How close is close enough

2 Replies

Hello all,

I've been looking around for a Duplex near where I live and came up with a few basic questions. I would like to know how close one should be from the main ''job hubs'' when looking at purchasing a MFR.

For example, here are the 3 main areas where people work/study in this town:

- The hospital

- The agriculture trade school/R&D center (not sure how you guys call that in the US)

- University campus (veterinarian studies campus only)

Is a 10 minute drive reasonable? Otherwise it's about a 30 min walk. For the hospital I'm guessing that would be fine but do you think students would prefer to be closer to schools? (maybe 10 minute walk instead?)

There is about a 30% premium for buildings that are within 10 minutes walk from these. The rents do not seem to have the extra 30% premium however... 

Let me know what you guys think or if you need any additional information!

Thank you!

Frederic:

I think you need to look at the question differently.  There is no magic answer.

Would you pay more for a property across the street from the hospital than one 20 minutes away in the country?  Yes, of course.  The more important questions is what are the returns and the anticipated risk of those returns.

If you could get 2x the returns from the far away property, you may want that one.  But, if you think those returns are risky because it is too far, then you may lean to a nearby property.

Your succes as an investor will be your ability to evaluate risk vs returns.

@gregg Scott, thank you for the reply, you are right on the risk VS return. However when running the numbers on both properties, the one that is slightly further (still close to downtown though) has much better cash flow potential. 

I forgot to mention that in Quebec we have very strict rent control rules and increasing rent is very difficult on anything over the inflation rate (unless you did significant work on the property) 

You can do bigger increases between two different tenants, however some rules apply there as well and the new tenant could demand to pay the same rent as the previous tenant. 

Personally I'm leaning towards the one that is a bit further away from key areas as of now. 

Other comments are welcome as I am not dead set on a choice yet. 

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