Is it better to buy investment property in better area & pay 10%

10 Replies

Hi there, Is it better to buy an investment property in better area & pay 10% -15% more for a better property/tenant? I'm struggling with this. If the numbers don't calculate as well, but I feel I have greater peace of mind. The perfect property/s haven't presented. How can I get over this and just take the plunge into investing and look at the numbers, not the quality of the property?

Location is key and well worth the premium. Now, you need to make sure the location is actually a good location now and into the future. Consult official plans and know what's proposed for development long-term.

@Tracie J.

I would agree with others here. However, I would make one distinction.

I would definitely pay the higher price, as long as your numbers are still yielding in a positive range. The second your numbers (with available maintenance allowance) are coming in negative, you've tipped into a range that will dog you for a few years. If this is the case, it's possible that both the properties in the 'normal' and 'better' areas are too pricey. The bad one can make the numbers work, but it won't really, because you'll have problems that come from the instability. The good one will be negative in the normal course.

There are plenty of markets and property types that are overheated in my opinion. Some lucky people will take winning bets, but it's not based on rigorous analysis.

really comes down to a few items.

1. is this passive or active.

generally speaking better properties will be much easier on the management side of things and more predictable income along with worth a bunch more money down the road which is were wealth is created 

Area is huge. I think the 10-15% premium may be worth it, especially if its in an area that will appreciate substantially over time. Always check with local city officials to see if there are any plans for new development. Being in the path progress is a great thing.

Life doesn't happen like a spreadsheet. In reality, the higher class properties will likely out perform lower class properties, even though a spreadsheet says different.