When you’re in the market for an investment property finding the right location is crucial to ensure it meets your goals. Whether it’s long-term capital growth, cash-on-cash return or immediate value creation, we’ve rounded up some advice to help you identify the best possible location. Here are three great tips:

1. Find Regions with Favorable Rent-to-Purchase Ratios
2. Follow Redevelopment Infrastructure Spending
3. Seek Out Big Companies and Colleges

 

Want more? See 10 Tips to Select a Location

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Costs vary significantly widely from location to another based on age, pricing, weather, labor costs etc. Costs usually fall within the range of $3,000 to $5,000 per housing unit for a middle-income property. Investors often look at ratios and operating expenses as a percentage of collected rent, in which case a normal range is 35% to 50%. However, in low income markets operating expenses can be a higher percentage of collected rent.

Investors must consider all the items that must be deducted from gross potential rent to determine net operating income (“NOI”). See measuring returns in Education Center for expense items

 

In some markets, such as Ohio, New York and Indiana, where average home prices are much lower than other markets, it is easier to purchase high cash flowing properties with a favorable rental rate to home price ratio. That is buy say a single-family home for under $50,000 that can produce a gross rent of almost $10,000 per year and a 10% cap rate. In other markets, such as California, there is substantial competition for any property and cash flow returns maybe as low as 4%. It’s clear the opportunity is to follow the foreclosures. In October 2014, 1 out of every 1232 homes in the USA received a foreclosure filing (source realtytrac). The real estate crisis created a big opportunity to buy distressed properties and there are still many foreclosure sales in judicial foreclosure states. See Where to Find Foreclosures in 2015 www.howmanydoors.com/members-home/education-center/find/finding-foreclosures/