How Can Location Affect Your ROI?
When evaluating the potential cash flow of a real estate investment opportunity, investors often make the mistake of basing their decisions solely on the price of the property and the rental fee that’s charged to tenants—but it’s also crucial to take into account the property location. If you fail to consider the area in which your investment properties are located, you could face some challenging situations and compromise your return.
For example, lower income families tend to settle in poor quality housing locations, and generally spend a large portion of their monthly income on housing costs. This heightens the risk for property investors, especially since lower income families often struggle with a lack of job security. If a tenant were to suddenly get laid off or run into another job-related challenge, you could suddenly find yourself scrambling to fill a vacant property.
Higher crime rates are also common in low-quality property zones. This means that property owners may be forced to pay higher insurance premiums and possibly deal with frequent police inquiries.
The unfortunate reality is that lower quality neighborhoods frequently attract tenants and property managers of the same caliber. Irresponsible residents could not only cause hassles for the landlord or property manager, but could go so far as to destroy an investor’s livelihood. In many cases, tenants move out and leave the property in poor condition, forcing the investor to sacrifice a hefty amount of their profits in restoring the property to its original condition.
Also, because problematic areas often earn a tarnished reputation, it could be difficult to entice reputable managers to oversee your property. An incompetent property manager is often worse than not having one at all.
Fortunately, you don’t have to become ensnared by these problematic and costly situations. Troublesome property areas are scattered all across the country, but you can avoid them by having an informed partner on your side.
At NexGen, we leverage our expertise and experience to connect real estate investors with single-family homes located in stable areas of the country. This is particularly helpful if you’re an out-of-state investor, as you’ll get the inside track on homes that are already occupied and have qualified property managers to oversee the daily operations.
In some instances, NexGen provides rent and maintenance guarantees, and also offers guidance in portfolio analysis, management oversight, and market intelligence that goes far beyond the initial purchase.
Don’t make the mistake of evaluating a piece of rental property simply on the basis of the upfront cost. Work with us to gain a full understanding of how a prime property location can significantly impact your monetary return.