Have you ever asked yourself how much is my house worth? Many people buying a home for the first time believe it’s the features of a home, some aspects of functionality, the style of a home and maybe the age that determines the value. While some of the elements mentioned may indirectly play a small part, someone involved in home investing is going to look at other variables.
The truth of the matter is the actual structure of the house depreciates as time goes on. It’s the land the structures sit on which carries the value. It is an important thing to understand especially since the home is probably the most significant investment a family will make in their entire lifetime. If you do not know what is creating value for your home, then you need to take some time to look into this, as this can impact your financial picture for years to come. It’s for this very reason you’ll want to look at your house as an investment because every decision from that point on can influence your assets. For example, you may want to look to see how much your HOA fees are and if you can negotiate those costs especially if that money could be going towards the principal.
The land that your house sits on appreciates as an asset for one reason. It is of limited Supply. Property is continuously in demand because no one can produce more. Price will continually increase for land because as the population grows as the land itself will become more scarce. The odd time situations occur causing the ground to devalue because it’s inhabitable due to the possibility of a toxic environment or it’s unusable. Asides from that, it should always be increasing in value over time. If you’re ever in a position where you wonder what the value is of your home you can use a home value estimator.
How quickly the home on the property depreciates will be specific to that property. In most cases, it will continue to depreciate until it does not provide value to the land anymore. There are situations where it can even reduce the value of the property itself. We came across a triplex, It was bringing down the property and should have been torn down. It impacted the surrounding homes in the area and their overall prices too.
There are some hot locations where this has less of an impact as opposed to other areas. For example, you can look at condos in some bigger cities, and you can see where some structures have been in pretty poor shape. Usually, these are located in old areas of town and can not only use a facelift but a complete overhaul. For some more information on some cities that provide an opportunity for investing there are some more resources here.
So, in conclusion, there are opportunities out there where some smaller not so attractive homes can give you a lot of value regarding returns on your investment. Also, sites inside of neighborhoods will also affect land values. Lastly, once you determine the age of the neighbors, it can provide clues to the appreciation rate for the property in the area.