4 Factors You Didn’t Know Impacted Property Value
Do you know what adds value to a property, and what doesn’t?
This is one of the most critical parts of investing in real estate. Sadly, even many Realtors have no idea what truly adds value to a property. You certainly shouldn’t be basing your education on ‘reality’ TV show makeovers or Zillow either.
By now, hopefully you understand that upgrading flooring and accessorizing don’t add real value. In fact, most home ‘improvements’ lose money. Which is a large part of why real estate wholesaling is so much more attractive than rehabbing or fixing and flipping.
It can take quite a few years, and hundreds of transactions for real estate investors, Realtors and even mortgage brokers to really be able to catch many of these nuances of this business. Important valuation factors which can make or break deals.
Many issues arise in mortgage underwriting. Even if you are paying all cash or are using transactional funding, where these aren’t problems, they can be incredibly problematic when it comes to your end buyer obtaining financing.
Then there are also quirks, like some of those below which may influence how much others are willing to pay for a property, regardless of what the comps may indicate based upon the numbers alone.
City Names
Some city names and mottos are certainly more attractive than others. Who wouldn’t want to move to the ‘Sunshine State’, the ‘City of Angels’ or Paradise?
Then we have those like Slaughterville in OK, Scary in WV and Hell in MI. They may certainly have some niche appeal. They may be a hit for some on Halloween. Not so much for the rest of the year, the bulk of the buyer pool, or those seeking an Airbnb escape.
Don’t forget Toad Suck, Arkansas, Boring, Oregon or Roachtown, Illinois.
Street Names
It is often bewildering to see some street names, and to try and imagine who thought they were a good idea.
Who wouldn’t want to live on Happy St.? It is a real one. Or how about Freedom Ave?
Then you have movies and events that destroy the value of streets too. Like Freddie Kruger. The Guardian reports that homes on Elm Streets all over now sell for 70% less than competing homes.
Industrial & Commercial
Having views of industrial and commercial real estate from your residential property can also be a huge issue for many mortgage underwriters. Many will just turn applications down.
Property Taxes
Homes are much more attractive in low tax destinations. Those in high cost areas can be dramatically different from one unit to the next. Often based on the owners appealing their assessments. There can sometimes be a 50% difference in the property taxes on almost identical units. Which would you pay more for? This can directly impact value when properties are being evaluated on their profitability and cap rates too.
What quirks have you found that have surprised or frustrated you, and you want to warn others about?
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