Most real estate investors believe that the physical features will help inflate the property value over time. But, in reality, a property’s physical structure and characteristics are likely to depreciate with time. The land on which the property sits on usually appreciates in value. However, such distinctions may appear to be trivial, thereby understanding how the future value of land influence the property returns enables investors to make wise and informed decisions.
The land value appreciates because it has a very limited supply. So, when the population increases, the demand for land inflates, and it drives the price up over time. It is suggested that all investors must focus on how land appreciation can offset the property’s depreciation, which demands capital mix for its maintenance when it ages. The level of physical obsolescence or deprecation varies depending upon the property and its location. But, if it is left vacant for a long period, it continues to depreciate until no value is added to the land. Some investors follow house flipping and rehab the physical characteristics to maximize its value and get the best rate when selling it.
What are the Factors That Decide the Value of a Property?
Implications for Investment
After understanding the impact of land value on total deprecation, the time secret realty mantra of location takes even more significance. The professional real estate investors consider the past physical characteristics and structure of the property and focus on the physical sites. Based on these elements, valuations as shown on Melbourne Property Valuers is done.
Locations within Neighbourhoods
Not all areas within the neighbourhood are considered valuable or equal. A property next to a popular shopping centre or amusement park usually has a higher property value and demand than those near a bust roadway. It is because the former usually have less traffic and safe for young kids. Plus, the majority of the middle or upper class, single-family home neighbourhoods have several construction restrictions set by the developers when buying the available land to construct the subdivision. However, most neighbourhoods have their own cultural, social, and demographic characteristics, and all these factors impact the demand and value of a property.
Average Age of Neighbourhood Offer Clues of Value Appreciation
Homebuyers with small kids and young adults often avoid investing in properties located in areas with several older homeowners. The older generation has a harder time acting as playmates for the kids and little ones. Plus, the public schools and international schools in the region also influence a property’s demand in specific school districts.
Future Development Influences Value of the Property
Professional investors not only focus on the available local amenities, but they are also conscious of future development in the areas. They look for future municipal and commercial developments in the area before investing. Plans for future developments, like hospitals, schools, shopping malls, and public infrastructure, significantly impact the land values. Such future developments can help your property to have a better value in the future.
So, single-family real estate investors must focus on the condos’ future developments in the neighbourhoods. It is because the condo developments comprise of multiple units on the small land parcel. The increment in the supply easily lowers down the prices for all homes in the area.
Population Growth
Finally, the population growth in the location leads to an increasing demand for new developments and housing. As the demand for new housing increases, it translates into quicker appreciation in the real estate value. So, property in such areas is likely to receive better value and demand from the investors.
Final Thought
Professional real estate investors always look beyond the iconic and stylistic characteristics of a property and focus more on land appreciation potential. So, they often overlook the most beautiful and captivating properties in the target location and focus on properties that can offer price appreciation and improvement opportunities. Land appreciation can be estimated or tracked by visiting the Federal Housing Finance Agency.
If your property meets all these criteria, you will likely have the best value and rates for your property when it is put on sale. So, if you are not sure about the value of your property ensure to visit FHFA to learn about the right property value today.