HOME AND INVESTMENT
Few people, especially those who live in large cities, are wealthy enough to buy a home purely for the fun of it: the size of the investment that mostly represents a large chunk of their net worth has to be viewed more than just a home or a whimsical purchase. When buying, it is therefore critical to remember just how illiquid an investment real estate can be......some more than others. Here are some considerations to take into account when buying a home from an investment perspective:
1) Knowing how illiquid real estate can be, what about the property you are buying makes it more liquid than others.....even if you have no plans of selling it for many years, if you HAD to, how does its desirability in the market compare to others even in bad times?
2) Is your property easily rentable, and at what price? If you had to leave your home for a year or two, or if you encountered a bad market, is your property easy or difficult....or impossible....to sub-lease. And could the rental rate cover your costs of ownership?
3) What is happening in overall buyer trends? If the markets are shifting to have new requirements does your property stack up? Many owners are shocked right now as to how much less their properties sell for than those in brand new buildings: this is not happening purely because these new homes require no renovation. Often it has to do with the overall quality of the building, common areas and amenities. This 'desirability factor' is enormously important to monitor as tastes and trends shift. Catching these shifts and acting on them before or as they are happening can be worth lots.
4) Investing a huge chunk of money in property takes that money away from other investments: will your property escalate in value as well as other investments? Future escalation, at least at the rate of inflation, is very important otherwise you could be losing value and depleting your assets.
5) Every good investment needs to be monitored and nurtured: maintaining a property to perfection is very important both inside and out. If you are in a building, participate in matters related to the entire building. A drab looking front yard, lobby or entry facade is everyone's first impression, especially your own while living there. Be certain that the first impressions are OUTSTANDING. Consistently. Even if you are not planning to sell.
6) While you may never wish to sell, there may be a time where you wish to re-finance: keeping your property at its peak always is very valuable when you seek to re-finance.
7) Sometimes spending a bit more or a bit less, or buying in a building or a location that is not necessarily your 'dream' may be the smarter place to park your money: a bargain in is usually a bargain out. A property that escalates in value by 3% annually is painfully much more valuable after 30 years than one that only escalates by 1%. (its about 4x more!!) Be acutely aware of quality.
It may be wise to consult with your agent every 2 years or so for an 'investment evaluation' of your property.....in both good and bad times....to help you better understand the performance of their property in relation to others. Sometimes making changes early can boost the investment quality of your home tremendously!
