Blog Post

The Trick - Buy properties where people want to live!

Chad Murray • Jun 27, 2020

No Matter what the proforma tells you

Early in my real estate investing career, I have to admit, I would buy property in almost any location - wherever the numbers made sense" - despite what the "feel of the location" felt like. I would often overlook the feel of the home in favor of the numbers. I figured, even if I did not like the looks or the feel of the location, I was not going to live there, and the outstanding proforma on paper would solve it all right? Problem was, that proforma with how it SHOULD perform meant almost nothing with how it ACTUALLY performed. Oftentimes, the properties I feared I paid too much for (had a much lower cap rate) were actually oftentimes some of the best performers in real dollars. Now I realize this is a general assessment, and is not always the case, especially since properties can be repositioned, but today with this blog post, I want to make the case for putting the "look and the feel of the location" primary versus simply buying where "the numbers make sense".

Why is it so important to care about the look and "feel of the location" - afterall, isn't real estate investing all about the numbers? Real estate investing IS all about the numbers, but its all about the REAL numbers! So, how do you cut the risk? It's simple: Buy properties (the physical assets) in locations (neighborhoods and streets) where people want to live, have the capacity to pay, and are proud to call "HOME". That's why, when contemplating new property investments, spend time out front, walk the grounds, and THINK. Thinking about why people would want to live here and what makes the home unique or desirable.

IF tenants are looking for a place they are proud to call HOME, what exactly makes a property HOME to them? For almost every tenant I, or any member of our team has ever met in this business over the last 11 years (probably thousands of people at this point), most would tell you they are looking for many of the same things. They say, they VALUE - safety, organization and order, prettiness (aesthetics is too complicated of a word for me), clean and well kept within a reasonable distance to where they work, shop and like to go and a place they are proud to bring friends and family. Also, they don't want to have to drive by or through places they personally find to be undesirable to get to their home.

So, as you are debating a new real estate investment, pay attention to how the numbers look on paper, making sure they fit your minimum investment criteria, but after they meet that, spend a good amount of time thinking about some of these things mentioned above and please have someone you trust physically drive the location for their opinion so that it validates or disqualifies what you are seeing. Once you do your research, you like the numbers, and have the physical drive by validation, it's time to add another investment! Folks want to live in places they love to call home - and believe me, they will be thinking about this each and every time they mail off (or electronically send) their rent to you. They are paying for value - so think about what they value and do yourself an investment favor, buy where people want to live.

The hard part is finding the asset..but once a great asset is purchased, let the market and sound property mgmt operations (like what Frontier offers) be the icing on the cake. It's almost a sure thing: If you buy a great asset in a location people WANT to live and have a good property manager to deliver the service, there is no better investment than rental real estate!

So, if you are looking for a team that understands this business and loves operations, give us a call. We are 15 people strong! Be happy to talk through and drive by any asset you are serious about buying or already have under contract. Congratulations on your investment into this business! Real estate is awesome in so many ways!

Chad

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