Real Estate Investing Blog

We’ve all seen distressed assets that seemingly will with just a bit of tender loving care produce great results. And sometimes, I can tell you from personal experience, this is true. I can also tell you that the risk of being incorrect can be quite large. That is the point of today’s article. Choosing an asset in a great location with timeless positives in its favor can go far to assure a successful investment, long term cash flow, limited risk loss, and a worry free future.

What defines a great location? A list of some identifiers include:

1. Very high traffic areas always stand out;
2. Communities with reputations as preferred for business or homes;
3. Areas with high concentrations of upscale employment;
4. Areas with quick and easy access to employment, commerce, entertainment, transportation;
5. Locations near very good schools;
6. Properties adjoining a large university;
7. Places near major points of interest;
8. Neighborhoods slated for and funded for major development;
9. Locations that are already strong with very limited development potential;
10. Locations that demonstrate long term high occupancy, steady rent increases, and steady value appreciation

Many other items stand out, but perhaps focusing on the most common place are also the safest bets for many investors.Analyzing properties from these locations will demonstrate that while initial cash flow sometime suffers the long term certainty of appreciation in rents and value will quickly overcome these issues.

Analysis of properties of this nature shows that while the may only return 3% – 6% at purchase often they deliver internal rates of return exceeding 15% on a long term hold of 10 years or longer. My opinion is that most investors should be very pleased with these types of returns as the long term snowball effect of this growth is very positive results for the patient investor.

Further, my review of the information and analysis suggests that once such an investment is made that over the course of the investment opportunities to improve the results by several percentage points will inevitably develop as rates fluctuate upward and downward and as values move higher or lower. By following the market, the investor will see and be able to capture stronger performance that this longer term more patient view supports.

Investors should seek value investing opportunities founded on these principals. This will protect their invested asset value, assure their long term value gains, and avoid the unnecessary risk taking of pursuing greater more exciting returns. Over the course of time, this form of investing is a great complement to hire risk investment alternatives and often the better performing choice.