If you’re interested in becoming a real estate investor the first step is finding the best places to buy investment property.
Investing in real estate, either as a primary residence or as an investment property, is one of the most common pathways to accruing wealth in the United States. Although most homeowners may not think about it, investing in real estate is one of the few investments that allows leveraged exposure to a typically appreciating asset. If you’re considering becoming a real estate investor, the first thing you’ll need to do is identify the best places to buy investment property.
The best places to buy investment property vary by the type of real estate investor you hope to become as well as the demographics and characteristics of the area. For instance, if you’re looking to buy a vacation home that you’ll use for only part of the year, job and income growth in the area is far less important than the area’s tourist season or annual weather patterns.
So, if you’re hoping to become a landlord (or to put it more charitably, a housing provider) let’s break down the characteristics you should be considering.
Characteristics of the Best Places to Buy Investment Property
If you’re investing in real estate with the hopes of generating ongoing income while your underlying investment appreciates, you may want to consider becoming a landlord. While it’s certainly not for everyone (you run the risk of being at the beck and call of tenants and are subject to more stringent legal requirements than other investors), becoming a landlord has put many investors on the path to wealth. These are some of the most important characteristics for landlords to consider:
Availability of tenants – Ideally, you’ll want to target areas that are likely to attract younger renters. Proximity to schools is always one of the best places to buy investment property because you’ll have a steady stream of new students moving into town, and those students are more likely to be reliable renters because student loans can be used to cover housing expenses (and parents often foot the bills as well).
Job growth in the area – Identifying an area with strong job growth or a greater number of jobs available than employees to fill them is also a good consideration for prospective landlords. Entry level positions, especially, are more likely to attract tenants than homebuyers.
Areas undergoing improvements – Keeping tabs on local development can offer you a lot of insight into finding the best places to buy investment property. It may seem boring or unproductive to attend local planning meetings or to review proposals being made to local development authorities, but that information can help you learn which areas are being developed into shopping or dining hubs and which are being developed for commercial or industrial use. Finding property in proximity to new developments can put you ahead of the curve. Renters will want to be close to dining, shopping, and entertainment, as well as new employers coming to the area. They won’t want to be near manufacturing or industrial facilities.
Proximity to you – As mentioned previously, as a landlord, you will have obligations to your tenants to ensure that the property you’re renting out meets livability standards. Plus, you’ll want to engender good will with your tenants in case it becomes a long-term rental relationship. If you’ll be doing most of the maintenance yourself, being relatively close by can save you a lot of headaches. You have more flexibility with this if you’ll be using a property management service, but it’s still useful to be able to check in from time to time.
Investing in a rental property can generate income for years to come and can become a valuable asset to sell in the future, should your financial needs change, or to pass down to help create generational wealth. As with most things, it has its risks and downsides, but if you focus on growing areas that attract young renters, you’ve taken the first step in finding the best places to buy investment property.
Have you considered becoming a housing provider to generate additional income?