Location is a powerful indicator when it comes to determining how much a rental property is worth. It will impact what you pay for an investment property, how you market that home to tenants, and what you ultimately set as a rental value. Your rental home’s location will influence the type of tenants you attract and your ability to retain them.
People aren’t going to rent a home in a neighborhood they don’t love. It could be the perfect property; updated and well-maintained, with a great gated yard and all the amenities and features tenants are looking for. If it’s in a terrible neighborhood, however, it’s not going to get the attention you want. Nor will it bring in the rents you expect.
That’s the power of location. It will either attract or repel the people to whom you’re marketing and renting your property.
This is Florida, and that means in general, location works in our favor. Whether you’re investing in West Palm Beach and renting out a home that’s close to the beach or investing in Orlando and offering a home in a comfortable suburb that’s close to work and schools, location here is rarely a problem.
But, even within the most desirable cities and towns, there are neighborhoods that perform better than others. How do you find them?
We’re talking about that in this blog, and helping investors understand the power of location when it comes to choosing an investment.
The Why: Location is Especially Important, But Why?
There are many reasons that location is so important. One reason is this: you cannot change the location of your property. While you can do a lot to improve your investment’s condition and you can control the tenants who you place, you cannot do anything about where it’s found. That means the value of its location is not something you can manage when you’re marketing, leasing, or setting a rental value.
There are another two immediate reasons that location matters when you own residential real estate: It impacts what you pay for your investment property; and, it impacts what you earn when you rent out that investment property.
You know how it works. Prices are a reflection of supply and demand. And, real estate appreciates based on the market. This means that an investment property’s location alone will make a property more or less desirable to both buyers and tenants. As demand increases, so do prices.
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Location Impacts What You PAY for a Property
As you’re checking out potential investments, you fully expect that you’ll pay more for properties that are in excellent locations.
No one wants to buy the homes that are hard to reach out there in more remote areas or drowning in the middle of heavily trafficked or industrial areas. This is especially true if they’re buying in order to rent those properties out.
As an investor, your budget will have to include what you’re willing to pay for the right location. It’s worth it to pay a bit more than you wanted when you find a property in just the right neighborhood.
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Location Impacts What You EARN on a Property
It’s always important to feel like you’re getting a deal. But, paying more for a well-located property isn’t so bad. It might sting when you’re closing the deal, but remember the opportunities it offers you.
A higher property price likely reflects the location, and it almost certainly means you’ll be able to charge a higher rent and count on fewer vacancy days.
When you buy in a well-desired area, you know that you can easily earn higher rents. Just like in the sales market, tenants are willing to pay more in rent when they find a home that’s perfectly located.
Location Questions to Consider When Investing
Here are a few of the things you should ask yourself about a property’s location before you decide to buy it. Understanding the answers will lead you to the right neighborhood.
- What type of property has the highest demand in the neighborhood you’re considering?
- Which neighborhoods see the lowest tenant turnover?
- Which times of the year see the highest inquiry rates in specific neighborhoods?
- What is the demographic of the tenant pool in the neighborhood where a potential investment is found?
It’s important to have this information when you’re preparing to invest in a specific property in a specific location. You’ll make better decisions about where to put your money, and you’ll have fewer surprises when it’s time to rent that property out.
Talk to a local property manager about anticipated rental values, vacancy times, and location data. This insight will help you better understand the neighborhood you’re considering.
Understanding Tenant Demand for Maximum ROI
Thinking like a tenant before you buy is something most investors know they have to do. It doesn’t matter what you think about the location; it matters what your ideal tenants will think and feel about a location.
Most tenants will want to be in a safe, attractive neighborhood with properties that are well-maintained and appealing. They’ll want to be close to schools, and they’ll want those schools to be highly rated. They’ll want an easy commute to work and easy access to grocery stores, restaurants, and shopping centers.
If you are thinking about purchasing a property and you’re not sure about the location, talk to a qualified and experienced property manager who understands the market and its tenants. We have been managing properties throughout Central Florida for years, and we can provide tips and advice on the features that local tenants value the most. We’ll also talk to you about yielding properties, the average length of tenancy, and the best time to bring your investment property to market.
When you have questions, please contact our team at Park Avenue Property Management, and we’ll answer them expertly. We work in Lake Buena Vista, Orlando, Kissimmee, Celebration, Maitland, Altamonte Springs, West Palm Beach, Tampa Bay, and throughout central Florida.
