The adage, location, location, location so commonly used in real estate can trace its roots back nearly 100 years. And, it’s a mantra that real estate agents still champion today as the single most important aspect in valuing a property.
But when it comes to evaluating commercial properties you may be considering in a DST investment, does location truly matter? As it turns out, location is very important and there are several factors you’ll want to consider when determining the best location for your investment property. Here are four key metrics you should explore.
1. Look for states with net population growth
Areas experiencing long-term population declines are at risk of continuing economic decline. Conversely, strong population growth can be a barometer of future and sustained economic expansion.
Currently, states with the highest net population growth include:
Colorado, Arizona, Texas, Florida, Washington, Utah
2. Look for states with no (or low) income taxes
States with little or no income taxes are often attractive for real estate investing because they are ripe for job creation and for keeping workers from moving to other states.
States with no income tax include:
Alaska, Florida, Nevada, South Dakota, Texas
3. Look for states with strong job and economic growth
As mentioned, the states experiencing strength in their job and economic sectors are generally those that stimulate their economies with growth-friendly policies like no state income tax.
According to The Motley Fool, states with the fastest growing economies include: Washington, Texas, Florida, Nevada, Alaska, Wyoming, South Dakota
4. Look for states with relatively low weather hazard probability
For obvious reasons, areas that are least prone to natural disasters like hurricanes, tornadoes, fire and flooding, are viewed as more stable from a real estate investment perspective.
According to worldatlas.com, states that are safest from natural disasters include:
Michigan, Minnesota, Illinois, Ohio, Maryland, Maine
It’s not just about the state, however, where your business property is located. You’ll want to look closely at submarket trends – cities, towns and neighborhoods – to assess how property values of comparable assets are likely to increase over a given holding period.
Ultimately, location is only one part of the investing puzzle, but it is an important one. It comes down to this: real estate is very local. You’ll want to focus on those properties that offer you the best chances of success with you investment, and in general, those are going to be properties where people want to live and work.
For more information, contact us.