Why Location is Still Critical in Single Family Rental Real Est

Why Location is Still Critical in Single Family Rental Real Estate

The real estate mantra that success is about “location, location, location” has been used for so long it has become a cliché. Consequently, it’s easy to ignore the fact that this age-old wisdom is still true today. And, it is especially true in single family rental real estate for a number of reasons.

First, where a residential property is situated is always important to the people who live there. Contrast this with commercial real estate where, in many cases, a business isn’t primarily concerned about the address of a property as long as the structure has the desired features.

People looking to buy a home tend to be willing to commute further to work to get the mix of amenities, school system and price they’re looking for. Proximity to work (or school if renting to college students), tends to be more important to renters. Thus, rental properties in an area with solid job growth tend to be in higher demand than more remote properties.

The “family” in single family rentals is also a big reason that location is critical. Individuals or couples with no children may be more interested in an area with lots of restaurants and a thriving nightlife, and more open to living in a neighborhood that is less desirable to families with children for one reason or another. A family with children, on the other hand, is probably more interested in things like crime rate, the reputation of local schools, whether there are other children in the area for their kids to play with, etc.

How Do You Find the Right Location? Research, Research, Research.

It’s important to know your neighborhood and understand the available pool of rental residents.

What’s the key to choosing the right location in which to purchase a single family rental? Research. And lots of it.

Successful investors put as much effort into researching the area around a property as they do the property itself. In many cases even more, if they are not already very familiar with the area. A single family home that meets all of the criteria on your list of property features will likely fail to provide the returns you are striving for if it’s not in a location potential tenants find appealing.

A helpful way to conduct location research is to think of it in terms of concentric circles. What are the properties immediately adjacent to the one you are considering like? What is the condition of the homes a block away? Two blocks? How many concentric circles until you reach essential services? Business centers and jobs? Schools? What’s the economic forecast for the area, the city as a whole, and the region? By looking at a property this way, you’ll know when those concentric circles zero in on a single family rental location that’s an absolute bullseye.