Value the Value of Property

Many first-time homebuyers believe the physical characteristics of a house will lead to increased property value. But in reality, a property’s physical structure tends to depreciate over time, while the land it sits on typically appreciates in value. Understanding how prospective land values influence property returns allows investors to make better choices. Land appreciates because it is limited in supply, consequently, as the population increases, so do the demand for land, driving its price up over time.

Not all spots within a given area are considered equal. Home situated alone is usually on higher demand than a home situated near a busy roadway because the former has less traffic and is safer for young children. Also, most middle- and upper-class, single-family-home neighborhoods have new construction limits that are set when developers purchase most of the available land, on which to construct the subdivisions. Consequently, most neighborhoods evolve their own social, cultural and demographic characteristics that impact demand for houses. New home buyers with small children often avoid locations with older homeowners who will not provide playmates for their little ones. Also, specific public schools can influence the demand for homes in particular school districts. 

Homeowners should not only be cognizant of current local amenities, but they should also be aware of the prospective commercial and municipal developments in the area, such as plans for new schools, hospitals, and public infrastructure, that may impact land values.

Single-family property investors should also consider the possible development of condominiums in their neighborhoods. Because condo complexes may contain multiple units on small parcels of land, the increased supply could potentially drive down prices for all area homes.

Also, other aspects considered during property value evaluation are 

Square footage.
Lot size.
Numbers of bedrooms and bathrooms (if residential).If commercial, the best usage the property could be put to (for example, office, retail, warehouse).
Overall condition (good, average, poor).
Garages, pools, upgrades Water Supply Etc 

Successful real estate investors look beyond the stylistic attributes of prospective home purchases and concentrate on a property’s potential for land appreciation. This requires overlooking the most attractive houses in a target location and concentrating on those that provide opportunities for improvement, which may enhance the value of the land.

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