“There are three things that matter in property: location, location, location,” a British real estate mogul once said. As cliché as it may sound, at Timberland Partners Investments, location plays a significant role in determining where we purchase and choose to invest.
Here are a few indicators that we consider before purchasing any property:
Primary, secondary and tertiary markets
There’s no precise method for defining the differences among markets. However, as Apartment Finance Today reported, the following is a good rule of thumb: “A primary market has five million or more people. A secondary market has two million to five million people. And a tertiary market is under two million people.”
While population size is a good indicator of an investment’s pool of potential renters, it’s only a small piece of the puzzle when determining what we purchase. At Timberland Partners Investments we focus on secondary and tertiary markets — staying away from the major metro areas of the real estate world. Secondary and tertiary markets are a good investment because they usually aren’t as attractive to developers looking to build class A apartments. With fewer new apartments on the market, renters usually have class B or C multifamily properties to choose from. Purchasing and renovating class B and C properties in these markets helps meet the increasing demand for quality living options. Before purchasing a property in a secondary or tertiary market, however, it is wise to consider whether the potential for significant growth — which we discuss in the next section — exists.
Population and employment growth
Timberland Partners Investments seeks properties that are strategically located in regions with excellent population growth projections. We analyze factors like a community’s access to good jobs, schools, and infrastructure which, among other things, are key indicators that drive population growth.
In terms of employment drivers, we keep a pulse on where major companies are expanding. A prime example of this is when Walmart announced expansion plans. A development such as will undoubtedly have a positive effect on the local economy. The same goes for any other major employer. More money and jobs in a community often mean more people looking for a place to live, which is the ideal scenario for real estate investors. It is, however, important to find communities that have a diverse pool of employers so that a property is less affected in the case of an economic downturn.
Neighborhood Assets
Beyond tracking traditional indicators on population growth and economic influences like new businesses, it’s imperative to consider other factors when identifying up-and-coming neighborhoods. New restaurants, art galleries, and other attractions, as well as a property’s proximity to highly rated schools and medical centers, can also serve as good indicators.
Walkability and access to public transportation are also important considerations. For instance, if a city plans to extend its metro line to the neighborhood you’re considering investing in, buying a multifamily property along that proposed transit line is likely a good investment. These new assets are what make a neighborhood a desirable location that attracts renters and buyers alike. While property in an up-and-coming neighborhood may take time to produce a significant return on investment, investing early can mean taking advantage of lower acquisition costs. Once a neighborhood is “discovered,” prices in the area can increase dramatically.
Understanding growth potential is important for deciding where and when to invest. Our team analyzes the above factors and more before acquiring a property, ensuring that we get the best deal and location to maximize our partners’ return on investment.
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