As a real estate investor, there are certain things you probably know to look out for when buying an income property or a home you intend to flip. For example, it's important to vet local school districts to see how they rank, and it's important to consider factors like proximity to public transportation as well as walkability to restaurants and other amenities.
But the next time you go searching for an investment property, consider paying attention to how close it is to a grocery store. You may find that favoring properties with food markets nearby works to your advantage -- and lends to solid resale value or the ability to command higher rent.
Should you prioritize grocery store proximity?
Homes located near grocery stores offer a clear benefit -- convenience. Everyone needs to eat, and it stands to reason that the typical homeowner or renter would rather live five minutes from a supermarket than 15.
But some grocery stores in particular may lend to higher home values. ATTOM Data Solutions did a study where it assessed how the proximity of different grocery stores might affect a home's value. Specifically, they focused on three supermarket chains: Whole Foods, Trader Joe's, and ALDI. They then aggregated data on current home values, five-year home price appreciation from the period of 2015 to 2020, average home equity, home seller profits, and house-flipping rates near these stores.
The results were interesting. ATTOM found that home sellers saw an average return on investment of 51% if located near a Trader Joe's, 43% for Whole Foods, and 41% for ALDI. Meanwhile, on a national level, the average home seller's return on investment for all zip codes with these grocery stores was 43%.
Now to be fair, there are some limitations to the study. For one thing, it compared data on only three supermarkets chains when there are many more that shoppers frequent. It also chose to focus on niche supermarkets, each of which tends to attract a specific clientele. And, the study didn't look at other potential factors that would lend to higher returns on investment, like school district ratings. Finally, the study wrapped up in 2020 -- a year when home values were almost ridiculously inflated as low mortgage rates caused a surge in buyer demand that drove listing prices upward.
But while investors don't necessarily need to focus on scooping up properties within close proximity to the stores ATTOM studied, it is a good practice to buy up homes that are reasonably grocery store-adjacent. There's really no arguing with the fact that the convenience of being close to a supermarket is a huge selling point for house-flippers and landlords alike.
That said, proximity to grocery stores is only one of many factors real estate investors should analyze when seeking out new properties. A home that's overvalued but two blocks away from a Trader Joe's isn't necessarily a better buy than a more reasonably priced home that's 12 blocks away. Investors should still keep their eyes on the big picture when purchasing new properties.