Appreciation, Cash Flow or Tax Shelter. These are the three ways people use Real Estate to make money & a good Real Estate investment may harness all three of these yet many quality investments specialize in just one.
This post talks about appreciation – the easiest methods to make money from your home yet the most commonly misunderstood. Appreciation is the slow increase in the value of your home, it’s often cited as 2-3% on the macro scale, yet people forget that is just an average! There are many neighborhoods in Edmonton appreciating at 5-7% (Per Year) while others may never appreciate a single % over a 10 year period.
As an investor, or current home owner, what indicators will tell you the percent of appreciation to expect from your investment?
Location – The location of your property is the main aspect of appreciation. So how do you tell if you’re buying in a good location that offers high appreciation?
- Crime Rate: Check Edmonton’s Crime Mapping service to see what sorts of criminal activity has been going on in your neighborhood. This will give you an idea of the levels currently and in the past, is it going up? Or down? this will give you a good idea as to whether or not your neighborhood is ‘on the rise’ or slowly become a less exciting neighborhood to raise a family in.
- Development Permits: Check the cities Weekly Building Permit Report or simply drive around your neighborhood. Is there any new development going on? This is a good sign! A redeveloping neighborhood such as Grovenor or Forest Heights is appreciating at levels of to 5-8% per year!
- Transit Development: Is transit actually good for your neighborhood? It will definitely make the area busier but it can also largely increase the value of your home. Check the Cities Transit Projects to see if you’re in luck! The year after an LRT stop is built even 7-10 minutes from your house expect a 15% bump in the value of your Land.
Appreciation of your land is constantly fighting the Depreciation of your house.
Your LAND appreciates your HOUSE Depreciates, if you’re not maintaining your home as it grows older, that beautiful 3-12% appreciation gets eaten up. Let me explain this from a commercial buyers perspective: A rent-able house allows for ‘land banking’ which means holding their purchase for a few years before building and it also keeps their GDS the same as the company does not have to take on non income generating debt.
To get the most out of appreciation ensure: Your Home purchase is in an up & coming neighborhood, the government is putting money into the area I.E Transit, and you maintain your house as to ensure it can maintain renters once you choose to sell!
This Blog was created for the purpose of showing Edmontonian’s the financial benefits their Real Estate has to offer with the hope of inspiring a small % of readers to to one day use Real Estate as an investment vehicle.
The main reason I hope to encourage people to use Real Estate as an investment is because of the entrepreneurial aspect involved in the business. Have you ever tried to learn about investing in the stock market? There are hundreds of ‘tips’ or mind numbing formula’s yet the average return rate from professionals, who have given their lives to learning the ins and outs of investing, is just 10%. What does that leave the rest of us with? Our 6% return mutual funds? I would rather pass: yet that’s what is so great about Real Estate.
Real Estate allows you to gain high returns on your investment because you’re allowed to use other peoples money to work for you, much like a financial investor is using your money to work for him, you’re now using the banks money to work for you! But there will be many blog posts to come about the financials of Real Estate investment; the second and best part about Real Estate is that what you learn about the business has a direct affect on your returns. Every hour you put into learning about what makes a good or bad Real Estate investment has a direct effect on the investment decision you make, and unlike financial investing the systematic risk of your investment is substantially reduced.
I am eager to teach you not just about your homes value, but also about the value your idle cash could have in the real estate market!
This post will review, the best tactics for 3 of the most common house selling methods. Remember! When selling your home a $10,000 difference in the price you sell means $10,000 extra in your pocket. To the buyer, that extra $10,000 is simply +/- $50 in mortgage payments each month.
Use a Realtor – Realtors are great for introducing your home to motivated future home owners; although their fees are substantial. How do you make money on the sell side of your Real Estate while still using a realtor? Make sure your house is what a future home owner expects in their house. This can include, a fresh coat of paint, a well-kept yard, a clean home, and most importantly: a good smelling house. Remember those Glad commercials? Nose blindness is a thing. Ensure your house smells fresh when people are walked through the property. These are some often overlooked points of selling your real estate as we like to convince ourselves these massive financial investments are decisive, rational decisions; yet we all know a house is something many people fall in love with.
For Sale by Owner – Choosing to sell yourself is the cheapest method of sale but also invites sharks into your midst. First you need to decide on a price, get a realtor to inspect your home and tell you how much it is worth, you can also check comparable prices in your area through the MLS system. Next you will want to establish your marketing channels: Kijiji, Craigslist as well as a few ‘for sale by owner’ signs on your street. This should draw enough traffic that you are able to get several offers. Lastly, if you have time to create a drawn-out sales process you should do so, the first few offers you get will likely be lower than the next couple. I would suggest spending less time on the overall quality of your hose if you choose to go this method, many times the buyers looking for FSBO are a little more entrepreneurial in their real estate purchase, they’re looking for a house they can add value to.
Sell to an Investor or Builder – This is the fastest way to sell your home if you are looking for a quick sale. Commercial real estate investors look for ‘fix & flip’, re-development or investment properties. The best way to sell your home by the end of the week would be to find a current under construction property in your neighborhood and give the number on their sign a call, if they do not buy it they will know someone who will. You can sell your home in 48 hours for the right price (normally about 85-90% of what you’d get selling normally). This is not optimal if you have time to wait but if you’re at risk of foreclosure, your home is too structurally damaged to sell as a livable property or any number of reasons, this is an option often overlooked by distressed home owners.