For this week, I would like to blow away another “secret” of property investing.
It is often said that the only three words that you need to be concerned about when investing in real estate are these – location, location, location.
But then both you & I know that’s a load of rubbish. Sure, location plays a huge part in what makes a property sought after. If you have been reading my recent blogs, you will know that money supply and what is available to borrow to purchase property, plays a big factor too. Other things to consider are how you finance your property and what property managers you have to look after your investment – these can dramatically affect your return.
But what factor beats location for above average capital growth?
It’s called – infrastructure. In particular, changing infrastructure. Some basic examples of this might include the addition of sewerage, which could enable a block to be developed. More sophisticated examples would be the addition of new transport options like a rail line, or the opening up of a new freeway which shortens travel times.
But even better than this – changing infrastrucutre, in an already established, popular area.
On a recent trip to New York City, I had the pleasure of walking along what is now a famous tourist destination called “The High line”. (http://www.thehighline.org) It is, or was a railway line that runs about four stories above street level from West 30th street, south down to about West 10th. It was built in the 1930’s and was used up until 1980 to transport all sorts of goods, including bulk meats down to the meatpacking district. Trucks eventually replaced the old rail line and by 1999, the High Line was under threat of demolition when moves were made to save it.
With private donations and public funding, the rail line was preserved and turned in to a park where thousands of people can enjoy a walk on the west side through several New York districts, enjoying fantastic views to the Hudson River and east across the city skyline. A really fantastic job has been done with the renovation and conversion to a unique park 30 feet above the streets of New York, running about a mile and a half in length.
The northernmost part of the line was completed in 2009, with the southern section finished in 2011. The first picture above shows the northern section. If you look carefully at either side, you can see many new apartment buildings that were constructed when the line was complete. The picture below is of the more recently complete southern section – you can see the green garden area where the walkway has replaced the old rail line running down the middle. What else do you notice?
If you answered a lot of construction on either side you would be correct. But what is important about that?
Before the High Line was fixed up and turned in to a park, the areas along the line were rundown and decaying. Living in the rotten old apartments next to the line would have been noisy and not very pleasant, Now, because of a change and improvement in the infrastructure, it is one of the hottest areas of reasonably priced real estate in New York.
Find locations where there are significant infrastructure changes or improvements happening – or better – planned to happen and invest there. You will have significant capital growth over and above the market.
A last thought for you – nothing changes, if nothing changes.