LOCATION, LOCATION, LOCATION WHERE TO BUILD YOUR PORTFOLIO OF INVESTMENT PROPERTIES JEAN NORTON
1. Define your investment strategy
What are your investing goals? Do you want the best cash flow available for your investment? Do you want your
investment to be in a growing area, therefore poised for appreciation? Are you able to get financing to leverage
your investments? Is this a savings strategy for your children’s college or your retirement? Do you want to
supplement your current income? Once you are clear on
your goals, you are ready to make a smart decision
moving forward.
2. First and Foremost, Where NOT to invest
Avoid areas where there is only one reason that the area
exists. Investing when there is only one industry
supporting the area could be a setup for a total loss. For
example, there was a major boom in North Dakota to
build for the oil industry workers. Investors scrambled to
build housing to accommodate the high stipends workers
received for living and working in the area. Their pro
forma spreadsheets showed incredible return on
investments. The demand soared and investors from all
over wanted to get in on that action. Oil, with historically rising prices and the subject of many wars gave
investors a level of comfort for safely diverting their cash into these investments. The unthinkable happened.
The price of oil plummeted. Oil companies stopped producing oil and the need for housing in those rural areas
vanished. According to Bakken.com (http://bakken.com/news/id/250977/northdakotagreatrecessionreal
estatecrisis/), as of January of this year, rents have decreased 50%, the State is preparing for a tax shortfall
and many investors are licking their wounds.
There are other areas I tend to avoid when the diversification of the industry isn’t robust, such as Las Vegas.
Currently booming with rents and housing prices, there’s no denying that the Entertainment industry is the main
attraction. During the “great recession” of 20092011, Las Vegas was one of the hardest hit areas in the
Country. Entertainment and Vacations are some of the first areas that feel the effects of a down turn of the
economy. As attractive as it may seem right now, with bartenders pulling down 6 figure incomes, be prepared
for that well known saying, “Real Estate is Cyclical and will always be cyclical”.
3. Critical issues to consider
This goes without saying if you read the previous section, but are there multiple and diverse industries in that