OK, guys, so you've all beat me down enough
to know that I hate the word location, location, location,
but I find myself doing a video on this because guess what, location really does
matter as it determines which property that you should buy.
I actually believe it is the number one decision.
So in today's video, I'm going to be discussing how much
the location of your property matters and why it matters.
We're going to break down the numbers
and really dove into the tenants, the landlords and looking for a property.
I'm also going to give you some red flags that I think would be very interesting
as you guys decide.
All too often I see investors looking at the deals and trying to decide
should I get a property in a great area that is more expensive or a property
in a decent area that is less expensive, oftentimes
on the edge of town as an example, or out in the country.
So this is a perplexing question, and I'm going to break it down for you.
So let's say you're looking
to purchase a property and you are considering two options.
Both of these options are pretty similar.
There are two bedroom, two bath condo,
and the monthly expenses associated with them are about the same.
The first property is three hundred and fifty grand.
Let's say it's in a place where there are restaurants or walking distance away.
Crime is low and the area is really nice.
The second property is, let's say, three hundred twenty thousand
and is only a short drive, maybe 10 or 15 minutes away from the first property.
But restaurants are 10 or 15 minute drive.
Crime is not bad, but it's not as safe as a first property.
And this area still OK.
But a little more rundown, just not quite as polished.
Which property would you want to purchase as a rental?
Now, a lot of people will chase after the less expensive deal.
That's not a problem. But that's why we're doing this video.
And this isn't an easy answer as you have to dig into the numbers.
However, most investors opt for a cheaper property,
typically because they're looking at their down payment.
Their mortgage will definitely be less because it is less of a down payment.
And they figure it doesn't matter
that much because the tenant will still be close to the amenities.
Just a short car ride away.
The problem is, when you make this decision,
you are thinking like a homeowner, not a tenant.
Think like a tenant for a second.
How convenient would it be to have restaurants and parks within walking
distance? Do you really want to drive 15 minutes to meet your friends to eat?
How important would it be to live somewhere where it's extremely safe,
especially if you are an elderly person or a young girl like a lot of tenants are?
There are all kinds of things that run through a tenants mind
when looking to rent.
They are going to be
looking at a lot of places and having to decide the best place.
So you want the unit, you want to be in the best location
so that you have the best chance of being the unit a tenant picks.
So now that you're done thinking like a tenant, let's
start thinking like an educated landlord.
Let's start with the numbers.
I always go back to the numbers.
It's what matters the most.
The numbers I look at art, the total price paid for the unit.
It is the income the unit provides versus the expense that it costs each month.
When you start looking at the monthly numbers versus the amount
you pay up front, it tells a very different story.
The difference in a down payment between property one
and property two is six thousand dollars.
While this is more money, it is not a big difference in the initial investment.
Then let's look at the mortgage,
assuming the interest rate is fixed at three point five percent.
Your mortgage payment on property number one is only going to be about one
hundred dollars more a month than property number two one hundred dollars.
That is all. So now let's jump back to the rent,
because this property is located in a better spot.
You can more than likely charge the extra one hundred
or more to your tenant on property, number one,
than you were going to be able to to a number two,
tenants will and can pay one hundred and fifty to three hundred dollars
more for added safety and convenience of just being located
in a great area with just that.
You're cash flowing more on property one than on property, too.
Secondly, and even more importantly, great locations have much
less vacancies than good locations.
If you make sure to purchase in a great location,
a lot of the time, you will never even have a real vacancy.
If you do, it is normally very short with an OK area,
your property could sit vacant for 30 days or more.
Those empty days will cost you a lot more money each month.
So in this example, property one is by far the better deal
for when you're purchasing it as an investment property,
while you have a slightly bigger down payment, you are going to be cashflowing
50 to two hundred and fifty dollars more per month,
and we'll have much less of a chance of experiencing vacancies.
This is why being an educated investor is so important.
So now let's take a look at what tennis look for.
They look at nice neighborhoods, nice schools,
low crime and strong job markets.
Those are the four top things.
In many cases, Ross and I buy properties
located in great school districts just for this exact reason.
Families will relocate to areas that have good school districts
just so they can enroll their kids into those local schools.
Now, let's take a look at some potential red flags when you're buying.
So obviously this picture
is a thousand words, but you guys have seen this for sale.
For sale, for sale, for sale, for sale.
Lots of inventory.
That is not a good thing.
Obviously, when you're trying to invest,
but you're going to find better deals when there's lots of supply on the market.
So a lot of people chase deals like this a lot.
Another one is you want to take a look
at schools that are actually enrolling more students.
We talked a little bit ago about how families do look
for good school districts.
You got to look for the other side of that.
If schools are enrolling fewer students, that could be a red flag.
Another potential red flag would be properties
that are located too close to industrial area.
A lot of people are very health conscious and a lot of people
don't want to be around industrial type areas.
And you might have a tougher time on the rental and on the resale side.
Another red flag would be empty storefronts.
The last two, you want to look for places that have good parking.
Parking can be a real problem for the renters once
they move in, if they have to carry all these boxes and groceries
and all those things for long distances, especially when it comes to safety.
So pay attention to that.
The last red flag is making sure that you buy in an area
where the homes are maintained.
What you want to do is the opposite.
You want to buy the home that's not maintained in an area
that's maintained very well.
So I just gave you guys six red flags.
This is why being an educated investor
is so important to learn more about educated investing.
Please check out my investing master course.
The link is below if you guys like what you saw.
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There's a tremendous amount of work that goes into these.
And as always, I appreciate you all.