Property values can fluctuate due to market trends and a property’s condition and location. You have little control over market trends and where a property is located, but you can affect the property’s condition. Knowing what increases and decreases a property’s value can potentially help you invest in the right real estate and maintain or repair a property so that it reaches its maximum value for your portfolio. Let’s discuss some hidden factors that can increase or decrease a property’s value so you can make wise investments.
Many people in the market to buy or rent a home are young and looking to start a family if they don’t already have one. So it shouldn’t surprise you that the school district nearest the property will affect its value. The quality of a school district speaks to the citizens who live in that community. Therefore, the higher a school district is rated, the more valuable the property in that area will be. This factor also relates to resale value, as it will be easier to sell a home or property that’s close to a good school district.
Neighbors and Neighborhood
The neighborhood where a property is located plays a big part in its value. A home or business that’s in an area with a high crime rate or lots of reported thefts will be worth less than a property in a safe neighborhood. Additionally, the neighbors will affect the value of a home or property. If the neighbors keep their yard beautifully manicured and free of trash and debris, people will be willing to pay more for it than a place where the neighbors have several old cars and appliances littering their lawn or driveway.
Before you purchase a property, it might be beneficial to drive through the neighborhood. Then you’ll see how well the neighbors keep their yards and the condition of the other homes and businesses nearby.
Having the right amenities close at hand can increase the value of a property. On the flip side, the wrong amenities can seriously take away from a property’s value. For example, parks and playgrounds add value to homes in a family-friendly neighborhood, whereas a corner bar will likely lower the value of a home in the same neighborhood.
Some things that will almost always increase the value of a home or property include:
- Green spaces.
Things that typically decrease the value of a property include:
- Industrial activity.
- Homeless shelters.
- Funeral homes.
- Power plants.
- Wastewater treatment facilities.
A neighborhood or community with a lot of recent foreclosures will significantly affect the value of other properties in the area. This is because appraisers look at the value of the homes or properties that have recently sold in an area to determine the value of properties being put on the market. Foreclosed homes typically sell for less than market value, so they drive down the value of nearby properties.
Another reason foreclosures bring down property values is that these places often sit vacant for longer than other properties, meaning they aren’t being maintained. If a property looks shabby, it makes surrounding properties appear shabby as well, decreasing their value.
Poorly maintained properties are worth much less than those that are well taken care of. A leaky roof can cause a lot of damage over time, as can leaky pipes. Bad wiring can lead to dangerous conditions and potential fires. Low-hanging branches or plants and bushes that are growing too close to homes and buildings can lead to structural damage to the foundation. Not only are these things dangerous, but they’re also extremely expensive to fix. Before investing in a property, it’s a good idea to get an inspection to check for these types of major issues.
Knowing a property’s condition before you invest can help you budget the right amount of funds for the project. Some properties are best to leave alone if you don’t think you can afford the costs of repairing them to a functional condition.
A property that’s overly personalized, meaning it has too much of the previous owner’s personality, will be challenging to sell. A good example of this would be the previous owner of a home who loved the color purple so much that they used a nice, vibrant shade of it to paint their entire home and all their outbuildings. While this may have been fine for the person who loved purple, most people prefer a neutral tone for the outside of their home. So this property will need a fresh coat of paint before its value will go up.
On the same note, too many personalized decorations inside a home or building can detract from its value, as can add-ons. The more neutral a property is, the more easily a buyer can picture themselves in it.
Upgrades and Improvements
Many upgrades and improvements can increase a property’s value. New asphalt in the parking lot can do wonders for the value of a commercial office. Putting hardwood floors throughout an older home can revitalize its appearance and increase its value. A new HVAC system is a great investment if you want to increase a property’s value. However, there are upgrades and improvements that can decrease the value of a property, including:
- Colored walls: While that red accent wall may have looked great with the previous tenant’s decor, it sticks out like a sore thumb in a vacant property.
- Refreshed accents: If the property has an old feature, such as a staircase or a fireplace, don’t try to refresh it. Restoration would be more appealing to potential buyers.
- Updated kitchen: It can be hard to predict someone’s tastes, so try to leave the kitchen as is unless it really needs to be updated.
Investing in real estate investment can be tricky. Let the team at Titan Funding help you make the right investment. We have a dedicated and experienced team that’s familiar with the real estate market in Florida.