Sustainability to an investment is as important as eating is to surviving, as important as water is to boating, or as important as location is to real estate.
So when you are looking for a sustainable real estate investment you can rest assured that investing in the best location is paramount for a long term sustainable investment.
What is a SUSTAINABLE Investment?
One of the most overlooked pieces of diligence when buying investment real estate is the sustainability of the investment. Most everyone considers the basic condition of the property and the rental income versus the expenses to own and operate the property.
This diligence is paramount if you want an investment property to produce the returns that you are expecting. However, this diligence alone is not sufficient to determine if the investment as a whole is sustainable, as so many have learned during the economic downturn. Remember you are not only buying a property you are investing within a real estate market as well.
This is the most overlooked aspect of sustainable investing and is so important because the sustainability comes from a real estate market that can provide a long term prosperous economic foundation.
You can start by looking at the definition itself. Dictionary.com defines the word sustainable as: able to be supported as with the basic necessities or sufficient funds. If basic necessities are a requirement for a sustainable investment, then it should be a fair assessment that when investing in real estate you need to establish within an investment market what it is that makes up these basic necessities.
An Investment Market Basic Necessities for Sustainability
- Job growth: it is the creation of jobs that provides for economic progress.
- Population growth: a growing population provides a continued need for housing.
- Undervalued markets: markets that have high affordability ratios have long term capabilities of producing long term appreciating property values.
- Local city programs to attract businesses: some cities have 5, 10, and even 20 year growth plans. They are most intentional about having a prosperous and growing community. While some cities are shrinking in populations others are growing. (Which one of these cities do you want your next investment)?
- Path of progress: within a growing city, is the city growing in one direction? Often a city (or market) may be expanding in one or two directions (perhaps toward a major highway where commercial is booming). When this happens the values in this market will follow the direction of the path of progress. Occasionally the opposite end of the city may be flat as it represents an older part of town and a lower economical makeup.
I could go on here, but I believe you see my point. While many people are shopping prices and perhaps evaluating the property itself, there is no more purposeful investment than doing diligence to insure the market is sustainable.