Why location is key in Real estate Investment

Along the highways to the different parts of Uganda, you often see vast chunks of undeveloped land lying idle, with no hope of anything being built there soon. This scenery always mesmerizes my mind. I always wonder how such bare land can exist at a time when we have people fighting over mere feet of plots in Kampala. Do you ever wonder why land costs so much in towns and cities compared to the outskirts? Why renting in one area might be several times more expensive than in another? The age-old answer to these questions is location! But why does location matter so much?

The answer relates to the economic equation of demand and supply. When it comes to land, supply is always fixed. There won’t be any creation of more land for us to occupy. Land in a particular location is always going to remain the same. Therefore the forces of demand are always going to push prices up. The more important question an investor should be asking is what influences demand for a location? Several factors influence people’s decisions to move to an area. These include;

Factors influencing demand for property locations

Proximity to amenities

Availability of services like well-ranking schools, hospitals, shopping malls, and recreation centers is critical to whether individuals move to a given area. People want easy access to amenities to avoid having to move great distances just to fulfill daily needs. Investing in areas close to such services will fetch better returns, especially for rental properties.

Accessibility

People prefer to stay in areas with easy access to public transportation. Locations with alternative routes for access are also preferable to those where only one main route exists. This is because the daily commute from home to work is a big part of most people’s lives. This is a big reason land in the far-off outskirts of city centers remains cheap while the suburbs are a hot cake.

Neighborhood

Have you ever visited an apartment block that was too good to be in a certain neighborhood? However much money is invested in the property itself, the surroundings influence whether tenants will want to stay there. A disorganized neighborhood can be off-putting for potential tenants. There are areas where neighbors built in the road reserve, leaving access for only one vehicle at a time. In some, you will find all kinds of uncoordinated activities, like a noisy bar in one corner, cattle moving along the road, a church preaching on loudspeakers at any time they feel like, etc. Such locations are not attractive for the majority of people and that will affect the value of the properties. On the other hand, a great neighborhood comprises spacious access roads, nice landscapes, and tree sheds. In such areas, the value of the property is likely to be high.    

Plot location.

There was a time when I stayed in a short-term accommodation facility that was located along a highway. The constant noise from speeding cars kept me up for most of the night. I wondered how people managed to stay there for longer periods. Even though the neighborhood was great, the specific location of this plot made living there unbearable. The same thought keeps coming to my mind whenever I see residential developments springing up along the major highways of the city. I can’t help but think about the people who will have to endure all that noise. The competitiveness of such properties is compromised by the inconvenience. Investors should be careful about the specific plots they choose, even in a great neighborhood.

It is common advice that one had better buy the worst house in a great location than buy the best house in a bad location. This is because the house is a depreciating asset but the land usually appreciates, or at least maintains its value. You can also make improvements to the house to increase its value. However, you will have very little influence on the location.

If you are looking to develop land as an investment, there are specific criteria you need to follow to identify areas that will maximize your property value. Even if it is entirely subjective, location is key in real estate investment. Consider some of the qualities mentioned above, such as access to amenities and neighborhood. An objective decision will bring you closer to your goals.

To learn more about investing in Uganda’s Real Estate industry, visit https://www.barosgroupltd.com/

About the author;

Benard Sonko is a real estate investment manager and founder of Baros Group Limited. For comments and inquiries, you can reach him on +256742140251 or info@barosgroupltd.com