Bahador Abadi

Bahador Abadi, Residential and Commercial Real Estate Broker

As many of you may have heard the famous saying, the three main rules of real estate are: Location, location, location. While many people may understand the saying, a lot of them fail to fully apply the rule for a variety of reasons. In this short article I will try to elaborate a bit more as for why it is important to apply this rule without any compromise and why some individuals do not succeed to fully apply the rule. In addition, I will also explain some of the main advantages of purchasing a property in a good location and the benefits that come with that.

 

Many of us know the rules of the game, but for some reason we fail to apply the rules completely. In real estate, sometimes we need to compromise; however, what we chose to compromise on may determine our gains or our losses. We all want to buy a property in a “very good location”, but we often forget that a good location also comes with a price. If the difference in the price is $20,000-$50,000 most of us decide to go to another location just because it is cheaper. This is one of the biggest mistakes that an investor can make. If you can obtain that extra amount through your mortgage or you can add it to your investment via your own personal savings, it is highly recommended that you do so. In a sought after area, you will make that money back and in the long run it will pay off to invest that extra amount. You wonder why? Keep reading.

 

When you invest in a location that is highly in demand, the property appreciation is more than the other areas that would appreciate at the average rate or sometimes even below average. So, you may pay a bit more for your investment in a better location, but if you hold on to your investment, which you should do in real estate, it will appreciate more in a 3-5 year period compared to an investment which was initially cheaper to acquire. In addition, a better investment and a better location dictate a better quality of neighbours, better quality of life, and better tenants. More expensive areas often offer many services and accommodations (i.e. supermarkets, metro stations, bus stops, proximity to the highways, etc.) to their residents as well and this is another determining factor for the growth of your investment as well as the return on your investment. Last but not least, in most cases, the vacancy rate of your rental property is much lower compared to a cheaper, less attractive area. This is very important if you buy an investment property to rent and you should consider how fast you can rent it and how often it will be vacant in a certain area.

 

Therefore, it is extremely important to pay specific attention to the location where you invest in real estate. If you are willing to compromise a bit, the compromise will pay off in the long run. Remember, a cheaper investment is not necessarily the best investment. Sometimes we may think we saved a few thousand dollars now, but this saving may actually cost us money in the future if our rental property does not appreciate as much as other properties in other areas or if it is harder to rent and we have to deal with vacancy. Location is very important, but ultimately it is our responsibility as well to make decisions that will pay off.