If you’ve played the classic board game Monopoly, you’d know that some neighborhoods are just more popular than others. Everyone wants to be the landlord of Boardwalk or Park Place while Baltic Avenue doesn’t get much love. Interestingly enough, in the real world of real estate investment, much of the rules and common strategies of Monopoly do apply. You can charge more money with premium addresses like Boardwalk than Atlantic Avenue. Some districts are worth more than others.
However, that is where the similarity ends. In real world real estate investment, making money doesn’t involve just zeroing in on the ‘good parts’ of town and focusing there. In fact, if you truly want beefy returns on your equity, you might do better buying investment property in the ‘bad’ parts of town than you would in buying the real world equivalent of Boardwalk in your particular city or town. How come? It all boils down to return on investment.
As an investor, your focus should be on putting your money in places where it generates more money in less time. Focusing too much on areas that have a reputation for high rents might mean you quickly reach the ceiling of your return on equity. Follow the tips below to get on the inside track of buying investment property in districts before they shoot up in value.
Look For Signs Of Growth
Compile a map of the city or town you want to invest in. Divide it into districts and subdistricts. Map out the latest sales and rent patterns of the different areas. Color code the map between no growth, negative growth and positive growth. For the areas showing positive growth, show color intensities with brighter colors showing great growth. See a pattern? Now, cross reference the growth rates with the average sale prices of the properties in that district. You are looking for low cost properties with increasing rental rates.
Buy Property That Accommodates Growth
Once you have identified a part of town where properties are cheap in relation to their revenue growth, pick out certain property types. Look for property that accommodates growth. Buy commercial property and apartments you can rent out.
Brush Up Your Property’s Appearance To Contribute To Community Growth
After you have bought promising property in the ‘bad’ side of town, do your part in maintaining, if not boosting, the upward trajectory of that district’s rents and sales value by renovating your property. Of course, you have to do some serious return on investment analysis to determine the minimum amount of renovation you can do. Renovating your property helps boost the district’s overall value and it will only benefit once the district completely sheds its ‘blighted’ reputation.