Finding the Right Market: Why Location Matters in Real Estate Investing

It’s no secret that location is a critical part of any real estate decision. Fix and flip projects in particular have unique factors to consider for real estate investing. The location can impact the potential resale value, the difficulty of the project, and your overall experience. Before moving forward with fix and flip loans, consider the type of investor you are and your end goals.

10 Reasons Location Matters in Real Estate Investing for Fix and Flip Loans

1. Population Growth

A simple search on Google will give you an idea of how much population growth has occurred in recent years. A growth rate of around 1% says that an area is in demand. With more people moving in, the real estate market will need to meet that demand. This is a promising sign for real estate investment opportunities.

If the population growth rate is on the decline, there’s less long-term potential for flipping properties in this area. While you may be able to find a few properties, investors should question whether this is a place worth investing in. It would be a shame to network and get things in place for a city in decline. At present, the City of Philadelphia is experiencing a decline in population growth.  The suburbs of Philly are fine though.  A growing neighborhood will have more opportunities for profitable investments in the years to come.

2. Competition

Some areas have established a competitive real estate market for fix and flip properties. This can make it more challenging for someone new to find suitable properties and get good deals. It can also mean feeling lost and alone in a community that’s not interested in networking with new investors.

To find low-competition areas, consider networking with local professionals to get a feel for the market. Analyze data like median home price and rental demand. Look for emerging neighborhoods that have a lot of potential for growth. A little time exploring the field can save you a lot of struggle later.

3. Costs of Material and Labor

Operational costs are going to vary a lot by location. Locations like Seattle and New York City will have much higher associated costs for hiring help or buying materials. Even a nail at your local hardware store will be cheaper in Augusta, Georgia. This will have a substantial impact on your bottom line in the long run.

On top of affordability, there are also issues of availability and demand. A highly competitive market may mean that hiring electricians for fix and flip projects requires scheduling far out in advance. Will the people you need to work with be available and affordable in this area?

4. Taxes

Taxes are going to have an effect on how much a buyer is able to pay for a home. This means investors need to consider what the local schools are and the taxes paid for them. What are property taxes like? These issues will be on the minds of homebuyers, so it needs to be on investors’ minds as well.

This will need to be part of your own financial planning before you apply for fix and flip loans. Will the local taxes have a major impact on your budget? It will also need to be factored into what you can realistically sell the property for.

5. Stability

Does this neighborhood have job stability? If the job market is stable then the population will be more likely to be buying homes. If the locals are facing layoffs the real estate market may soon decline. This is an important part of forecasting for the months and even years to come.

You’ll also want to look for signs of good, stable neighborhoods like low crime rates, public transportation, and public schools. Certainly, there are real estate investing opportunities in less stable areas. However, it’s something to be aware of when making location choices. Stable neighborhoods may be a lot more competitive because investors value how great this can be for real estate.

6. Nearby Amenities

The types of nearby services and amenities will tell you a lot about who the buyers are. This will have a major impact on what renovations will need to be done. If the property is near the town’s top public schools, you may be catering to families. Features like a swimming pool, fenced-in backyard, and multiple bedrooms will be important selling factors.

With a nearby university, your buyers may be people looking to invest in a rental home that caters to students. Bedrooms with private bathrooms will be easier to rent to multiple tenants, and so will a smart use of community spaces and a larger refrigerator. Local services, and therefore your buyers, will have a major impact on what you need to do to create a desirable property.

7. Local Laws

Local regulations can have a major impact on renovation projects. These regulations can impact the profitability and ease of the project. Regulations for rent control, zoning restrictions, and even what types of businesses are allowed in a neighborhood.

For example, if a bar opens up down the street from a home, its property value may sink. The city council may require permits that take months to apply for every time you build a deck. The local laws will impact your projects and it pays to know them.

The national news makes many blanket statements about real estate trends, but they don’t necessarily apply to a local area. It can pay to discuss the local market with real estate agents in the area. They often see what’s currently happening and what may be around the corner. These can gain you valuable insights into the potential risks and opportunities of investing in the area.

You can also learn about local real estate trends by researching local home sales or even reading the news. For example, you may see that a major corporation is building a new location in town. The neighborhood surrounding that location is going to be a prime spot for its employees to buy homes.

9. What You Like

The location of your real estate investments is going to have a significant impact on your lifestyle. It may impact your decisions on where you live and who you work with. Flipping homes gives investors a lot of freedom, but also a lot of tough choices. Be careful about choosing an area that seems profitable but that you dread being in.

Even if you live elsewhere, you’ll be visiting and having to deal with issues in the area. If you’re going to do this long distance, do you mind traveling that far? Do you have local contacts? Are you comfortable networking in the area?

10. The Types of Properties Available

Different neighborhoods have different kinds of homes, so what kinds of real estate are you looking for? Do you want to find multifamily properties? You’ll need to look at locations where those are plentiful. If you want to renovate large, family homes, there are a lot of those neighborhoods around.

Consider whether you’re looking to renovate 100-year-old homes, 50-year-old homes, or only ones built within the past 20 years. Neighborhoods with homes built in the 1960s will have unique concerns. Do you care if you have to worry about lead paint or asbestos? These aren’t insurmountable hurdles, but they are ones some investors will find intolerable.

Ultimately, finding the right market for your business is a personal decision. It impacts what kind of investor you are, your overall profitability, and the realities of day-to-day work. When you’re ready to scale your business, you’ll need flexible financing with faster funding. Contact Turning Point Lending today for more information about applying for our fix and flip loans.