Location, location, location. Investing in premium locations is the golden rule for real estate investors to achieve long-term financial success.
Below you will discover some of the main advantages of investing in real estate in A locations.
Real estate as an investment for rent in the best A locations offers some unique advantages for investors.
Find out all about it below.
Table of Contents
- 1 Investing in premium locations offers advantages
- 2 Main reasons for buying property in A locations
- 3 How important is location really to property investors?
- 3.1 Purchases for private use VERSUS purchases for rental
- 3.2 Crucial factors that tenants analyse in terms of location
- 3.3 Not all characteristics of a location yield more
- 3.4 Beware of personal assumptions and prejudices
- 3.5 Investing with the tenants’ target group in mind is crucial
- 3.6 Supply and demand dictate the law when it comes to investing in premium locations
- 4 Two frequently asked questions about the location of investment property
Investing in real estate in high-quality prime locations offers several unique advantages for investors and their invested capital.
Investment property in a prime location is a very interesting investment and an excellent element for a well-diversified investment portfolio.
In order to limit the risk of an investment portfolio, it is necessary to properly diversify between different types of assets.
Specifically, prime locations for investment property offer certain opportunities that are attractive to investors who are looking for a stable-value investment product.
Characteristics of A locations
Investment properties in premium locations are located in neighbourhoods or streets with very specific characteristics:
- A privileged location with a large local offer of services such as education, catering, medical care,
- Proximity to many strategic locations and hubs (financial services, shopping centres, business zones),
- Good accessibility, good connectivity and transport options
Such A locations are often located in urban areas and offer great price stability.
In the context of investing in real estate, the relationship between risk and return is different depending on the type of opportunity.
Investment opportunities in properties for rent in prime locations generally have the following characteristics:
- Moderate rental yields because the purchase price including costs is usually higher than average in prime locations
- More stable in value than properties in B and C locations and therefore less risky for retail investors (safer for the invested capital)
- Property in A locations is usually quick and fairly easy to let (compared to B and C locations)
One of the best places for property investment in Belgium is Brussels, a real A location.
Start now and invest in a prime location in Brussels:
- Investment opportunity consisting of premium flats for rent to individuals with purchasing power
- Attractive annual net income that you can receive carefree thanks to an all-in formula of stewardship for passive rentals
- Click on the following link to view the offer in detail: Investment flats in Brussels for sale for rent in a premium A location in Watermael-Boitsfort
Main reasons for buying property in A locations
Some of the main reasons for investing in real estate in premium A locations are the following:
- Valuable investment with very limited risk of extreme fluctuations in value:
- A locations are shockproof and even in times of financial or economic crisis property prices in these locations fluctuate less than elsewhere
- Since real estate in A locations is quite pricey per square metre, the other side of the coin is that extreme upward price increases do not happen often
- Real estate in premium locations is therefore growing rather slowly but steadily, an ideal investment for investors with a long investment horizon of 10 to 15 years at least
- In A locations, one often finds a tenant market with purchasing power. Potential tenants usually have a good job with an attractive salary, which results in higher than average purchasing power. This is positive for owners who want to rent out their premium properties to such profiles.
- An established local property market is present, which is useful for quickly matching supply and demand. As an owner, you can easily rent out premium locations yourself or through a professional rental agency. Finding a suitable tenant is quick and easy in premium locations.
- Investing in premium locations ensures that the naturally illiquid nature of real estate plays a lesser role. If you wish to sell your buy-to-let property after some time, the property can be sold very quickly at market conditions. The reason: In premium locations, there is a large and stable demand for high-quality real estate. Demand exceeds supply in such locations.
- Investment that brings peace of mind and security. By opting to purchase premium properties for rent in such premium A locations, you can count on a high stable demand for premium properties for rent (often in combination with low local supply).
How important is location really to property investors?
In books and courses on real estate it is often said that the 3 L’s (Location, Location and Location) are all-determining.
But how important is this golden rule about property investment if you want to invest in property to let?
Well, the location of a property for rent is also crucial if you are about to buy property for rent.
But beware: However, some nuances and comments should be made:
Purchases for private use VERSUS purchases for rental
The factors surrounding the concept of location are broad and are experienced and interpreted differently depending on who will occupy the property.
If you buy a property for private use, you will have different factors to consider than if you buy with the intention of renting it out permanently.
For example, are you about to buy property for your own use? Then you will pay close attention to location considerations such as:
- Proximity to shops and amenities
- Peace and quiet
- Community life
- Proximity to nature
- Relaxation possibilities
- Accessibility and commuting time to work
On the other hand, are you about to invest money in real estate to let?
Then you will have to take into account what your future tenants want and desire from a property in that specific neighbourhood.
Crucial factors that tenants analyse in terms of location
To find the right location for an investment property for rent, you as an investor should think like a prospective tenant.
In other words, you need to find out what future tenants in this area want and what is important.
In premium locations, it is often the case that prospective tenants have a well-paid job. And probably these people even moved to that A location specifically for work reasons.
Place of employment
It is therefore crucial to invest in a property for rent that offers easy access to important places of employment.
