Where to Buy Real Estate

©2009 Bob Sharpe
C.E.O., RealEstateWinners.com

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You're ready to purchase an investment property. Where should you buy it? Should you buy it close to home?

Remember, the reason you are a real estate investor is to make money. That means you should buy in the areas where your potential real estate profits are the greatest. If you can make more money investing in another State, you should consider it. With a professional property manager, you don't have to be there.

The bottom line has to do with The Law of Supply and Demand. When the demand for housing goes up, so do the rents and prices. Buy in areas of increasing demand.

At RealEstateWinners.com we specialize in finding investment properties in areas that make sense for investors who want to make money in real estate.

What factors should you look at when looking for a location for investment property?

1. Is the area declining or growing?
   
   Some areas are losing population. You can find great bargains in those areas, but with a declining population, you may have a hard time keeping your property rented, and you may not be able to sell it. Stay away from declining areas. Detroit, Cleveland and other areas that rely heavily on the US auto industry for employment are in a long-term decline. Many parts of the South and West are growing.
   
2. What is the long-term growth potential of the area?
   
   If the area is growing, is the growth sustainable? Or is the area growing because of a temporary condition, such as the war in Iraq? (This is not a political statement, but a statement to help you decide where to invest).
   
3. Is the economy of the area relatively strong?
   
   This is particularly important in 200R9. In areas where the economy is very weak, people have trouble keeping their jobs and paying their rent.
   
4. Is the area attracting jobs?
   
   Municipal and county governments in some areas are very aggressive at trying to attract employers to move their businesses in. Nashville and the 11-county area of Middle Tennessee are working hard to attract new industry. As a result, Nissan moved there from California, and many other employers moved there from other States. High corporate taxes and heavy unionization have driven many employers from Ohio to Texas, where the cost of running a business is much lower. Areas that are attracting jobs are some of the best places to invest.
   
5. Does the area enjoy economic diversity, or is it dependent on only one industry for employment? 
   
   Contrast Detroit and Nashville. Detroit has one major industry - the US auto industry. Thousands of homes all over the city are abandoned and boarded up. It's hard to believe, but on a recent tour I discovered that almost every block in the city had at least 3-4 abandoned, boarded-up houses. And many of those blocks also had vacant lots where abandoned, boarded-up houses once stood.
   
   Nashville, on the other hand, has major employers in many industries - health care, insurance, education, publishing, automotive, tourism, and of course, the music industry. In addition, four major Christian denominations are headquartered there. Nashville has a very stable economy compared to most US cities. That makes it a very safe place to invest.
   
6. Is there a coming event that will cause property values to change?
   
   Recently in Costa Rica, the completion of a new international airport cause nearby land to rise to $1 Million per acre, and some investors received a windfall. The bankruptcy of a major auto industry employer in a small city in Indiana caused local properties to plummet in value overnight.
   
7. What is the cost of housing and the average rental income?
   
   For many years, California investors have been investing out of state because local houses were so expensive. Recently I met an investor who was sold a house with a $4,000-a-month mortgage, and he was only able to get $2,000 a month in rent. He was losing over $2,000 a month on one property!

For more insight, see the article, Cycles and Trends from RealEstateWinners.com.