Interested in buying a piece of real estate? Many real estate investors and first-time homeowners seem to focus on the style and functionality of their potential purchase, thinking that these aspects help to increase the property’s value. They seem to have forgotten the popular adage, “location, location, location.”
The truth is, the physical structure deprecates as time goes on, it is the land that increase in value. This is very important to note because buying a home is a huge purchase, one of the biggest in most people’s lives. If you don’t look at your investment from all angles and understand everything that drives the value of your home, you can limit your opportunity to increase your wealth.
Land appreciates in value because, as the population grows, the demand for it grows and it’s in limited supply. When you focus on the land underneath the structure, this can help you find more efficient investments that will give you the best return for your money.
It’s not to say that the appearance of the home doesn’t increase the value of the property, but it’s impact is less that you may think. When you understand how location and future estimates of land value will influence property return you can then make better investment decisions.
Here are some considerations of the top things that determine a home’s value to ponder before you purchase your next home:
- Smaller and/or less attractive home can provide you with more bang for your buck: This is because all homes in a neighborhood, no matter the size or aesthetics, appreciate by approximately the same amount every year
- Your location within your neighborhood will affect the value of your land: Because they get less traffic and the implied increase in safety for children, homes in cul-de-sacs are more in demand than others with more traffic.
- The average age of your neighbors can tell you how much your property will appreciate: For instance, neighborhoods with older homeowners are less in demand for home-buyers with children.
- Future prospects of development can change your property’s value: You must be aware of both the present state of local amenities as well as the future prospects for governmental and commercial development in the area. Both of these factors will influence whether your land will appreciate or depreciate.
An effective real estate investor looks past the physical attributes and the style of prospective purchases and, instead, focuses on the land appreciation potential. So, in order to be successful, you must overlook the more beautiful homes for a great location that provides opportunities for improvement that will increase the value of the land.