What do you look for in an area?

7 Replies

I am still a new investor, and I am trying to develop my business plan. I want to specify what local areas I want to invest in. I've come up with a few requirements, but I thought I would poll this group and see what everyone else thinks. Here are a few of mine in order of priority:

Price-to-rent Ratio - 1% + ($1,000 rent for a $100,000 house or better)

Crime/Safety - no violent crime

Schools - high rated schools

Appreciation Rates - San Antonio is a relatively low appreciation area, but I am trying to find the best I can.

What are some of yours?

I'm a fan of b/c product in A locations or infill areas that will be A in 5-10 years. The cash flow component is better and you may have multiple exit/uses. Covered land play if you will.

Thanks for the reply @J Koehne How do you determine if an area will become an A area? Job growth?

Close to desirable schools and grocery shopping. Away from massive apartment complex parks. I'd look for areas that are part of a future development plan in the city. No violent crimes in the area. You're always going to have theft and domestic assault, but hopefully no rape, murder, etc. Also, unless you are buying into a downtown that is part of a redevelopment plan, I'd stay away from older neighborhoods (1970s or newer).

For retail/business, they say its all about location, location, location.

To me, for investing (at least for buy and hold for rentals which is what I'm familiar with), its schools, schools, schools.

Give me a house in a town with good schools and you're going to do well.

Less turnover. Larger and better tenant pool.

Everything else will follow with the schools.

Thanks @Mike Dricken

and @Mike H.

How do you determine which schools are best? Locals and word of mouth? Trulia, redfin and other real estate sites with school ratings?

Thats something that you just need to ask around. I do think that you can find numbers on schools in terms of test scores and the like from the state. But ultimately, I think it comes down to perception by people in the area so asking around is the better way to go.

I'd also suggest asking realtors. They are extremely aware of what schools in the area are good and which ones aren't. They are probably the best resource for finding that out.

But, to me, everything about investing is driven by schools. Better schools = better renters, larger tenant pool, more increases in rent, and more appreciation. Bad schools is the exact opposite. And of course there are average schools which bring in average renters, avg increase and avg appreciation.

I've got 28 houses in roughly 12 different towns so I have a real good view of the difference between good, average, and poor schools and how it relates to buy and hold. Couldn't tell you how that affects flipping. But I've bought exclusively in the areas with the better schools over the last 3 years and the management of my houses has become so much easier.

There's no way I could handle this many houses with a full time job if all 28 of them were in some of the towns I'm in with the poor schools.

@Mike H. That is great insight, thanks so much!

I have one rental property right now...and I did not even think about schools going forward. It is definitely going to be my top priority for future rentals.

Its funny though, even though my rental isn't in a great neighborhood, the reason my current tenants want to stay in the house is because of the schools. The tenant has a high school aged son who wants to graduate from the same school as his mom. Even though it isn't a high-rated school, it still has value to them.

I can imagine that the really good schools would create even more loyalty.

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