Location Location Location

Real Estate Investments:
How about location within location?

 

When deciding about a property purchase as capital investment, the selection of the correct location plays an important role. “Location, location, location” is probably the oldest wise saying in the field of real estate; even the Roman Emperor Caesar evidently recognized this and built his forts at top-locations, like Rhine (Rhein) and Main.

Until today, nothing much has changed about it. "Rhein Main" could be said to be a typical major or macro location.

But once one has agreed about the macro location, the rest of the homework is far from being complete. About just as crucial is the question of the micro location.

What is a micro-location? Let’s consider a city as Cape Town as the macro location; it is the city (or if applicable the region - in this case the Western Cape), the larger perimeter of choice.

In other words, the micro location is the small location, the “mini location” within the larger scope, the macro location.

This can be explained easily with some current examples. As before, we are taking Cape Town as a model. Without question, Camps Bay is always part of the top real estate locations in Cape Town ; it generally ranges traditionally next after Stellenbosh as number two or sometimes number three but seldom further down.

However, for a private investor, who wants to invest in a property as capital investment, normally the residential property is what interests him most – hence we can examine the best micro locations with regard to living.

Which are the best living locations in Cape Town? No problem to answer that, if one is an insider and knows the city – of course one first would name Camps Bay, Paarl, Stellenbosh and almost in the same breath.

But strictly speaking however, these are only districts and no real micro locations.

 

If we allege that some areas are less desirable, we need to ask: Less desirable for whom? For everone? Or reverse: Are there people who like to live in locations that are “less desirable for some”? When going for a stroll in the streets around the local station one will find out very fast that no flat stays empty apparently, thus some people obviously don’t mind. Someone is always living there – after all, it is still Camps Bay.

Here enters the question of one’s own investment philosophy. Let us take the example of an average investor who would like to let out lastingly for a good rent to a clientele who works in Cape Town, has a good level of income and more elevated demands to the living ambience.

Didn’t we just define a target group for our acquired property? Exactly so!

Thus we, as potential investor, always need to ask the following questions first:

Whom would I like to have as tenant? Which kind of future tenant do I have in mind as my partner, who shall pay the major part of the property for me in the long run, but who is also willing to take care of it and to treat it well?

Admittedly, most capital investors seldom ask themselves such difficult questions, or they simply work out that point of the checklist without further ado in their subconscious.

Also this is easily understood:

Anyone who spent half of his life in a certain city, knows intuitively the areas he should avoid and those he should look for. And he knows which clientele of tenants likes most to live where. In accordance with this, he will make his pre-selection without needing any sophisticated preparations.

We have however asked a crucial question for the understanding of the term micro location. That question is: Which clientele of tenants do I want to get?