Purchasing a Hot Property
By Elizabeth Dougherty
We've all heard stories about folks purchasing
real estate that skyrocketed in value.
Unfortunately, there's no magic formula that
will predict a home will appreciate above
the standard level. There are, however, some
particular factors that investors look for when
buying a property in hopes that it will be worth a
lot more than they paid for it.
Location, Location, Location
Yes, the old adage is true. This is the singular
most important aspect of selecting a property.
Where is it located? Is it an area that is already
expensive? If so, pick the smallest house in the
neighborhood. It will usually be the best deal and
you can probably make it bigger or add some
attractive amenities while still making a profit.
Is it on the water? Statistically, homes on the
water appreciate at a higher rate than those that
are not. There will always be a big demand for
waterfront property because it's harder to find.
Some things that affect the desirability of location
include surrounding commercial property or
multi-family property, a neighborhood that does
not reflect pride of ownership, and areas where
land use may be subject to change. For instance,
if you are purchasing a home that is surrounded
by pastureland, you might want to check with
the county and find out the possible uses for that
property. If you don't, you may end up living next
door to a shopping center or industrial complex.
Condition
After you've determined the location is desirable,
the next most important factor is the condition of
the home. In a perfect world, the house you are
looking at will be newly remodeled and need no
improvement at all. Usually, however, there are
going to be some repairs or updating needed.
The most important (and expensive) things to
watch out for are roof repairs, plumbing repairs
and termite damage. Problems in these areas can
completely wipe out any profit you intended to
make if you are not careful.
Floor Plan
The floor plan must be functional. It should flow
in a normal manner without oddity. In other
words, if there is a bedroom located where the
dining room should be, there is a functional
problem. When you walk in the front door, you
will normally be walking into the living room. The
dining area or room should be connected to the
living room and the kitchen should be very near
the dining room. The bedrooms can be together
on one side of the home or upstairs. Split
bedroom plans with the master on one side or on
a different floor are very desirable also.
Another aspect of the floor plan involves space
and lighting. If the home shows light, bright and
airy it will attract buyers. A dark, choppy floor
plan can make it very difficult to sell a home even
if the location is good.
The Seller's Situation
It's hard to make a profit without a flexible seller.
Ideally, investors look for a seller who is willing to
work with them on both price and terms. Usually
sellers will make concessions on one or the other,
but not both. Working with a Realtor who is
experienced in investment property can help you
make the best offer to maximize your profit down
the road. Situations that motivate a seller to
lower their price are not always the most positive.
Keep in mind that even if there is a death in their
family or they are getting divorced, your purchase
of their home will help them move on and put
their lives back together.
Would You Live in It?
Only select homes for consideration that you
would live in. New investors sometimes make the
mistake of buying property that might be good
for other folks, but they would never reside there.
You can purchase small rentals that you intend to
keep for years and years with that mindset, but
don't expect to make a profit in the short term.
The bottom line is that if you really want it and
would be happy living in it, other people probably
will too.
Elizabeth Dougherty, a resident of
Auburn, is a former Real Estate Broker
and Mortage Broker. She can be
reached at EADougherty1@aol.com.
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