They’re also people that have amassed much wealth by having a pragmatic and long-term approach to real estate investing.
Your goal may not be to make millions of dollars, but then you’re also not looking to complete a home renovation and hope that your investment yields dividends down the road. Rather, you’re somewhere in the middle of it all, hoping to make some money off your property holdings. If so, the following are some strategies to employ as increase your wealth.
Know Your History
You have a fairly good idea of your local market. You’re up on recent sales and have been tracking the trends for several years. That’s a good place to start, but you should look further back as well as ahead.
In any real estate market, home prices vary over the course of the years. In almost all markets those prices have gone up, not down. A good way to measure a potential investment is to look at home prices for the past 40 years. That’s possible if the neighborhood that interests you has been around for at least that long.
Obtain the public records for homes in that neighborhood and look at home prices. Create a table to track prices as they changed through the years, using public data (i.e., census reports and county property reports). Prices will reflect inflation increases as well as local changes that have impacted home values. These changes include: new or updated schools, improved infrastructure, housing saturation, new businesses, and other factors. A neighborhood is a good performer if home prices have outstripped inflation.
The Current Market
What trends in your local market are apparent today? If a neighborhood has undergone a significant upgrade, then home prices will be affected accordingly. Conversely, if the neighborhood is over run by aged homes with little owner investment to make improvements, then home prices will have suffered.
Survey the neighborhood to review homes along a street that interests you as well as several surrounding blocks. You should be able to detect a pattern here — most residential neighborhoods have homes in a uniform condition with the occasional exception here and there. You may find a great value in a neighborhood, but if that area is on the decline your investment will suffer. Keep on the look out for other signs of decline including a new highway that comes to close to the neighborhood, zoning changes that bring in commercial use and other changes that encroach on a neighborhood.
Looking Ahead
What separates the average, even fairly successful real estate investor from the pack are those people that do their research with their eyes looking ahead. Specifically, at what the market may look like five, 10 or even 20 years or more down the road. At this point, you’re following trends that the average investor may miss including inspecting reports that may not yet be finalized.
Those reports are often created by local, county and state governments, outlining proposed changes for various areas. For instance, a proposed belt line may be several years from starting with its location not yet determined. For property in the way of the road, eminent domain means that the owners will get only a fraction of what it is worth. For land near a major highway and zoned commercial, its later sale could reap huge rewards for the owner. You need to know where that highway, light rail or new airport is planned and buy up the property close to it.
Other changes that require much fore site has to do with new commercial or residential development especially where virgin land is acquired with the purpose for development. Most people won’t know where a factory will be built until a company scouts out land to acquire. Proactively, you could snap up large parcels of property and have these rezoned for commercial use. Your chances of finding a buyer may hinge on several factors including highway access, rail lines, and an airport.
See Also — Real Estate and Your Title Search
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