Location and interest rates play a big part in the value of property. While the federal funds rate is the benchmark, different locations have different real estate markets. A location with low interest rates may be less profitable than one in a high-end neighborhood. Geographic factors like crime and homelessness can depress property values. If you are not careful, your investment may not be worth much. Consider this when making a decision. Check out this website to learn more about real estate investments.
The economy is also a major factor. When the economy slows down, interest rates on commercial properties rise. These changes affect REITs more than others. While retail tenants are not affected by economic changes, hotel businesses are dependent on consumer spending to make sales and rent rooms. During slow times, the value of real estate drops. If you’re a deep-pocket investor, you can purchase a distressed property cheap and hold on to it for a price jump when the economy returns.
Location is a critical factor. Consider the long-term and mid-term implications of property value. A peaceful piece of land could become an uninviting manufacturing complex over time. You also need to consider how the surrounding area will be used. A quiet residential area might soon be overrun with a manufacturing facility, reducing its value. A good rule of thumb is to invest in a location that will remain desirable and increase its value over time.