Real Estate A Real Good Investment?
The old adage about real estate being a good investment is that "they're not making any more of it."While that might be true everywhere but Hawaii where an active volcano is still creating new shoreline and places like Juneau, Alaska and some surrounding islands where the great glacier melt off is causing isotactic rebound, it doesn't tell the true worth of owning property.
Property in and of itself is a great investment in that even if the government decides to take it away, it must still pay fair market value for the property.The question is if it is a good investment for someone with limited funds.Property comes with its own yearly expenses - property taxes, property maintenance and property improvements.
Investment property looks to gain value a couple of ways.First is through location, location, location.A good investment property is still cheap, but located near a place where the population is expanding.As the population expands and more land is needed, the property value will go up.Investors might start to come calling to buy the land for strip malls, apartments or some other development wish.That is when the property value starts looking good.
Another way that a property can gain value is through improvements.That may mean the addition of electricity, water and/or sewer, or it could mean building a new house.There are many things in between those two options - adding on to an existing house, landscaping, going green, even painting can be a property improvement.Basically, anything that adds value to the property can help an investor make money.It is the whole concept of flipping a house for profit.Buying a dirt cheap house making some improvements and selling it for more than it was purchased.
The problem with an increase in property value through either of these ways is that in can price an original investor out of the purchased property.Property taxes are not cheap in many states, and when the perceived value of a home goes up, the property taxes go up with it.Property improvements carry with them another hidden cost, in that it is often the property holder's responsible to get the necessary permits to make property improvements.Something as seemingly simple and private as redoing the bathroom may require a city permit that can run more than $50.
While property maintenance does not increase property value, it still needs to be done so that the property can maintain its value.Another reason to maintain the property is that the rights of renters may be impinged upon if the proper maintenance is not done.That can mean lawsuits - both criminal and civil.Those are not cheap.
Failure to pay property taxes is a good way to lose the property in question.Making improvements without the proper paperwork may result in fines and court processes.Renting property comes with its own headaches of finding renters and taking care of their problems while hoping that they do not destroy what they are renting.
All of these things need to be considered when purchasing property.Because of these considerations, an investment property isn't the right way for everyone to make money.Buying a home to live in is a different story.While the American dream continues to evolve, especially due to predatory loans that have destroyed people's dreams in terms of owning their own home.Those that weren't caught up in the banking frauds have an opportunity to pick up a home for their family at a relatively cheap price.Living in a home can be a dream achieved.