The Power of Location: Finding the Right Neighborhoods for Your Investment Properties - Article Banner

Even if you’re not an experienced real estate investor, you understand the most important thing in real estate: location. It’s always about location, whether you’re buying a home, selling a home, looking for commercial property, or investing in something residential that you plan to rent out. 

You also understand how locations are typically classified. There are rural neighborhoods, urban locations and suburban spots. Within each of those general classifications, of course, you’ll find a bit more nuance. Some locations are densely populated and others are remote. There are industrial neighborhoods and up-and-coming areas. You might find a pedestrian-friendly street or a location that’s located in a good school district. 

It’s not a single quality that makes a location good or bad. 

You have to find the right neighborhood when you’re investing in a rental property. Tenants will be selective when it comes to where they’re willing to live. 

We’re talking about the power of location, and how easily it can hurt you or help you when it comes to your investment property. Here’s how to find the right neighborhoods when you’re considering an investment in real estate. 

What Makes a Location Attractive to Renters? 

A city like Santa Rosa and the surrounding areas offer residents a lot of great choices when it comes to where they want to live. When residents from the area or even outside of the area think about where they want to live, there aren’t a lot of neighborhoods here that will necessarily turn them off. 

Here’s what most tenants are looking for: 

  • Recreation and entertainment opportunities
  • Proximity to schools and colleges
  • Local shops and restaurants
  • Parks and natural spaces
  • Easy access to essentials such as healthcare and grocery stores.
  • Jobs and economic factors.

Knowing this, as you conduct your due diligence, here are a few of the things you should ask yourself about a property’s location before you decide to buy it:

  • What type of property has the highest demand in the current Santa Rosa rental market?
  • What neighborhoods see the lowest tenant turnover?
  • How many rental homes are in this neighborhood vs. owner-occupied units?
  • What times of the year do tenants in this neighborhood tend to move?
  • What is the demographic of the tenant pool?
  • What are the key property attributes that those tenants are looking for in a home?

The location you choose will also depend on your own unique investment goals. It’s important to know your goals and to answer the questions above when you’re preparing to invest. Understanding how the location will impact your process needs to be part of your investment strategy.

Location and Money: What Will You Spend? What Will You Earn?

It’s all about supply and demand when we talk about pricing. That goes for the price of the property you purchase and the amount of rent you’re able to collect. 

Real estate appreciates based on the market. This means that an investment property’s location alone will make a property more or less desirable to both buyers and tenants. That will impact its price. As demand increases, so do prices. You will pay more when you invest in a well-located property. But that’s okay, because you’ll also earn more in rent.

It’s safe to say that a property’s location has a larger impact on home prices than anything else.

When you purchase a residential investment property, the amount of rent you can charge will depend on that property’s location and how convenient it is for your tenants. Renters want easy access to schools, their favorite grocery stores, restaurants, and entertainment. They want to be close to parks and recreation.

The more you have to offer renters, the higher your rents, and it starts with location.

Think about this when you’re searching for properties. Even the best deal and the most upgraded property will bring you nothing if it’s not in a good location.

Neighborhood Features and Amenities 

A property is not on an island (usually). 

Instead, it’s in a neighborhood. So, you have to know what makes a good neighborhood. We’ve been managing homes in Santa Rosa and throughout Sonoma County and the surrounding areas for years. WE know what makes a good location and a desirable neighborhood. 

Here’s what your tenants are looking for, and thus, what you should be looking for when you invest: 

  • Things to do, especially with family, friends, and children. A well-located rental property offers easy access to conveniences and fun. Residents in and around Santa Rosa will want to be within a quick drive or a pleasant walk of shops, restaurants, grocery stores, and entertainment. Roads and highways should be nearby and easy to access. They will need to get to work, school, and recreational activities.  
  • Safety and security. Tenants are looking for neighborhoods with low crime rates. They want to feel safe walking around their neighborhood and they want to be sure their children can play without being overly concerned. Get to know what type of neighborhood you’re buying in. Study the statistics and take a look at the home in the daylight and in the dark.
  • Reliable and modern infrastructure. Are the roads and bridges in good shape? Are there shopping centers nearby, and good restaurants? These are the types of things that contribute to a well-located investment property. People like parks and preserves. They want to know the neighborhood is close to a police and fire station as well as hospitals. 
  • School districts. High quality tenants want to live in an area that has excellent schools, even if they don’t have school-aged children themselves. And, a good local school only increases your property values. 

You have to think like a tenant when you’re choosing a location for your next investment property. You’re not going to live here yourself, but you should never buy in an area where you wouldn’t live. 

The Pros and Cons of HOA Locations

HOAs have a set of unique challenges, but they also offer a lot of great benefits. You’re likely to attract high-quality tenants who are looking for a well-maintained home in a fantastic neighborhood with a lot of amenities. 

HOAs serve an important function, especially when it comes to property values and a sense of community. They establish and enforce standards. If you do choose a location within an HOA for your investment property, make sure you’re communicating well with your HOA when you rent out your property, and make sure your tenants understand the importance of complying with all rules and regulations. 

Ask these questions:

  • Can you rent the property you buy? 

One common mistake that real estate investors make is to purchase a property in an HOA without reading the rules and regulations regarding rentals. Some associations won’t allow you to rent out a property. Others will require you to wait for a year. In some HOAs, there is a limit to how many homes in the community can be used as rentals, so you may be on a waiting list to rent yours out. 

  • How much are HOA dues and assessments?

HOA dues are the owner’s responsibility, not the tenant’s. You’ll have to consider this when you’re determining how much to charge in rent. You will likely get services in exchange for those dues, such as landscaping and security. This can help make the location more attractive, but also more expensive. 

  • Can you educate and trust your tenants?

You’ll need to share all the rules and regulations set forth by the HOA with your tenant. When you’re discussing the lease agreement with your tenant, make sure you include a copy of those rules and regulations and double-check your lease agreement so you know it reflects what’s required. Any time a tenant violates a rule, you’re ultimately going to be held responsible as the property owner and association member. 

Choosing an investment property within an HOA makes it easier to maintain your property and its value. The rules enacted by the governing body keep the properties looking pristine and the property values intact. It’s extremely important to stay in touch with your HOA, even if you’re not occupying the property within the association. 

Santa Rosa Property Managers Understand Location 

Property Management PartnerWe can help you with choosing the right property and more importantly, the right location. Partner with a local property manager when you’re evaluating neighborhoods for an investment property and trying to decide what to buy. Consult with us before you make an offer, because your property management team can tell you more about the location. We can discuss the benefits and the challenges to the property you’re thinking about buying, and we’ll start with where it’s located. 

Most property managers will provide a complete analysis of the neighborhood you’re considering, as well as some recommendations on how you should negotiate the purchase. You’ll have access to reliable data that will tell you how much rent you’re likely to earn and what sorts of tenants would be likely to apply for your property. 

Analyze the neighborhood carefully before you invest. You might be considering what seems like an ideal investment property, but if the surrounding area is rough or the homes are not maintained, you might have trouble renting out that perfect house. 

Let’s talk about some of the best areas in Santa Rosa and Sonoma County for investment homes. Contact or team at Redwood Residential Property Management.