10 Tips On How To Choose The Right Neighbourhood For Your Property Investment
When thinking about a neighbourhood for your property investment, you will consider a number of factors before looking or speaking to your broker. Here are a few tips to consider when selecting a neighbourhood for your property investment.
- The Property’s Neighbourhood
The neighbourhood will determine the quality of tenants and the rate of vacancies. If you invest in an upmarket neighbourhood, your tenants will probably be upmarket and thus your rental income will be high. But other factors may affect the rate of vacancies as well.
If you buy a property near a university campus, then you are likely to attract students as tenants. The market capitalization of your property will also be determined by its location. Town properties cost more compared to rural ones.
Property taxes and compulsory fees have a way of eating into your rental income. Talk to the people living in that neighbourhood and ask how much they are paying in taxes. Alternatively, you can go to the local tax authorities (Zambia Revenue Authority in the case of Zambia) and inquire.
- Schools Nearby
If your chosen investment is residential real estate, you will need to confirm that there are good schools in the neighbourhood. This is a great way to reduce vacancies in your property. Parents will find it harder to move if their kids are in a good close by school.
- Crime Rate
Vandalism, burglary, and other crimes will make your property investment a hard sell. No one wants to run a business or host a family in such a neighbourhood.
- Employment Opportunities
Try investing in a residential property near an industrial town or a city. Bus, railway systems and good public transport are also important. If there is lots of accessible jobs that is a huge factor for you.
- Other Facilities
Are there shopping centres/malls, some family parks, public transport and other social amenities nearby? If you invest in a property that is near all these facilities, it will be very hard not to get a return on investment.
- Check with the Municipal Department
Apart from giving you building permits, the department will have some information on upcoming developments in the area such as sports parks, shopping malls, road constructions (e.g. the T400), etc. You will need to know whether it will be a growth area or not.
- Vacancies in Surrounding Properties
You may want to avoid investing in a property whose neighbourhood has hundreds of vacancies. You will be competing for tenants with other property owners. The effect of low vacancy is reduction on rent so as to attract tenants.
- The Average Rent
In order to be able to repay your loan or return your capital investment and handle other property expenses such as tax, you will need to be sure that the rental income in the neighbourhood you want to invest in will be enough to cover all this and leave you with some profits.
- Susceptibility to Natural Disasters (If Any)
Note that your insurance premiums may be higher in an area prone to disasters such as flooding, disease, etc. All this will eat into your pocket.