I wrapped up the sale of one of my apartment buildings a couple of weeks ago. Part of that process involved meeting with one of the city building inspectors, as I was in the middle of my second bi-annual rental property inspection per their ordinance when we closed.
The process went smoothly, and I was (again) pleasantly surprised by how down to earth and practical the building department was to deal with over the term of my ownership.
And as I thought about it, i realized that pretty much all of my interactions with the building departments in cities where I own rental properties have been good to great. (I say pretty much, because because I have one rental that was a flip that I couldn’t sell, and I wouldn’t have bought a long-term hold there.) And that has really helped make my ownership experience a pleasant (and profitable) one.
As I thought about it some more, I also realized that this wasn’t by accident.
You see, except for the one flip I couldn’t sell, each of the cities I have houses in, I bought in on purpose. I target school districts primarily. And buy targeting only very good school districts, I find that there is a very high correlation between the quality of the school district, the quality of the city, and the self esteem of the building department.
What a shocker, I know.
Just add it to the list of reasons why location matters, and why buying in great areas beats the pants off buying in crappy areas when it comes to profitability, and, well, pretty much everything else.
Yes, the properties cost more in good areas. That’s the most common reason I hear when people are explaining why they buy in crappy areas. But if your goal is cash flow, and you have a long-term hold mindset, then shouldn’t cash flow, profitability, and ROI be your decision criteria instead of purchase price? I think so. In my areas I can pay twice as much for a house than my competitors and get the same and often a higher ROI than my colleagues do in crappy areas when they buy two houses for the same total cost.
Why is that? Because properties in great areas get rented faster, they stay rented longer, and they command higher rents than properties in crappy areas. You also don’t have to deal with Section 8 tenants. And there’s often a lot less competition when you buy in good areas. Go figure.
So in my book location is the criteria I use when I’m looking for a “good deal”. Not price.
So choose wisely!
