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The Single Most Important Rule for Buying Investment Real Estate

By Peter Churchouse, editor, The Churchouse Letter
Friday, August 11, 2017

If you want to be successful in real estate investing, you absolutely must get one thing right.
 
I have invested in all types of real estate over some 40 years – and this factor has a bigger impact on property price than any other.
 
I'm talking about a property's location...
 
It is the oldest cliché in real estate. But there's more to it than meets the eye...
 
The particularities of location are infinite. How do you judge the desirability of one position over another? How do you assess human nature? What really drives people to pay more for the same piece of property in one location versus another – not only now, but in the future?
 
When it comes to location, a few simple ideas have worked for me repeatedly over decades of investing in real estate in many different cities.
 
Like this...
 
  1.  Buy in "suit and tie" areas.

I buy properties in places where people wear a suit and tie when they go to work.
 
Does that sound a bit elitist? Perhaps. But this makes my life so much easier. People who wear a suit and tie to work are usually in higher-paying jobs. Therefore, as upwardly mobile white-collar workers, they can typically pay more to buy or rent a property.
 
In these days of casual work clothes, you'll have to give this point a bit of latitude. But I always buy in locations where white-collar workers want to live.
 
2.    Buy close to transport – or where transport is being planned.

Your "suits and ties" need to get to work.
 
New transportation infrastructure, like underground rail, can be a major value-enhancing factor, especially in big cities where getting to and from work can be a major hassle.
 
3.  Look out for rezoning.

As cities grow, increasing pressures on existing resources often make land increasingly valuable. Recognizing this, municipal authorities may dramatically increase how many people can occupy a particular piece of land.
 
For example, low-rise warehouse areas in the middle of a city may be rezoned for high-rise offices, apartments, hotels, or retail.
 
Authorities are making more "use" of land by rezoning it from industrial buildings to residential or commercial spaces in many areas around the globe. Look out for locations that could be moving from industrial to mixed-use zones, and you could be on to something.
 
4.  Do the walk test.

A lot of people invest without checking out the property or the neighborhood. This is a terrible idea. Unless you don't care whether your real estate purchase makes money, you absolutely must "kick the tires" before you buy anything. Walk and walk and walk some more to get a feel for the neighborhood, the shops, the people, the streets, everything. Seeing is believing – go take a look.
 
5.  Use local knowledge.

You can research any location from anywhere in the world, thanks to the Internet. But if you want to find the best locations, you'll need some local knowledge to back up your research. By asking a local, you might find a location you hadn't considered before, or realize a location isn't as great as you thought.
 
For example, buying a property next to a cemetery might not be a big deal in the West. But in China, where buyers take Feng Shui (that is, harmonizing with your surrounding environment) seriously, a property next to a cemetery would be a horrible investment. Chinese investors wouldn't be interested. It's unlikely you'd find this information out on a basic web search, but any local would know.
 
To sum up... whenever you're looking to invest in real estate, remember that location is the one thing you can't get wrong. It's the first step to successful real estate investing.
 
Good investing,
 
Peter Churchouse

Editor's note: You can find more of Peter's insights in the Asia Wealth Investment Daily, a free daily e-letter that gives you a look behind the curtain at the world's most important ideas in business, economics, and investing. His expertise is the perfect guide to making smart financial decisions and avoiding costly mistakes. Click here to sign up.



Further Reading:

In 2015, Peter shared an anecdote about a recent trip he had taken to the French Alps... and offered a dangerous lesson about "recreational" real estate. Read more here: The Hard-Earned Truth About Recreational Real Estate.
 
The secret to making a fortune from real estate isn't actually a secret at all. You simply have to "buy right," Mark Ford says. Get the facts here: How to Buy Real Estate 'Right'.

Market Notes


THE HOUSING BULL MARKET MARCHES ON

Today's chart highlights more proof of the housing uptrend...
 
Regular DailyWealth readers know Steve has been bullish on housing since the bottom of the bust. Recently, we showed how this idea is playing out with homebuilders KB Home (KBH), PulteGroup (PHM), and NVR (NVR). These stocks are soaring this year, riding the tailwinds of tight home inventories, low mortgage rates, and rising consumer sentiment.
 
Today, we're looking at another sign that the housing bull market is in full swing – the performance of the world's largest flooring manufacturer, Mohawk Industries (MHK). The company offers a range of products like carpet, tile, and hardwood floors to dress up any space. As a "bellwether" of the housing market, Mohawk benefits when folks are buying new homes or renovating existing ones.
 
As you can see from the chart below, Mohawk is thriving in today's housing market. Shares are up nearly 250% over the last five years... and recently hit an all-time high. It's the latest signal that the housing boom is still going strong.
 

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