Location is important when you’re choosing an investment property and considering its neighborhood.
This is not something you don’t already know.
However, a lot of investors can get drawn in by a great property and forget to notice where it’s located. It doesn’t matter how much potential a prospective rental home has; if the location is working against it, you’re not going to make the money you want to make.
Whether you’re shopping around for a long term rental or a short term vacation type rental, the property’s location is going to drive the offer you make, the terms you’re willing to negotiate, and the rent you ultimately collect.
Without a great location, it’s more difficult to market a rental property, place a tenant, and retain that tenant. When you’re ready to sell the property, its location needs to help rather than hurt.
As you think about location and its impact on your investment potential, think about this important fact: Location cannot be changed. It’s permanent. As the market shifts and certain property types become more valuable than others, you might make some renovations to your investment. You can improve the landscaping, install new appliances, and even give the entire home - inside and out - a fresh coat of paint.
One thing you cannot do is change the property’s location.
That's why there’s so much power in location. If you’re thinking about investing in a new property, let’s take some time to consider how a property’s location can increase your chances of success or curtail them before you even get started.
We’ll also talk about how to find the right neighborhoods when you’re considering an investment in real estate.
Location Questions to Ask Before You Buy
You’re likely working with a fantastic local real estate agent. Hopefully, you’ve enlisted the help of a property management expert too, so you can access the data you need to make good decisions about locations and the rental market.
Here are the things you need to be thinking about with the help of your professional team:
What is driving demand? What do tenants in Norfolk and the surrounding areas want to rent?
What neighborhoods see the lowest tenant turnover?
How many rental homes are in a given neighborhood? Are there more owner-occupied units?
What times of the year do tenants in this neighborhood tend to move? Is it close to schools?
What is the demographic of the tenant pool?
What are the key property attributes that those tenants are looking for in a home?
It’s important to have this information when you’re preparing to invest. Understanding how the location will impact your process needs to be part of your investment strategy.
Location’s Power over What You Pay and What You Earn
The amount you pay for your investment property will depend on supply and demand, and other factors driving the real estate market. Location impacts a lot of the demand side of this equation. The property’s location alone will make it more or less desirable to both buyers and tenants.
You’ll always pay more for the homes that are found in highly desirable locations. Very few buyers are fighting over the properties that are more remote or on busy streets.
If you come across a well-located home with a higher asking price, it doesn’t mean you should walk away. Paying more isn’t necessarily a bad thing when you’re expecting to rent that property out. Just like in the sales market, tenants are willing to pay more in rent when they find a home that’s perfectly located.
The more you pay, the more you’re likely to earn. This isn’t a hard rule that will always apply, but when you measure asking prices against potential rental values, you’ll see a pattern emerge.
Like homeowners, renters want easy access to schools, their favorite grocery stores, restaurants, and entertainment. They want to be close to parks and recreation.
Earning high rents begins with location.
Explore Neighborhood Features When Making an Offer
Before you make an offer on a potential investment property, make sure the neighborhood has everything you’ll need to make it an attractive rental property.
In our area of Virginia, that might include easy access to conveniences and recreational opportunities. Residents in and around Norfolk will want to be within a quick drive or a pleasant walk of shops, restaurants, grocery stores, and entertainment. Roads and highways should be nearby and easy to access. They will need to get to work, school, and recreational activities. It would not hurt to be close to the water.
Your property needs to be in a safe neighborhood, too. Tenants are looking for neighborhoods where they can feel safe. Hesitate before investing in an area with high crime rates.
Just as important as safety is infrastructure. Are the roads and bridges reliable and in good shape? Are there shopping centers nearby, and good restaurants? These are the types of things that contribute to a well-located investment property. People like parks and preserves. They want to know the neighborhood is close to a police and fire station as well as hospitals.
Good schools are always going to be important when we’re talking about location. High quality tenants want to live in an area that has excellent schools, especially if they have school-aged children.
What Does an HOA Mean When We Talk about Location?
More and more investment properties, especially newer homes, are found in HOA communities. Investing in these types of properties is usually a good idea. You’re likely to attract high-quality tenants who are looking for a well-maintained home in a fantastic neighborhood with a lot of amenities.
HOAs serve an important function. They aim to keep your property value high, and that’s especially important to investors. You can expect your HOA to maintain a clean, consistent set of standards throughout the community. These are the benefits.
There are some risks, too. If you do choose a location within an HOA for your investment property, make sure you’re communicating well with your HOA when you rent out your property, and make sure your tenants understand the importance of complying with all rules and regulations.
Here are some of the things to consider when you choose a location that’s in an HOA:
Rental Restrictions May Exist
Virginia courts have consistently upheld the rights of HOAs to restrict rental properties in their communities. So, if you purchase a property in an HOA without reading the rules and regulations regarding rentals, you might find you cannot rent out a property. Or, you’ll have to wait for a year. In some HOAs, there is a limit to how many homes in the community can be used as rentals, so you may be on a waiting list to rent yours out.
Paying Your HOA Dues
HOA dues are the owner’s responsibility, not the tenant’s. You’ll have to consider this when you’re determining how much to charge in rent. You will likely get services in exchange for those dues, such as landscaping and security. This can help make the location more attractive, but also more expensive.
Educating Tenants on HOA Responsibilities
Owning and renting out a property in an HOA location means being the conduit for information between your association and your residents. You’ll need to share all the rules and regulations set forth by the HOA with your tenant. When you’re discussing the lease agreement with your tenant, make sure you include a copy of those rules and regulations and double-check your lease agreement so you know it reflects what’s required. Any time a tenant violates a rule, you’re ultimately going to be held responsible as the property owner and association member.
Choosing an investment property within an HOA can mean you’ve chosen an excellent location.
The HOA you’re working with can also make it easier to maintain your property and its value. The rules enacted by the governing body keep the properties looking pristine and the property values intact. It’s extremely important to stay in touch with your HOA, even if you’re not occupying the property within the association.
Norfolk Property Management
Property managers can be an extremely valuable resource when you’re searching for your next investment property.
We know the neighborhoods. We know what tenants are looking for. We know what kind of rental value you can expect, based on where you buy.
With your property management partner, you can discuss the benefits and the challenges to the property you’re thinking about buying, and we’ll start with where it’s located.
Analyze the neighborhood carefully before you invest. You might be considering what seems like an ideal investment property, but if the surrounding area is rough or the homes are not maintained, you might have trouble renting out that perfect house.
Let’s talk more about this, as well as your unique investment goals. When you’re ready, please contact us at Doud Realty Services, Inc. We provide expert property management in Norfolk, Portsmouth, Hampton Roads, as well as surrounding areas such as Virginia Beach, Suffolk, Chesapeake, and Newport News.