As real estate prices are starting to rise again after years of heading down, smart investors are looking to make real estate investments in the hopes of selling for much higher amounts in the coming years. But, many real estate investors ignore legitimate profit opportunities and instead focus on whether or not they like the house itself. With that in mind we want to give real estate investors a brief guide to the legit reasons to buy a property.
• Legit reason to buy a property #1. The land itself may appreciate. The home is a depreciating asset. Because homes require maintenance costs, they may lose value over time. But that may not be true for the land it sits on. There is only so much land in the world, so the land itself often appreciates in value while the home itself depreciates, so you want to focus on the potential value of the land itself, not the house.
• Legit reason to buy a property #2. The location of a home. The location is far more important than the state of the home itself. People like to buy homes in cul-de-sacs and other areas that are low traffic because it's safer for their children. They also don't want to buy homes in a neighborhood with an aging population, because they want playmates for their children. And they want homes that are close to parks and schools. Also, what the local government plans to do with the area affects the home value. If they are planning on building new schools in the neighborhood, that's a good thing. If they are planning on building a hospital or a dump, that's a bad thing. This information is public and you can research it. All of these things mean that a small home in a great location ends up being a better investment than a larger home in a less than desirable location. So, look for real estate in a location where people are looking to buy.
• Legit reason to buy a property #3. Supply. Condos are a popular real estate investment, but their value is completely determined by their supply. A condo in a complex where only 10 percent of the condos have been sold is worth much less than a condo in a complex where 90 percent of the condos have been sold.
• Legit reason to buy a property #4. Development potential. If you see a small house on a large lot, you can often demolish the existing house and then sell the lot off in pieces to people who are willing to build several homes on the large property. This can cause you to get a great return on your real estate investment.