You must have heard “Location, location, location” thousands of times regarding real estate investing. However, what does that mean? Moreover, how true is that?
Indeed, location is VERY important if you want to succeed in real estate investing. However, our point here is that it’s NOT everything. In fact, there are other factors that play a major role in profitable income properties along with the location. You will be able to make money investing in real estate only when you combine these factors.
As for the location, there are a few factors that make for the best locations in real estate investing. These factors are:
- Crime rate: Everybody wants to live in a safe neighborhood, especially if it is a family with children. Therefore, the lower the crime rates, the better the location.
- Amenities and facilities: An investment property that is close to schools, universities, shopping malls, and gyms is the best choice for a profitable location.
- Transportation: Easy access to transportation is also important. What people are looking for is being able to get anywhere in the shortest time possible.
So, here are the other factors that are as important as the location for income properties to make money:
#1. Real estate investing: The property price
The property price is one factor that determines whether a certain investment property is worthwhile. Buying an investment property involves calculations, and these calculations involve the property price in order to estimate the return on investment. There are plenty of cheap properties such as foreclosures that have a high rental potential. Look for these properties and make sure to conduct real estate market analysis to compare your potential investment property to other similar ones in the same location.
#2. Real estate investing: Timing
One very important factor in real estate investing is timing. Remember the recession? This is the time when many real estate investors lost their money and/or their entire business. Those who bought investment properties during that time have lost a lot on their investment. Our point is: always pick the right timing. Study the local housing market and decide whether it is a good time to invest in rental properties.
#3. Real estate investing: The real estate investment strategy
Picking the right real estate investment strategy is also crucial. For instance, rental properties are great if you choose the right rental strategy. Airbnb rentals are great in vacational locations. However, they are a bad idea in a school district, for example. Long-term rentals, on the other hand, are great in a quiet neighborhood. But they are the worst near an airport. So, really the real estate investment strategy can determine whether you succeed in real estate investing or not.
#4. Real estate investing: The type of property
There are so many property types that you can invest in. There are single-family homes, multi-family homes, apartments, studios, and condos. Decide what type of property you want to invest in and make sure you analyze it thoroughly. Sure enough, you will choose the type of property based on the location. But the thing you must understand is that location and property type come along to become a factor in the success or failure of your real estate investing business.
#5. Real estate investing: Investment property analysis
A very important thing to do before buying an investment property is conducting investment property analysis. In order to make sure that you are purchasing a profitable investment property, you must analyze all the numbers involved with it. The cash flow, the rental income, the capitalization rate, and the cash on cash return are all elements that decide the return on investment you will have in real estate investing.
Your ultimate goal with real estate investments is to make money. Therefore, you want to be investing in a positive cash flow property. A positive cash flow property means that you still have extra money after you subtract the rental expenses from the rental income.
In fact, performing investment property analysis comes along with real estate market analysis. The first one takes care of the property’s profitability, while the second one looks at the location and other similar investment properties within that location.
#6. Real estate investing: Diversification
Diversifying your real estate investment portfolio is essential. It means that you are using several investment strategies or several types of investment properties. This helps you in mitigating the risks of real estate investing. If you lose money on a certain property, you have other investment properties that will make up for that. Also, if one real estate investment strategy did not work for you, you can choose to divert your strategy. So, basically you are not losing much.
To sum things up
As important as it is, location is still not everything in real estate investing. The other factors we have mentioned above are as important as the location. Only when you combine these factors with the location, you will have the most profitable investment properties in real estate investing.
In order to always choose the best real estate investments, you should use an investment property calculator. This simple online tool will do most of the work for you. Conducting investment property analysis and market analysis will be easier with it. An investment property calculator will provide you with the latest market trends as well as other facts to take into consideration. Moreover, it will tell you whether a property is worthwhile at all.
However, it does not mean that you should not work with a real estate agent. We always recommend getting help from a professional, especially if you are a beginner real estate investor. It takes knowledge and experience to spot the perfect income properties and, therefore, succeed in real estate investing.
All in all, make sure you use whatever it takes to have the best investment properties. The real estate business is all about making the right investment decisions. Focusing on one factor while leaving out the others might lead to disastrous consequences. That is why we recommend that you sign up for Mashvisor and learn what it takes to become a successful real estate investor in the first place.