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Rental Property Location Research Checklist

 

Where to buy your rental propertyHere’s the really good news… when you know the signs to look for you’ll find that picking a good location for real estate investing is fairly simple. It takes a bit of leg work to research the locations and find one that meets all of the criteria on the checklist, but when you do, you will also find an enormous opportunity for wealth creation!

In an interview for Canadian Real Estate Magazine, real estate developer, investor and co-owner of Boston Pizza Jim Treliving said of real estate investing “The most important thing is to do your homework…You have to read a lot, find out about the areas you want to go into, where the emerging markets are. It’s often not the biggest ones necessarily; it’s a matter of where you see growth, go and find out, go into the markets yourself.”

The goal of the checklist is to have a barometer to use when locating a good area to invest in. Essentially you are trying to find out if the market is staying the same or is about to make a turn for the better or the worse.

The main elements in our checklist are:

Familiar Area,
Population Growth
Good Employment
Good Transportation
Healthy Housing Economy
Appealing Opportunities.

 

For some of the above items you want to see trends and where they are heading over a longer period of time for an overall market – like population growth for example. But, you will also want to find out what factors may impact that trend. In Vancouver, we are looking forward to the 2010 Winter Olympics. This has had a significant positive impact on employment opportunities and has likely contributed to a growth in the population in the last 24 months, but if you only looked at the employment or population trends you wouldn’t know that this trend could reverse or slow significantly after 2010. So, you need to take a look at the trend and then figure out why it is the way it is and what is likely to happen in the future.

Starting with an area you already know reduces your learning curve when you are starting out. Often this is not where we are currently living, but it’s somewhere we have lived or somewhere we visit on a regular basis. We do this to make it easier on ourselves. If we buy somewhere we don’t know anything about, it means we have way more research to do, and we have to start from scratch in building a network for that area. Then, we have to make an extra effort to stay on top of that market once we own a property in it. It’s possible, but it’s more work!

Ozzie Jurock, a Vancouver real estate celebrity, wrote a book called Forget about Location, Location, Location. In the book, Ozzie says:

In my view, it is always better to buy locally, because you can do your due diligence easily and deal with a local realtor. If you live in Toronto and want to buy in Phoenix, however, get in touch with a Phoenix realtor, particularly if someone in Canada is trying to sell you a packaged deal. The local realtor has the property perspective.

He also says, of buying from a distance:

Go there, look at it, kick the tires. Once you get there, you might find an entirely different property that will be a much better investment. Also, you have to bear in mind that if you’re investing outside your area, the people who are presenting you with properties are going to show you only what they have in their wagon. They’re not going to go out of their way for a stranger unless they’re assured a piece of the deal.

As you research all of the elements on the checklist, think about prospective tenants. Where will they work? How will they get to work? Where else would they live, if not in the area you are looking at? And, of course, think about an exit strategy. Julie wrote an article for the popular online e-zine Early to Rise called The Biggest House Buying Tip Ever about buying any property with the end in mind. It doesn’t matter if you plan to live in the property or rent it out … before you buy, envision yourself selling it.

You are making an investment only if there is a reasonable probability that you will make money on it while you own it and that you will be able to make money when you sell. Good location research BEFORE you buy the property will increase the likelihood of making A LOT of money from the property!

Published February 19th, 2009

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