How Do I Evaluate Real Estate Property?
Congratulations on making the decision to buy real estate property! Real estate can definitely
be worth your time, whether you are looking to invest in the real estate market as a way to generate passive income or find a new place that you can call home.
When you are seeking out homes for sale, it is important to know which characteristics are key in determining how valuable a real estate property is. This is true whether you are doing this by yourself or under the supervision of a real estate investor. It is not about looking at home prices and making a conclusion based solely on the money that you have in your bank account. Learning how to invest in real estate is both an art and a science. There are some things that are arguably set in stone while other things are up for debate depending on context.
Here are some factors that you need to look for when examining any property in the real estate market:
1) Location: Cliché as it is, everyone will tell you that the most important factor in real estate is “location, location, location.” Under this single category, several questions spring to mind. What is the neighborhood like? Are the neighbors friendly? Is this a safe place for me and my family to live in? How close am I to my workplace and other essential services within the city? Are there any environmental concerns in the area? Location is everything––make sure you have this in check before you look at any other variable.
2) Home condition: This relates to the condition that the property and the home itself are currently in. Is the exterior of the home in good shape? Are there any problems with the foundation, plumbing system, electrical system, or any other system that is integral to a functioning house? Is the landscaping in good shape? Depending on your answers to these questions, you may be shocked to find that it will take a significant amount of money in order to fix all of these issues. For some people, this hassle may not be worth the investment into a real estate property.
3) Expected appreciation: Developments that can be happening nearby the area will have an effect on the price of the home you are buying and therefore its value. For example, if nearby businesses are shutting down and locating to a new area that is farther away from your desired neighborhood, the house prices can go down. This is important! If you try to sell your home a few years later and you find that the homes around you have depreciated in value, you will have a very hard time selling your home at a higher price, let alone the original price that you bought it for.
What other factors do you use to evaluate real estate property? Let us know in the comments below.
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