In the world of real estate, a good location can’t be undermined. It is, arguably, the most important feature that determines your property’s value. However, a lot of factors come into play to make a location good or bad. So, when you plan to buy a property, take a look at these factors and select the location that will give you maximum profits. This is a comprehensive guide to help you choose the best location for an investment property. Let’s discuss these factors below.
How to Choose the Best Location for an Investment Property
Numerous factors come into play when selecting the best location for real estate investment. For your convenience, we have created a list that will help you pick an ideal location for property investment.
- Check the buying trends
- Price to rent ratio
- Property laws and taxes
- Safety and crime rates
- Presence of well-reputed schools
- Access to public transportation
- Presence of job opportunities
- Nearby amenities
Let’s discuss each of these factors one by one.
Check the buying trends for that location
Checking out buying trends plays an important role in figuring out which area can help you reap the maximum profit. Is it a popular locality? Are people buying property there? Are property prices going up or down? Such statistics about a particular location will help you make the right decision.
If you are planning to buy property in a particular neighbourhood in Pakistan and want to explore the most popular areas for investment, then check out Zameen.com’s buying trends section and make a well-informed decision.
Price to Rent Ratio
People who want to invest in the real estate business know that there are big risks involved. You can never be sure when the property prices would rise or go down. Moreover, the stakes get higher when you spend all your hard-earned money on buying a property, hoping that it would give you more profits.
If you want to minimize the risks and maximize the profits, determine the price to rent ratio of the area. Calculating the price to rent ratio is quite simple and yet it is one of the most popular metrics investors consider when analyzing a specific location. Basically, the price-to-rent ratio tells you if it is a good time to invest in a property that you can later rent out or if you should invest in that particular locality.
If you know the average property prices of an area and the average annual rents of a location then you can easily calculate the price-to-rent ratio. Check out this formula to calculate the ratio:
Price to Rent Ratio = Average Property Price/Average Annual Rent
So, if the price to rent ratio comes out low, then it tells you that the average property prices in the area are quite low and hence it is easier for an average person to buy a property. Therefore, you can safely invest in the locality at the time. It is important to mention here that if you are looking to generate revenue through rental income, then you shouldn’t invest.
Why? Because the market suggests that people are buying properties in that locality and are not interested in renting. However, when the price to rent ratio turns out high, then it suggests that it is a good time to invest in a rental property as people are looking to rent in the neighbourhood.
Property Laws and Taxes
When investing in real estate, you must also determine the laws and taxes that are levied on property in your city. There are some locations where property taxes might be higher than other cities. Do your research well before you decide the best location for property investment.
When choosing the best area to buy a property, check out if there is any regulation on the rental price of a unit. Check out the laws pertaining to property buying and selling in Pakistan. Moreover, also take a look at types of property taxes in Pakistan before you invest your hard-earned money into the real estate business.
Safety and crime rates
There is no denying the fact that people prefer living in secure neighbourhoods. So, you wouldn’t want to invest in a locality which has a high crime rate. Inspect the area and ask the residents if there has been any robbery or theft recently.
It is always a good idea to take residents’ views about the area before choosing the best location for an investment property. Are there any specific police checkposts? Are security cameras installed? Is it a gated community?
Presence of well-reputed schools
Check out if there are schools in the locality. People sometimes search for an area where well-reputed good schools are located. So, buy your investment property in an area where there is a school district or a well-known school to increase your property’s resale value.
Remember that properties near schools might be more expensive to buy, but if they generate a good rental income, you would be compensated well.
Access to public transportation
One of the major factors to consider before choosing the location for property investment is good public transportation. If the area is easily accessible from all parts of the city, then it is a good choice for investment.
The property’s value would increase due to it and when new roads are constructed and public transport options increase, you can then resell your property and earn profits.
Presence of job opportunities
Invest in an area that has easy access to offices and job opportunities. People tend to move to an area which is near their offices. That is why property prices are higher in the city centre than in the suburbs. When choosing the location for investing in a property, it is important to also keep an eye for a population increase.
Better job prospects mean people shift to that area, which in turn increases the area’s population and thus creates a housing demand. So, this a good metric to choose the location for property investment.
In addition to the availability of basic utilities like water and electricity, the presence of entertainment facilities, such as nearby cinemas, play areas for kids and family parks also play a pivotal role in determining the neighbourhood’s worth.
If the area you want to invest in has hospitals and medical facilities then it is in great demand and an ideal investment choice.
If you are planning to select the best location for property investment in Pakistan, then let’s help narrow down your search. Check out our comprehensive and detailed area guides on major cities of Pakistan: Karachi, Lahore, Islamabad, Peshawar and Multan.
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