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Pros and Cons of Investing in Urban Areas

The Good and the Bad of Property Investments in the City

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An urban area is one type of neighborhood where you can own investment property. However, there are pros and cons to owning property in a city environment. It is important to educate yourself on this type of neighborhood and to understand the pros and cons before you make the investment.

Pros of Investing in Urban Areas

  • Different Individuals, Different Needs- Since there is such a variety of people who live in cities, they have different needs. There are those who need Section 8 housing, those who need senior facilities and those that want the trendiest apartment available. Once you decide who your target market is, you can tailor your property search to properties that would appeal to that market.

  • Variety of Investment Properties- There are a lot of investment options. You can invest in a single family home or you can invest in a 20 unit apartment building. The variety in the market allows you to have flexibility in your current or future investments.

  • Active Rental Market- A large portion of the market in urban areas are renters. If you choose to invest in a rental property, you will likely have a large target market for your units.

  • Attractive Shopping and Entertainment- You don’t have to sell the features of your property as much because of the great features of the actual city. Tenants are more likely to sacrifice on the features and space of their living quarters because of all the features available to them outside. There are restaurants, bars, museums and shops at their fingertips.

  • Public Transportation- Another great thing about urban investing is the proximity to public transportation. You don’t need to own a car to get around in an urban area. You can take a bus, train or taxi. This is a great feature for many individuals.

Cons of Investing in Urban Areas

  • Noisy- Since there are so many people confined to a small area, urban areas are notoriously noisy.

  • Older Buildings May Need Renovation- Many properties available in urban areas have been around for decades, sometimes centuries, so you must be aware of the renovation and repair costs that may be involved.

  • Smaller Spaces- Since space is a luxury in an urban area, units tend to be much smaller than those in the suburbs You must also realize you will pay more per square foot because of this premium on space.

  • Limited Outdoor Space- Outdoor space is a luxury in urban areas and you will have to pay more to get it. If your tenants want grass, they will most likely have to go to the public park.

  • High Turnover- Cities are made up of transients. People will live or work there for a short period of time and then move on to the next stage of life. There is therefore a lot of apartment turnover, which is a cost you must factor in when looking at rental properties and potential profit.

  • Higher Crime Rates- Urban areas have higher crime rates. You may be more concerned with the safety of your property or your tenants than you would in a more suburban area.

  • Limited Parking- Parking is extremely limited in urban areas. For those with cars, having a designated parking space at the property or a close parking garage is essential.
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