When it comes to Real Estate Investment, it is often said that the secret to success is location, location and location. Where you invest is generally more important than how much you invest.
There is a very strong link between where your real estate investment is located and the financial success you will enjoy. There are several examples of individuals with access to a lot of money and who also invested in real estate but 10 years down the line, although their investment has appreciated, they had more feeling of regret than satisfaction because they later discovered several other locations they could have invested in that had experienced exponential appreciation.
Thus, it is important to note, that merely owning real estate is not the secret of successful investment but owning the right piece of real estate at the right price. Let’s examine a few factors to consider before you buy a piece of real estate.
Firstly, invest where growth is coming. There are areas of a state or local government where growth factors seem to be converging. For instance, imagine a location already earmarked by the government as the permanent site for a university. Often, a certain area gradually begins to attract certain kinds of businesses and opportunities. When you invest in an area where growth is coming, you cannot miss a financial breakthrough. The other advantage is that if you are a little wrong in the investment the growth will bail you out.
Secondly, observe the population or demographic trends in the state or area you are planning to invest. Population growth is one of the impetuses for the demand for real estate. All other things being equal, if you can identify areas where a lot of people are moving to you have found a place where the real estate will appreciate rapidly. The increase in population will increase the demand for accommodation and that will affect the value of land. This process will accelerate whenever there is a high influx of people into an area. So if you are planning on investing in rental property, consider areas with high population or potentially high population.
Thirdly, evaluate the social cum infrastructural advantages of the area. What is the crime rate? Does this neighbourhood have great schools that will attract families there? Are there work, retail, recreational and religious centres nearby? As you seek to answer these questions, it will give you an insight into the potential of the neighbourhood you are seeking to invest in. One of the common sense rules is that a person should avoid living in an environment that is far below his or her social grouping. When your standing is far higher than that of your neighbours you may attract undue attention which may expose you to certain security risks. And if you observe it, the more secure and better equipped an area is, the higher the rental incomes and all other real estate values. This is generally the reason why estates or Government Reserved Areas appreciate faster. Such areas are usually more organised and because they are enclosed, often have unified security arrangements.
Fourthly, proximity to centres of economic productivity. Most times, people love to live not too far from where they work.
In fact, if you draw concentric circles all around certain areas where offices, industries and commercial centres are located, you will discover that fast appreciating real estate properties are not more than 5 to 15km from those areas. One good indicator to follow is the major highways or arterial roads. Somewhere along or off such areas are places that will yield good dividends for an investor. The demand for real estate often corresponds with areas with increasing wages. Traditionally, areas or cities with stable employment in the government sector, educational sector and medical sector or a combination of these sectors will enjoy rapid real estate value growth. This is why political or economic capital cities and areas close to them enjoy rapid appreciation.
Finally, if you have the required fund to invest, buy in an area with little buildable land. Often, these areas are expensive but often enjoy strong demands that often push rentals and real estate prices up thus, enhancing your profitability. Upward pressures on real estate prices are often greatest in such areas. Moreover, most of such areas are “matured” in terms of infrastructure; that is, they often have basic infrastructures, schools, accessibility, nearness to markets and commercial centres. Government presence and interest are often high and the competitions for real estate in these areas are reduced because of the high barriers to entry. Since you technically cannot manufacture any more land these areas will continue to generate faster returns on investments.
I recommend that in making a choice of where to invest, you do a comparative analysis of a few neighbourhoods, listing basic criteria and scoring them based on your observation or research. The essence of this is to ensure that you make an informed decision on where to buy and that it should be an excellent investment decision.