When thinking about purchasing a home to live in or a property for investing, one thing is certain; location is everything. We have all heard the old adage, “Location, location, location!” This still applies when purchasing Sacramento investment property, rather than a home for your family. Location can make or break your ROI and here’s why.
Real Estate Value Cycles
Just like stocks, real estate values fluctuate. The key to maintain a higher value is to have a well-located property. Properties in good Sacramento locations tend to be the last ones to take a hit when the down cycle comes around. They also appreciate faster and for more extended periods of time than properties in less sought after areas.
Adversely, properties in poor locations are last to appreciate and first to depreciate. They have the biggest swings in value, leaving the owner with the risk of selling at a loss.
Rental Income and Location
Rent all depends on a property’s value. If your Sacramento property is in a desired location, rent will rise. When rent rises, appreciation occurs, increasing cash flow.
Ultimately, location is key to maintaining a steady cash flow. Rental income will swing with the property value cycles, which could be detrimental to your cash flow and ROI.
Starting Your Search
Here is a list of things to look into before settling on an area for your Sacramento investment property:
- Schools: potential tenants may have children and the quality of surrounding schools could play a factor in their decision to rent.
- Crime: there are several ways to check crime in the area. Check with the local police or public library to learn crime statistics for neighborhoods in the area.
- Employment: when searching for a rental, tenants want to be near job opportunities. Properties closer to employment centers average a higher rent and are able to maintain it.
- Amenities: check the area for local parks, shopping centers, community pools, gyms, movie theaters, and anything else that may attract potential tenants.
- Local Rent: look into the average rent in the area. Make sure it could at least cover your mortgage, taxes, and other expenses. Take into consideration any possible fluctuation.
Do Your Homework