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.
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.
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.