People have definite opinions about whether they would rather live in the city VS the suburbs when they are buying their personal home, but that's not the only time. Investors also have strong preferences when they are buying investment property.
Part of this comes from where each of our “comfort zones” lies, but another part of it comes from where we find the most value or the most demand in our investment property. I have a guest post for you today from Ashley Lipman that takes a look at living in the city VS the suburbs.
I would love to know your opinion. Where do you prefer to live? Is it the same or different from where you invest?
Here is Your Guest Post
Thanks again to Ashley Lipman.
Where do you want to buy a rental property? Like most things, your choice should be guided by your tastes and preferences. However, you need to understand the difference between suburb and city investments to form a preference. Here are some things that you should know:
Buying in the City
When it comes to buying property in the city, you cannot go wrong. This is because there are more people in cities, meaning more tenants. You should consider the following pros and cons of investing in the city:
More tenants – most Americans, about 63 percent of the population, reside in the cities. For a real estate investor, this means more tenants. Not only will you have more tenants to choose from but you also have diversity. For instance, high-income earners live in uptown apartments Dallas while students live in hostels.
Superior long-term investment – homes in cities appreciate by 11.3 percent per year, which makes them better investments. Aside from getting positive cash flow, you will also enjoy appreciation gains.
Better work locations – because more people reside in cities, this means more job creation, which in turn brings more people. More people are a good thing for an investor who wants a wide range of tenants from which to choose. Many adults prefer cities because they are closer to their workplaces. This means more guaranteed rent for investors.
Crime rates – cities have higher crime rates than suburbs. Before buying a city property, you should investigate the safety of the location thoroughly.
People are moving to the suburbs – increasingly more people are moving to the suburbs because city rent is just too high. This means that tenant numbers are going down.
High home prices – city properties are costlier, which means that you will get higher returns as a city property investor.
Buying in the Suburbs
Rental situations in the suburbs are more stable. Here are some pros and cons of investing in suburb property:
Financially stable tenants – more families reside in the suburbs; this means multiple income sources. The more financial stability your tenants have, the more stable your rent becomes.
Larger homes – on average, suburban homes are larger than city homes. This means that you can earn the same amount as you would from a city home. The size of suburban homes will justify a higher rent. This means that you will have a great investment opportunity.
More long-term tenants, fewer vacancies – because more families live in the suburbs, they are in it for the long haul. Tenants in the suburbs sign longer leases; this means that they will consider your property their home. For this reason, you will have fewer vacancies to deal with and save more money.
Less diversity – because people who rent in the suburbs have families, the properties are mostly homes for single families. This means that suburb properties are less diverse.
Fewer renters – although more people are moving to the suburbs, most of them are doing it as homeowners. Moreover, your pool of tenants reduces because there is less diversity in the suburbs. For instance, people who work in the city will prefer to rent in the city. This makes it harder to find tenants who work in the city but want to live in the suburbs.
Whether you are purchasing property in the suburbs or city, you have several pros and cons to consider. If you want guaranteed rent and long-term tenants, the suburbs are your best choice. On the other hand, if all you care about is positive cash flow, you should invest in a city property. Just ensure that the benefits outweigh the disadvantages.
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