Posted by Tim Stobbs on August 12, 2010
The following is a guest post, by William Eve. I some what disagree with the term ‘Hot Spots’, but his advice is actually practical on factors to consider when looking for real estates as an investment.
Looking for property hot spots can be a daunting task. As an investor you need to find a property that is priced low but has the potential to increase in value so that you can hopefully sell it an make a profit. Investing in property can be an excellent source of income and a great way to build wealth, but only if you know how to do it. The truth is that many people call themselves investors or think they have the ability to be investors once they have purchased their first home. This is especially true when the value of that first home increase leading many people to believe that property investment has a lot to do with luck.
However, luck has very little to do with choosing property hot spots. Choosing good investment properties takes a lot of research and an understanding of what drives property values. You simply cannot sit behind a computer, or with a real estate agent and choose an investment property. You have to get in the trenches and examine each property based on several factors including population, the location, the infrastructure, and its current value. Moreover, you actually have to go out to each property and look at it with a discerning eye, so that you make sure you get a great property in a great location.
In terms of the population of your property locale there are two different ways to look at it. It may seem callous, but an aging population could mean better investment deals. When people pass away, their families are often willing to unload property at a cheaper rate just to get rid of the burden of taxes and upkeep. Often, neighborhoods that are populated by the elderly become family neighborhoods for just this reason. If you, as an investor can get in on this you can stand to make some money.
Whenever people talk about real estate location is always a top concern. While the perfect location is different for everyone there are some key factors that almost always make for a good location. Some of those factors are areas that are close to conveniences and shopping, but are not right on top of them. Most of us want a home that is near a grocery store or a library, but we do not want the parking lot in our back yard. Also, areas close to natural beauty like the beach or parks are good locations because there is limited space. Not only do homeowners get the benefit of living somewhere beautiful, they do not have to worry about overcrowding.
Understanding infrastructure can be a bit tricky when looking at property. You want a property that is easily accessible, however most of us do not want to live on a major thoroughfare because of noise and pollution. You should look into the scheduled public works in any area you are thinking of investing. Is there a new highway being built that could mean more jobs in the area, more businesses, maybe even new schools? Or, is there a new highway that could actually divert people from coming through a certain area causing it to lose business and eventually value? The answers to these questions will help you decide whether or no to buy a property and how much it is truly worth.
While any investor knows that they need to consider the potential value of each place they look at, they must also consider its current value. Even if you think a house will be worth twice what the sellers are asking in a few years you must resist overspending on it in the short term. Get the best price that you can on a home based on what it is worth in its current state. That way you can probably sell it even if you are unable to do extra work on it or if the highway you are hoping brings in extra population winds up getting scratched.
Problems to Avoid
The first key to getting great property hot spots is research. As an investor you will have to come up with a way to evaluate each property in terms of the potential for increase in value as well as what drawbacks there are to buying it. It is simply not enough to buy a property based on a real estate tip or because that area is allegedly hot. Instead, the smart investor has to have an investment strategy that they develop based on long and short term goals and their finances.
Another important aspect of finding just the right investment property is to take the emotion out of it. Buying an investment property is not the same process as buying your family home. You cannot buy something based on any kind of instinct or feelings about the area or property. In the same sense it is not a good choice to buy a property because you simply love visiting a certain area. Instead, find property hot spots through careful research about the earning potential of buying and then selling that property.
One of the last steps in procuring a hot spot for your investment property is to do the work yourself. Your real estate agent is in the business of selling houses, even if they know that they are not the wisest investment. That is the simple fact that any smart investor must understand. If you know that then doing your own research makes sense. You have to actually go out to each property and look around. Evaluate the neighbourhood and the surrounding areas. You have to look into the business and infrastructure trends and figure out what they mean in relation to property values. If you do that then it will not matter what the real estate agent says because you already know the real value of a property.
If you want to find property hot spots you have to figure out what exactly that means to you. You have to be absolutely determined to research each and every property based on a set of unflappable standards. It will be a lot of work but in the end it can pay off in a very big way. Buying and selling the right property at the right time can be a great investment so do your homework and you will reap the benefits.
This article was written by William Eve. William writes about saving money, investment loans and real estate for Home Loan Finder. If your a first home buyer or looking to refinance, visit the Home Loan Finder website for great advice and to compare the best home loans today.