How to find a home that will appreciate in value
Some people invest in real estate so they can secure a steady influx of cash. If you buy a good property, take good care of it, and work with a property management company, you can establish steady cash flow and make some extra money – or even fund your retirement, if your portfolio is robust enough.
But others invest in real estate primarily to capitalize on long-term appreciation. They want to find properties with the potential to grow in price over time, sometimes over the course of decades.
Of course, property appreciation is far from a guarantee. In some neighborhoods, properties may even tend to depreciate. How can you go about choosing a property that maximizes your chances of benefitting from long-term growth?
Work With a Professional
First, consider working with a professional, or at least someone with more knowledge and experience in the real estate industry than you. At minimum, you should be working with a real estate agent. If you’re interested in purchasing an investment property, consider working with a property management firm. In addition, you may consider working closely with a mentor or a business partner willing to help you make property purchasing decisions.
Your chosen professional (or team of professionals) will help you analyze the potential of each property. They’ll provide you with information about the state of each neighborhood and will likely be able to catch some key details you’d otherwise miss.
Find the Right Neighborhood
The most important factor in your home’s potential for appreciation is its neighborhood. The location of the property will dictate its fate; in a good area that continues improving indefinitely, its price will continue rising. In a stagnant or problematic area, you’ll have a harder time finding a property that can grow.
So what constitutes a “good” neighborhood?
- Schools. Good neighborhoods tend to be grounded by good schools. Great school districts attract caring, hardworking families, which in turn support a healthy, growing neighborhood.
- Crime rates. You’ll also need to look at crime rates, with lower crime rates obviously being favorable. If the crime rates are steadily dropping over the course of years, that’s an even better signal for the future.
- Access to employment opportunities. People tend to choose where they live based on where they work. If there are a lot of promising job opportunities in a given area, it’s probably going to support property price appreciation.
- Access to transportation. Similarly, good neighborhoods tend to have convenient access to transportation. For example, they may be near a public transportation stop or a major highway.
- Access to shops, restaurants, and amenities. Though minor, you’ll also need to consider the neighborhood’s access to shops, restaurants, and amenities – the more, the better.
- Future potential. Think about the trajectory of this neighborhood. Are there new additions coming? How is it going to change in the near and distant future?
Get a Good Price
Next, you’ll want to get a good price. If you overpay for a property, your home may not benefit from the neighborhood growth in the area.
Consider:
- Market timing. The real estate market experiences hot and cold periods, with conditions that alternate in favoring buyers and sellers. If you purchase a property in a hot market with lots of buying competition, you run a higher risk of overpaying. That said, it’s very hard to time the market correctly.
- Repairs and maintenance. While it’s often appealing to purchase a property that’s practically new, with no work needed, you can often find a better deal on a home that needs some repairs and maintenance. Be willing to put in a bit of extra work.
- Negotiation. It’s also important to negotiate and create conditions that allow you to get a better deal. Consider making offers on homes that aren’t currently listed, or waiving certain contingencies in exchange for a lower purchase price.
Take Good Care of the Home
Finally, make sure you take good care of the home. Even a good property in the best possible neighborhood can decline in value if you allow structural problems and points of damage to grow worse over time. It’s important to conduct routine maintenance on the home, replacing components and making repairs when necessary, and inspect the home on a regular basis to catch potential issues before they grow any worse. While you’re at it, consider making renovations or other major changes to keep the home up-to-date (and in good selling condition).
With these strategies, you’ll be in a much better position to buy and manage a property that has the potential to grow in price over time. With a bit of practice and experience in the real estate market, you’ll get even better at sniffing out good deals – and your property portfolio will have a chance to grow even faster.