Understanding the Importance of Location in Real Estate

Property Management Blog

Everyone who has anything to do with real estate industry knows that the single most important factor affecting the price of a property is its location. Despite this overwhelming importance of location, many real estate investors do not know how many factors are at play within the location of a property. Seasoned investors know that location of a property is much more than just than its address and position. Understanding the variables involved in the location of a property is very important for an investor as investors knows buying real estate in which location would be more profitable.

All investors know that buying a property in New York and San Francisco is more expensive than a property in Memphis or Omaha. These investors also know why some properties inside New York are more expensive than others.

Buying locally vs. on a national level

It is clear to all investors that they can buy a property at a cheaper price if they choose to buy it in their local market rather than buying a property at the national level. However, there are also sub-markets inside a market, and you may be surprised how prices of properties go up and down depending upon where they are located inside a sub-market.

Differences in sub-markets

There are many sub-markets across the country where investors are required to provide properties with appliances. Before buying an investment property, you should check out whether there is any such requirement or not. The provision of providing your tenants with appliances makes the property costly even in a local market for the investor.

Another factor that needs a mention when talking about the importance of location when buying a property is the tenant issues faced by a landlord. Operational costs are just as important for the investor and he wants to avoid buying a property in a location where he is likely to experience lots of issues with tenants. There are housing markets across the country where landlords hold their tenants responsible for all repairs costing less than $100. This allows them to keep their maintenance costs manageable as their tenants pay for the repairs that cost $100 or less. Such a scenario is of course very pleasing for the investors, but it is a fact that such liberty is not available to landlords in most housing markets around the country.

There is also a factor called utilities in the contract signed by landlords with their tenants. In many locations across the country, landlords mention the name of the tenant against utilities. They do so to avoid any problems of late payment or non payment as a tenant is held responsible by the service providers. In many locations, utilities remain the headache of the landlord and they must face the consequences whenever they have a bad quality tenant in their premises. You need to keep in mind that buying a property in a location where landlords have an upper hand over tenants is more beneficial in the long run. It is therefore prudent to buy a costly property in a location where you are not likely to encounter tenant issues very frequently.

All the factors mentioned in this article regarding location of a property are only those that are obvious to any smart investor. However, there are many more small-scale factors that have a deep financial impact on the investor long after  purchase of the property. It is therefore advisable for a real estate investor to study the sub market where  buying a property so not so costly to manage a property.

If you’d like to talk more about property management, or you need help with Everest Property Management, please contact us at Everest Realty.

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