Determining the economic value of an apartment building’s location can pose challenges for novice apartment building investors as well as seasoned experts. As compared to evaluating the location of a residential single family home investment property, an analysis of an apartment building location can seem overwhelming.
When examining the location of a single family home the necessary data to reach an educated opinion of a properties location for investment purposes can easily be comprised by determining such factors as recent sales prices in the neighborhood, the general appearance and upkeep of the surrounding houses, the school district, the rents in the area and the areas major employers. When assessing the location of an apartment building, especially in a city that is unfamiliar to the investor, additional data and further analysis is necessary to create an educated analysis of the apartment building’s location.
Factors of Analysis
The economic analysis of commercial real estate location is a complicated, in depth and sometimes tedious process whose parameters are far beyond the scope of a short introductory article but some of the basic issues and themes should at least be familiar to first time apartment building investor. The geographic location of an apartment building investment property can have an enormous impact on its long term value appreciation. It is the relationship between physical location (within a state, a city, or county) and the local economy that can impact the location value of an apartment building most prominently.
For example, is the apartment building geographically close to a high technology hub, a hospital, factory, or other major employer for that particular geographic location? This type of analysis will require some extra work and general familiarity with the local economy.
Trends
The apartment building investor should also examine what the population trends have been in that area over the past few years or even decades. For example, has there been an influx of young professionals from the suburbs moving to the city center for employment or a lifestyle change? Or, has there been an exodus in the opposite direction.
Area Vibrancy
Another general point to consider is the overall economic vibrancy of the urban area where the real estate is located. Have major corporations recently opened branch offices in the area? Have developers built infrastructure like strip malls and shopping outlets? Are there plans to build a utility or factory that could be a supply of well paying employment for prospective tenants? A small investor can often make assumptions about economic conditions by watching the activities of large retail commercial construction companies.
These few observations are just a few of the myriad factors that can go into a comprehensive analysis of an apartment building’s location. Obviously, I haven’t introduced any financial models that can be of great help when comparing different apartment buildings in different geographical locations.
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Article Author: Ted KarschTed has written 70 articles for us.
Visit Ted's Website: http://www.apartmentbuildinginvestor.com
Joshua Dorkin
{ 7 comments… read them below or add one }
When you buy a home you must always consider location. Location, location, location may be a trite saying but there’s something to it. Location affects which home you buy and who buys it from you in the future.
Excellent article. I like the question of “is the location near to a tech park, etc?” this is something I look for myself each and every time.
I’ve read your posts before… just never commented on them. Very cool – nice follow-up!! I agree location is important and you have to consider a lots of factors while assessing the location of an apartment building.
Definitely agree that location is the main factor should be put into consideration before buy home or apartment.
I agree with location. But I also think that any type of apartment has a chance to get cleaned up with little investments. I’d rather have the inside of my house look nice then the outside.
this entry looks like a part of a good thesis. Location really spells the difference between your apartment becoming either a house or a home.
The saying location, location, location exists for a reason in all types of investment ventures! Curb appeal is also an attraction that can get people looking which is the first big hurdle, especially when there are others out there vying for customers.