You are shopping for a new home, confident that you have done your homework. You know your price range, the general area you want to live in, how many rooms you need, and how much land you prefer to have. However, have you considered whether your new home will appreciate in value over time?
Shopping for appreciation requires a different mindset. You still want to buy a home that meets all your requirements, but you will also look at a house through the eye of an investor. What properties will not just hold the property's value, but allow you to increase it?
- Location and Surroundings – Location is almost a cliché in real estate, but it really is one of the most important assets of a home. First impressions can make a huge difference. The views, the traffic, access to parks or natural areas, proximity to airports or industrial areas (noise and smells) – all these things play a huge role in appreciation.
Not only do you want a great location and surroundings, you want them to stay that way. Therefore, the next factor to consider is…
- Growth – Nobody wants to live in an area that is decaying and losing population. You want to live in a thriving neighborhood with growth that is close – just not too close. Check the local planning and zoning office to see what sort of road upgrades, business developments, or similar plans will appreciate or depreciate your property.
- Schools – Whether or not you have children, check around to find out which school districts have the best reputation in the area. Good schools keep the neighborhood more desirable, which keeps demand high, which keeps property values high.
- Land – In general, the value of the land will appreciate faster than the house that resides on it. Make sure you are assessing the value of the land, and whether any improvements to the landscape can increase the potential for appreciation.
- Consider Fixer-Uppers – If you buy the best-looking and most expensive house in your neighborhood, you should not expect it to appreciate as much. It may hold its value just fine, but you have left less room for improvements that can accelerate appreciation.
Fixer-uppers can provide the greatest increase in appreciation, as professional house flippers can tell you. Just be sure that you are capable of doing the work (or having it done for you), and that the house is structurally sound.
- Good Structure – People do like to change and renovate homes, but they do not want to have to gut a home completely to do it. The basic structure of the home (foundation, supporting walls, roof, etc.) must be sound; otherwise, any renovation costs would be prohibitive for a potential buyer.
Any home with an unusual floor plan or one built for a specific purpose may have great appeal to a very narrow list of buyers, but, in general, it will not appreciate well because of the cost it would take to change the basic layout.
- History and Trends – What have home prices been doing in the region you want to buy? Are they increasing or decreasing, and are they moving in unison with surrounding areas? Is there any reason to expect the trend to change based on one of the above factors?
If you want a house that is likely to appreciate, consider these factors as you shop. Be sure to look with an investor's eye before you buy.