The One Thing That Matters Most When Selecting Your Next Passive Real Estate Investment

Just as with any large or small decision in life, when it comes to investing, there are so many choices to choose from and variables to consider. Which asset class to choose; which type of asset within that class; what are your goals and strategies? The list of questions can seem daunting and never ending. If you stumbled upon this blog, you are likely somewhat interested in real estate. Let’s think for a minute. Why is it that you are interested? What attracts you to the idea of owning real estate investments? If you love the idea of freedom and wealth creation through real estate, great! As I mention in many articles, knowing your why is essential and identifying your investment criteria is fundamental to your success.

Let’s talk about investment strategy.

There is much to consider. However, assuming you know and trust those with whom you intent to invest, the most important detail in your next investment is location.

You could have the most formulated plan and strategies for real estate investing, partner with great people and look for “great deals,” but without a focus on great locations, you are opening yourselves to much risk.

People are renting all over the world. Investors can find investment properties everywhere. But just because there are renters somewhere does not mean it is the best place to invest. I am not just talking about regions of the nation, states, or even cities. I am referring very specifically to the neighborhood-level.

How well do you know your market and submarket?

As you know, in many cities, you can be in a great area one minute and literally cross the railroad tracks and things change. If you are an out-of-state investor, you need to know these things. This is why it is important to have someone with “boots on the ground.” That term refers to a resource that 1) resides close to your target market 2) knows it well 3) can help with due diligence and provide accurate feedback about that specific area.

Why is all of this important? Sure, you can throw darts at the wall and invest and make money, but nothing massively successful happens by accident. Take time to build a team, understand your market and get honest feedback.

Go The Extra Mile

As I write about often, I am rigorously working on finding multifamily assets in growing markets. Florida is one of my focus areas and I happen to be a boots on the ground resource for others looking to invest in Brevard County, Orlando and Jacksonville. Earlier this year, a few associates advised that they had identified a property that they were negotiating in Orlando and wanted me to check it out. Having lived in Orlando, I was somewhat familiar with the location, but being such a big city, without having spent much time there, it could truly be a hit and miss situation.

I took an early morning drive to the property to take pictures and assess the area. I could see that it was not far from downtown Orlando (good thing) but being a few miles off and seeing the property itself, I was not sure if it was on the rougher side. (Side note: downtown areas in major cities can easily transition from Class A communities to rougher parts in just a short distance. Unless you have experience with Class C- and D communities, it may not be best for you to seek out investments in these areas. In my case, I seek out Class C or B properties in Class B or A neighborhoods).

Already recognizing that the area was currently rougher, I advised to the team of my findings: Property: Good value add potential; Location: Close to beautiful downtown but in rougher area; possibly in the path to progress for more growth as the downtown expands. The feedback was helpful, but I had to call a few friends I knew from my days as a leasing agent who are very familiar with the Orlando area. Their assessment was as follows:
– Currently a rough area
– Lots of growth and development happening
– Future state of area is more revitalization

From their feedback, we learned much more than we originally knew. For other reasons we decided not to pursue the property, but this experience was rewarding nonetheless and a significant reminder of the importance of choosing great location, knowing your market and getting help and feedback from city experts where needed.

Location, Location, Location.

When it comes to real estate investing, it is hard to ignore the common axiom, Location, Location, Location. From a planning and strategy perspective, you can do everything well, but do not bomb it because of poor location selection. Even for passive investors, before investing anywhere, go the extra mile to ensure your capital is protected by investing in great, growing areas.

We hope these tips are useful to you and your family as you take your journey towards diversification, wealth-creation and time freedom! As usual, reach out to us with any questions.

Safe Investing!

RRII

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