Tom Kelly: Looking for an investment? Put yourself in the renter’s shoes

In a recent column, we addressed the possibilities of buying an additional property for investment or personal enjoyment. Your ability to maximize the net income you receive from a property purchased specially for investment depends on choosing the right property in the right community. Doing so will minimize the amount of time the property is vacant and may also increase the monthly rental you can charge.

Your own preferences, however, often mean little in this choice. The property and the community must appeal to the renters who will consider your property among all others. So, you must look at the attractiveness of the community from the viewpoint of the renter.

Even if you use a real estate professional, and even if you invest where you live, there are some specific factors that you need to consider in choosing a location. Each of them can be resolved by considering a series of components.

Accessibility

The most attractive properties will be those that offer the best access to the amenities renters’ value. For example, renters tend to want to be close to work or school regardless of space considerations. A property that is located nearby or having convenient transportation rates higher than a property that may be larger or better appointed. Again as an example, a vacation rental property is more valuable the closer it is to the water, the wilderness or the golf course. So, in evaluating a location for investment, ask (and answer) the following questions. You can score each answer on the basis of a 1-5 scale, and then compare total scores for each alternative property.

Where is this property located in reference to major employment and education centers? The closer the better.

Is the property convenient to major transportation corridors? Consider both roads and public transportation here.

How convenient are shopping, amusements and recreation? Renters often use public space more than private space for nonwork needs.

If the investment property is a vacation rental, how close is it to major recreational sites (water, mountains, golf, etc.)?

Safe and sane

In this environment, safety is a high priority for everyone. For renters, this is even truer than for owners. In part, this is because owners have more direct control over the security of their properties; in part, it’s because urban rental properties tend to be in more densely settled areas with higher crime rates. In either case, renters will rate alternative properties partly on the safety of the neighborhoods in which these properties are situated. So ask yourself the following questions that will rate the neighborhoods in which you seek to invest.

What is the crime rate in your target area as opposed to the metropolitan area as a whole?

What security precautions have been taken at the property? As a related consideration, think about what you are willing to spend to increase the safety of the property after you acquire it.

Is the property fireproofed? Fire is often a greater risk than crime in many areas.

If the property is a high-priced or vacation condominium, is the community gated or the entrance tended 24/7?

Neighborhood quality

Research has shown that where the community is strong, house values are high, and demand for living in the community high as well. Most people, renters included, want to live in vibrant, unified communities. If you are considering an investment property, the quality of the neighborhood is a very important factor. It will go far in helping you maintain strong cash flow and high appreciation on the property. A few of the important factors are listed below.

How strong are the neighborhood organizations? When a community is progressive, the residents will participate.

What is the quality of the neighborhood schools? Even if renters tend to use schools less than owners, they will benefit from communities where education is a priority.

Do the commercial areas in the community attract a large volume of street traffic? Busy areas are more vibrant, exciting and attractive; besides, they tend to be safer.

If you are considering a single-family detached house as an investment, what percentage of the population owns in that neighborhood? Traditionally, high percentages of ownership are associated with better neighborhood quality.