I am sure you have already heard a thousand times, “The only three things that matter in real estate are location, location, and location.” The fact is that a ten bedroom, eight bath home with cathedral ceilings and a swimming pool that is sitting next to a garbage dump is nearly worthless.
On the other hand, a little one bedroom, one bath shack sitting in the middle of downtown Columbus would be worth a small fortune. So you can see that the location is of the utmost importance when you are considering a piece of real estate to invest in.
What is it that makes the location of a piece of real estate valuable? The answer is fairly simply really. The value is based on nothing more than the desirability factor. Desirability is a fluctuating intangible that is really hard to nail down.
Property that is totally undesirable to one person might be just the next person’s dream-come-true. And this phenomenon is true for real estate investors and for home buyers and for renters. It is true for all aspects of the real estate market.
The main point for any real estate investor to consider first is what their strategy will be for making a profit on a property. Buying is only half of the equation and whether the location of the property is good or bad depends upon that profit strategy.
For example: If an investor is going to invest in a property with the intention of just waiting for the market to go up, prime real estate is probably the very best choice. Locations that are near entertainment centers or developing areas would be best because the likely hood that the property will increase in value simply by waiting is a pretty good bet.
On the other hand, if an investor is going to invest in a property with the intention of renting it and making a monthly income from it, he might be better off to look into urban properties. Urban properties wouldn’t be considered ‘prime’ real estate but they are ‘prime’ rental properties.
Then there are real estate investors who are handy with their hands. They can make repairs and renovations to rundown properties themselves, sell it for a great deal more than their purchase price, and make a very nice profit. The location that these kinds of real estate investors often find the best is in neighborhoods that are made up of mid-priced homes in working neighborhoods.
There are many factors that real estate investors consider when they are deciding which property to invest in. One factor can be what I call the ‘snob’ factor.
It’s strange but people will pay a lot more money for a small property in the ‘right’ neighborhood than they will for a larger property in a less desirable neighborhood. However…one person’s definition of a ‘good’ neighborhood will not be anywhere close to another person’s definition of a ‘good neighborhood.
Then there is the ‘visibility’ factor. If a neighborhood or an area has become famous or even infamous, property values rise regardless of the location. Convenience is another factor when considering the desirability of the location of a piece of property. People do like to live close to where they work and where their children attend school. Rising gas prices just might work wonders for real estate prices in inner cities.
The desirability of the location of any piece of real estate can be determined by a great many different factors for real estate investors and for home buyers and renters. If the location is desirable for the investor’s purposes he will invest.
If the location is desirable for a home buyer’s purposes then he will buy. If the location is desirable for a renter’s purposes then he will rent. So basically, you can roll all of the various factors for determining whether a location is good or bad into one simple work; desirability.
We are a nation of individuals. We all see things from a different point of view. Look around. There are people living everywhere. They live in big cities, small towns, and in urban and rural areas. Who can determine what a ‘good’ location really is?
There is a proverb that says, “Beauty is in the eye of the beholder”. The modern version would be ‘whatever floats your boat is good’. In real estate, it would translate to ‘if the location serves your purpose then it’s a good location’.