How important is property location for RE investing?

[Eric T.]

Let's say that you're a buy-and-hold investor and you analyze a deal where the numbers work out great. The cash-on-cash ROI is >10% and the cash flow is >$200 a month.

Given these numbers, how much would the location of the property weigh into your final decision of taking the deal? One consideration I'm aware of is what class the neighborhood is. If it's a D neighborhood, I'd probably think twice on the deal. But aside from that, how else could location affect your decision?

[Joseph Cacciapaglia]

Location is always the first thing I consider. Is the property in an area that will continue to attract tenants, or is it a miracle each time you find a tenant? Is this an area with a lot of turnover/vacancy? Is there strong rent growth in the area, or is it declining or just sideways? Is there strong appreciation in the area, or is it declining or sideways? Is there a lot of property crime in the area? Will I be spending a lot to paint over graffiti, fix broken windows, or cleaning up after dumpers? Are there major employers nearby that you're expecting to continue to grow, or some that are shrinking or going out of business?

I buy for location first, and numbers second. Even if you're numbers aren't quite there the first year, if you have a good product in a great location, it's only a matter of time before you've got strong cash flow. On the flip side, you can buy a deal in a poor location that looks great on paper, but turns into a loser after only a couple years. There is a reason that the saying goes, "The three most important factors in real estate are location, location, location."