3 Tips for Finding the Best City to Purchase an Investment Property

Investing in the housing marketing is a great way to diversify your portfolio in a relatively safe way. However, often it is hard for someone to find a good investment property in their own town or city due to the price of homes or the housing market in general.

For this reason, many people look for properties to purchase in other cities throughout the country. However, knowing which city to look for an investment property in can be difficult. To help you find the perfect location for your next real estate investment, here are three tips for finding a good city in which to purchase investment property.

  1. Job Growth

When looking for the right city to make a real estate purchase, you want to find an area that is growing. Erin Carlyle, contributor to Forbes, says that an investor should look for a city that has a rising job growth and many people moving to the area. This will ensure that you’ll have a large number of potential tenants and landlords to work with your property.

By finding an up-and-coming city and purchasing property while it’s still on the upswing, you can ensure that the value of said property will be on the rise for a while longer, giving you a greater return on your investment. A city that has all these factors will make for a relatively safe bet for your investment.

  1. Demographic Trends

The type of tenants you’ll be renting to will depend on the demographics of the area you choose to purchase property in, so keep in mind the type of tenants you want when you decide on a city to invest in. If you want to rent to baby boomers, find a city that has a high elderly population. If you’re looking to rent to college students, look for towns that have a school nearby.

Michael Gerrity of World Property Journal quotes Daren Blomquist of RealtyTrac when he says that leveraging demographic trends for certain ages or groups of people can give an investor a greater return and home price appreciation, especially if you target people who are in life changing stations that include moving living quarters.

  1. Low Home Price/High Rental Price Ratio

The last thing you want to look for is an area that has relatively low home prices but can charge a premium for rent. This will give you the biggest return on your investment because you’re paying less for the property but can charge your tenants a higher rent. Mark Ferguson of InvestFourMore.com says some areas that fall into this category include Memphis, Indianapolis, St. Louis, and Milwaukee. If you are able to ask your renters to pay a premium for rent, be aware that you may have to deal with issues of subletting. Knowing where you stand on this issue beforehand will help you make these changes more seamlessly.

Location is everything when picking an investment property. Use these three tips to help you find the perfect location for your next real estate investment in the U.S.