It's Still Location, Location, Location
|Contrary to what many creative investing courses may tell you, the old standby "location,location, location" still matters. I've seen both courses and speakers attempt to dispel this adage because the technique being promoted miraculously makes physical location a non-issue. I was foolish enough to buy into it. You don't have to.|
If you're wholesaling, does location matter? Certainly. If you've spent any time in this area, you quickly realized that some areas are better than others not only for locating deals, but for moving them as well. True, you're not looking for the end buyer, but what about the rehabber who will buy the deal from you? That investor will have the best success selling the property as a retail property or filling the property as a keeper if it's in a desirable location with convenient amenities, good schools, etc. This should be an important consideration for you if you want to attract serious rehabbers and a large number of them. Yes, if you've got good numbers, you can still get the deal done, but why make it harder than it has to be? Supply the market what it wants.
Where you happen to fall in the investor food chain doesn't change the location variable. Regardless of whether you're bird-dogging, optioning, wholesaling, rehabbing, owner financing, lease optioning, short selling, etc., at some point there has to be an end user with some cash to make it profitable.
As always in real estate investing, there are no hard and fast rules. One caveat to the location issue might be if you're in a scorching seller's market and you sell everything for cash. The challenge in that situation is when you're buying since in you're on the wrong side of the market. Perhaps it requires working harder, smarter, etc., but when you locate a deal, it doesn't really matter where it is because your business model is in and out. The only trick there is knowing when to begin to weigh location a little heavier as the market cycles back to a balanced market or a buyer's market.
But what if you like to keep some properties and offer creative terms such as owner financing or lease options? Again, in a strong seller's market, it's not that big a concern because it's true that your phone will ring off the hook. You get to decide how many hoops you want your end user to jump through. It's great to be able to funnel prospects to voicemail, a web site, and require them to fax a copy of their driver's license and an application before you even speak to them. Been there, done that.
However, if you happen to get lazy on your screening process and put some not-so-qualified folks in your property, that not-too-desirable location could come back to bite you. You end up evicting or foreclosing on your residents or they just leave after a while. The market's changed on you and is now a buyer's market. Everybody and their mother is offering owner financing, lease purchases, free rent, free vacations, free dvd's, whatever just to attract a prospect. No longer are there any hoops for the end user, other than can you fog a mirror? Which properties will go first, second, third? It won't be the one that's a bit out of the way, in a mediocre school district, or the one where the grocery store is five miles away.
And do you really want to drive an hour to change the locks, make sure the cleaning folks did a good job, check to see if the yard's actually getting done, etc.? When you're in a strong buyer's market, this routine can become the norm. So, don't forget to factor in "proximity" to your normal stomping grounds when evaluating location.
I ask these questions to cause you to think about these issues. I didn't. I happen to still own what I call "hassle" properties that fit these criteria. I didn't expect to own them today. They were supposed to be gone long ago. After all, if you're selling with terms, location doesn't matter, right? Yeah, right.
Give the market what it wants, and ultimately, the market wants a good location.
|Tim Randle bought his first investment property in 1994 and he still invests today. He is also the founder of www.REIClub.com, an online resource for creative real estate investors.|
Tim's informative articles on real estate investing have been published in Creative Real Estate Magazine as well as the Mr. Landlord Newsletter and his counsel is frequently sought by investors around the country.
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