Surprising as it mean seem, though “location-location-location” certainly is true when purchasing a home, it may or may not always be true when purchasing investment real estate.
It makes perfect sense that a homeowner would be strongly influenced by the location of a property in which to live and raise a family over others. But this is not necessarily so with rental property investment. In fact, real estate investors commonly purchase properties in areas they might not otherwise want to live themselves.
This disparity over this golden rule of real estate between homeowners and investors has a simple explanation. Whereas, a homeowner has a natural regard for all things that affect the family’s well-being, an investor on the other hand doesn’t generally occupy the property. So they aren’t intimidated by the location of the property, especially in cases where the investor lives out of state and may not even see the property they purchase.
The most important fact about real estate investing is the bottom line. How does the rental property benefit the owner? Does it offer return on investment cash flow, tax shelter, and appreciation? In other words, will the real estate investor make money if he or she invests in the property, and how much will be made?
Of course, that’s not to say that location has no influence on investment decisions.
As a real estate investor, you must always examine general trends of the area and get a feel for the direction in which it is heading. You certainly would not want to purchase a rental property in the worst part of town (and for that matter, even in the best part of town) unless all indications are that the property will appreciate.
You might also have pause to invest in a location where there are excessively low occupancy levels or rents. It goes without saying that you do not to invest in a building that may, by its very location, remain mostly empty or never have the ability to demand substantial enough rents to make your cash flow requirements.
Here’s the point.
While location is still important in selecting investment real estate, it is rarely as critical to investors as location would be to homeowners.
In this case, your primary concern is in finding rental properties that meet your investment needs and goals. So don’t let the location steer you away from an otherwise sound investment. Remember, your purpose for investing is to make money, and any building you acquire is not intended to occupy your children, but to build your estate so you can care for them.