How important is location to an investment real estate?

This Neck of the Woods
Creative Commons License photo credit: trazomfreak

It has been said that the three most important considerations in buying real estate are: location, location and location. This is most certainly true in purchasing a home but may or may not always be true when purchasing investment real estate.

The most important fact to remember in purchasing a real estate investment is that you are buying a “moneymaking machine.” The property that may be of interest to you may not be in the best part of town, but it does offer the investment benefits you want… return on invested capital or cash flow, and appreciation.

Don’t let the location steer you away from an otherwise sound investment simply because you would not want to live there yourself. Your purpose for investing is to make money, to build your estate. Chances are, you’ll sell or exchange that property within five to seven years anyway, and get into something larger.

We are not suggesting that you pick the worst are in town for your acquisition. You want your investment to be located in an area that, from all indications, is appreciating. Examine the general trends of the area. Get a feel for the direction in which it is heading.

Check with the authorities if you have questions about an area. They can tell you of any intended major changes, such as roadways, that may be planned. When you have logical reason to believe the area is a questionable one, do not invest there.

One advantage in investment real estate as opposed to your personal residence is that the door is virtually wide open when it comes to location and type of property you select. Your most important consideration is, does it meet your investment goals, such as cash flow and appreciation potential. If it meets these goals, physical location of the property may be secondary.

While location is still important in selecting investment real estate, it is not as critical as the location for your home. There are out-of-state investors who never or seldom see the property they purchase. They invest based on the financial performance of the investment. Needless to say, these investors are not intimidated by the location of the property. That’s why there are so many Singaporeans invest in Johor Bahru’s real estate, and so many foreign investors invest in Malaysia’s properties.

 

About The Author

ongkl

Coming from a humble little town named Tangkak in north Johor state of Malaysia, I am so lucky to have chances to learn and work both in Johor Bahru and Singapore – a conurbation with 6.49 million still fast growing population – since year 1996. Hope now I can have a chance to contribute back to the community by sharing what I see, what I know and what I learn in this wonderful place.

3 Comments

  • Muliani

    Reply Reply June 13, 2010

    I am quite interested in the property at Taman Laguna, Johor because of the space area and that the property is gated and guarded. However, I am quite skeptical about the rental prospect should I decide not to stay. A general feedback from my friends is that not to invest in this property as the location is not desirable and a house is not a good investment compared to condomiums. Appreciate your advice. Thank you.

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