You have probably heard the old adage: “There are three things that matter in an investment property: location, location, location”. I can’t tell you how important this is for a healthy and manageable investment portfolio.
In this post, we are going to take a look at how location affects residential real estate investing.
You want to be buying houses in a very specific area, especially when you are buying, fixing and renting. As a hard money lender, I talk to real estate investors every day that are relatively new to the industry and are looking for a rental property loan. Sometimes they tell me about a house they are looking at in Orlando, or another one that they have in Tampa, and another one in Jacksonville… If this sounds like you, it’s time to re-evaluate your strategy. Here’s why…
The first rule about renting investment properties and building a nice portfolio is to look for houses in the same location. In my view, if you can’t stand in the center of where the houses are and, figuratively speaking, throw a rock and hit every house, you have the wrong plan. A rental house in Orlando, another one in Tampa, and another one in Jacksonville is a recipe for disaster.
Why should you buy rental houses in the same location?
There are 2 reasons to buy rental houses within close proximity:
- To really know what you are buying – Buying properties within the same neighborhood will help you understand the challenges and advantages of a specific investment property (appreciation, crime rate, etc).
- To create synergy between the properties – Houses within the same area are usually of the same kind. This can be beneficial in many cases. For example, you can hire a local handyman and he will know exactly how to fix maintenance issues in that kind of house. This is much more efficient than sending a handyman to a house in Orlando that was built in 1963 and another handyman to a house that was built in 2001 in Tampa, or Jacksonville.
In summary, you want to invest in rental properties that are in close proximity to each other. Find a neighborhood that has good prospects in terms of appreciation and study every aspect of it. This will help you make smarter buying decisions. You will also benefit from the synergy created by investment properties in the same neighborhood because they are usually of the same kind. You’ll be surprised how much more efficient your investing business will be.