It is no coincidence, for example, that one of the most expensive places to buy property in Belgium is the capital, Brussels.
This centrally located metropolis offers the most well-paid jobs.
Easy access to the place of work is all-important for prospective tenants in premium locations (such as Brussels).
Transport and commuting time
For prospective tenants, good accessibility to the housing unit by public transport (tram, bus, metro, train) and by road (car, bicycle, on foot) is important.
But this is not all. Apart from geographical distance and ways of getting around, travel time and the cost of transport also play an important role.
As a real estate investor, you should also think about access to other facilities (such as restaurants, shops, leisure and entertainment venues, etc.).
Personal motives such as family ties (which are very difficult to influence from the investor’s point of view) also play a role.
It is usually the case that prospective tenants are willing to rent at a premium price if it allows them to live close to work and family and friends.
And this is especially true if the property they wish to rent is only available in a limited number of locations.
Not all characteristics of a location yield more
In addition, as an investor, don’t start to dream! Just because you, as an investor, are attracted to a property and its location, it does not mean that tenants are automatically attracted too.
In other words, it is not because you would like to live in the property yourself that the property is equally attractive to potential tenants.
Some examples are as follows:
- Interior design, decoration, furnishing and accessories of excellent quality:
- This is obviously nice to enjoy as a resident and can make it easier to rent out a property. But beware! Few tenants are actually willing to pay a premium for it.
- Leading and highly regarded educational network in the area:
- The quality of education is a factor that plays a major role for people buying property for private use.
- But if you are going to rent to the average tenant, the quality of the local educational institutions will not have a great impact on the attractiveness of your housing unit. Only if you specifically target long-term renting families with children can this be a different story.
- Tip: It can be disadvantageous for you as an investor to buy near schools because it could mean that you pay too much of a premium for the property in question, making the rental yield too low.
- Views, local communities, village-like experiences, natural beauty, wealthiest neighbourhoods, extremely safe neighbourhoods with neighbourhood watches:
- Tenants in A locations live there primarily to be able to do their job easily and without much trouble.
- Usually, such tenants do not intend to live in the same place for several decades.
- Consequently, they are not particularly attracted to the things that an investor would consider important for private use (so paying a premium for them is usually out of the question for the average tenant).
Beware of personal assumptions and prejudices
What may seem really disturbing and terrible to you as an investor if you were to occupy the property yourself for private purposes, is not necessarily repulsive to prospective tenants:
- In other words, tenants in premium A locations are quite willing to compromise if the housing unit is located where they really want to live.
- In other words, the presence of a busy road, an airport approach route or a busy railway line is not necessarily a spoilsport for smooth leasing.
- In other words, for investors, such underdog locations within a premium location are interesting investments. One can buy at lower prices but rent out at average rates (which gives a higher rental yield than in the obvious locations).
Investing with the tenants’ target group in mind is crucial
For investors buying property to let, location, location, location in practice means taking into account the profile of the prospective tenants.
As a real estate investor, it is vital to study the local tenant market of a premium location.
Who are these tenants? What do they do? Where do they prefer to live? What do they think about the ideal housing unit at that location?
In other words, get inside the head of the local tenant market to draw up an accurate profile of your prospective tenants.
Talk to a few local rental agents to get a feel for what rents quickly and what does not.
As a retail investor, you should therefore think about who will rent your buy-to-let property from you.
Profile your tenant market and find out what local tenants of a premium location are looking for and want.
Once you know and understand this, you can invest accordingly in a housing unit that suits this target group of tenants.
In essence, the real estate market and the principle of investing in real estate is subject to the fundamentals of economics.
In other words, the game of supply and demand also applies to premium locations.
The best locations for a buy-to-let property for rent are therefore locations where there is stable tenant demand.
Residential units that are in an attractive location and where tenants like to rent are of particular interest to investors.
And investing in premium locations is even more interesting if there is more demand than supply in that premium location.
For example, due to a licensing issue (as is the case in Brussels).
Two frequently asked questions about the location of investment property
Why is the location of property important?
From the point of view of a subsequent resale of the property, an attractive location is the key to long-term financial success.
In other words, you should always consider an investment property as a whole, including the neighbourhood and location.
In other words, you should never analyse a buy-to-let property in isolation, without taking into account the location and amenities in the neighbourhood.
The value of real estate always remains at the same level if the property is in a good location.
For investment purposes, it is also much easier to sell a well-located residential unit in an attractive neighbourhood.
How does location affect real estate?
A good central location of property affects the value of the property.
For example, houses and flats in cities are usually more expensive than housing units in the countryside or in suburbs.
Although you can expect less land in the city for a given investment amount compared to the countryside, you get many more amenities in return.
So if you are considering buying a flat for rent [AVAILABLE SOON], you should definitely take this into account.
Most tenants like to have many facilities and employment opportunities close by!
Finally, a comment on investing in premium locations:
- There is no investment without risk and with good returns
- Therefore, it is important to build a diversified investment portfolio
- Include in your investment portfolio a sufficient number of different investments and locations (if real estate)
- Today, you need to invest and diversify to get the most out of your savings!