Certainly local knowledge is important, but there are times when it can sway your opinion in the wrong direction, for instance if you have had a bad experience of living in an area that essentially represents a good investment. They will help you understand the peculiarities of local market requirements - supply and demand are key to your decision. You have to remember to be objective about both the area and the property itself. Your own taste is not hugely important. Medium and long term market requirements are what matters most.
Demand Always try to choose an area where there is a good market for rental property.
This sounds really obvious, but is not always considered by some landlords. Outside of city centers, choose areas of high demand - near universities, nursing colleges, large employers and so on. These sorts of institutions should guarantee that there will always be a continuing stream of prospective tenants. Bear in mind though, that some areas will appeal only to certain types of people, so you must be prepared to let your property to that social group unless you want an empty house on your hands. Local employment prospects have a large affect on the demand for properties.