real estate.
Calculate the price/rent ratio before choosing a location for investing. Begin financially evaluating an area for its economic viability. The higher the price to rent ratio, the worse the market will be for real estate investing – in terms of rental income.
When the supply gets limited over a period of time, it is harder for developers to build more units. Then there is a greater scope of appreciation in the value of your existing property as demand rises but supply remains limited. Natural borders like lakes and rivers prevent expansion. Man-made borders prevent expansion of protected parks, land and universities. Restrictive land development rules make construction difficult and expensive. Limited amounts of particular types of zoning like commercial or multi-unit properties make properties with that zoning more valuable over a period of time.
Several aspects make a location rich in terms of comfort. Some people love to live in crowded areas while some prefer quiet corners. Some need locations with plenty of open spaces around, and for some vast acres of green make no difference at all. City or suburbs is another choice to make. Some prefer to live in densely populated areas with modern amenities and some want peace and greenery in life. They prefer a suburban location to save money and also let children grow in harmony with nature.
Convenience is a clincher when you are choosing a property. Spare a thought for your family. Think about your own life. A particular location looks ‘convenient’ if it is easy to reach. Some find it comfortable if there are fun and entertainment zones, shopping and food outlets in the vicinity. Consider the commute time from office to home using public transport. Geography has a big impact on lifestyle. If you stay at home for a long time, consider job opportunities in your domain, and climate. Probably a combination of these factors decides the level of comfort available in a particular location.
You can form an idea of safety in a particular area but there is no way to determine that an area is absolutely safe in every aspect. No incident of robbery in the past is good. But it does not mean there is no possibility of robbery in that area. The threat always remains. The same goes for crimes against women. Strolling in a neighborhood at night gives a feel of safety but it is not a foolproof way to ascertain safety. Many complex social issues and undercurrents of tension exist. There are general threats that one should take note of. Besides, safety threats also arise from factors like flooding, cyclonic winds, the presence of harmful chemicals or salt in the soil.
Within a particular area, different neighborhoods have different characteristics. You prefer the one that is the closest fit to your lifestyle and personality – a place where you feel comfortable and where you are likely to get along with your neighbours and socialize more. The kind of people who live in the neighborhoods you are considering does influence your ultimate choice. If you do not have green fingers, living in a landscaped area is not exciting. Beliefs and preferences count. Some want to live near others who are like them. Some do not want to live in a homogeneous milieu. Some do not get affected at all.
Proximity to loved ones
The best home does not feel warm and inviting if you live far away from your friends and relatives. But your friends and family can possibly move in later. Make sure their proximity or emotional bonding is not the only reason for preferring a location.
If you are fond of sports events in the free hours, you may not want to live far from the stadium. If you are a foodie, you like an area with many restaurants specializing in cuisine from all parts of the world.
Once you have shortlisted the location factors that matter most to you, spend enough time to research that location. Visit the area at different times of the day and also at night to find how the piece of realty looks like in reality.