Buying, Then Reselling A Home

« « How to Find Florida Real Estate | Common Mistakes To Avoid When Choosing Real Estate Agencies » »

Monday, November 10th, 2008 Subscribe To Our Feed

Some people buy homes that they are certain they’re going to live in for decades. It has just the right number of bedrooms and bathrooms, with all the amenities a family could want, including room to grow. Every time they walk through the front door, they feel settled.

For others, however, buying a home is much more than that. It’s considered an investment, one that the homeowner is purposely looking to sell sometime in the future.

This may be true of those just starting out, such as a young couple that purchases a “starter home,” or something that’s sized just for the two of them, and they plan to sell the home in a few years and get something bigger when they’re ready to start a family.

Many who buy a home for resale purposes do so to make money, pure and simple. They may live in the home they’ve purchased, or only buy it to resell it. If this is the case, what are some common pitfalls that one would want to avoid?

Location, location, location.

Yes, the old adage of “location, location, location” is still true in the real estate industry. Let’s face it, even those who purchase the most expensive homes on the market, and who do so not because they need to necessarily be near their work or office, still want the affluent zip code. They also want the finest that the neighborhood has to offer. What’s the point of living in a fabulous home if there are no nearby fine dining establishments, upscale stores, or entertainment venues that are worth your time and dollars? Of if the neighborhood is nothing to look at?

Unfortunately, some real estate purchasers forget this point when buying homes that they mean to resell or flip. Since they’re not living in the house themselves, or only plan to for a short time, they forget how important location is. Additionally, they may be easily suckered into thinking that if a home has a high price tag, then it’s a guaranteed seller, when this may not be the case – especially if the next buyer is someone that does plan on living in the home for year.

You also want to make sure that your home will have the strongest appeal for a wide range of buyers, and this is most important when dealing in high-end real estate. The “buying pool” for such a price tag is limited, so of course you need to make the property marketable to the widest margin of potential buyers as possible.

So never underestimate the importance of location for any real estate purchase, whether it’s a private home for yourself or one that’s for investment purposes only.

Economic surroundings.

When dealing in high-end real estate that you intend to resell, ask yourself, What is the surrounding economy like? What businesses and industries are supported in this area? How solid are those industries?

Take your time to do some homework. If the area in which you’re considering purchasing an investment property is currently hemorrhaging jobs, even the high-end property is eventually going to be affected.

In addition to residential neighborhoods, there should be a healthy mixture of commercial and business districts. These not only provide jobs to the local residents, but also add an income source that the city can use to upgrade and maintain roads and city services.

In fact, you should take a drive and see how well the community is maintained. You have probably heard of “pride of ownership” when referring to an individual home or an automobile. Look to live in a city that demonstrates community pride, as well.

Some areas will almost always have stability when it comes to the economy. For example, it’s unlikely that New York will ever see a housing slump, since so many high-end industries are headquartered in Manhattan, including banking, finance, insurance, fashion, entertainment, advertising, and the like. These types of industries only do better as the world “shrinks,” so to speak, since foreign investment brings in money and creates jobs. This is unlike the manufacturing sector, which actually sends jobs overseas as much as possible.

Other areas, however, are a bit more tricky. Some places that seemed secure are now hurting, such as Silicon Valley.

Obviously there is no one, guaranteed answer when it comes to checking the economic stability of any area, but it does pay to do some research and make your decision based on that.

Be attune to the local neighborhood.

It’s true that many high-end properties are not going to be as affected by local businesses as others. The buyer with millions of dollars to spend is not going to worry about whether or not a local grocery chain goes out of business or if there’s construction problems on local roadways.

However, the look and feel of the local neighborhood around any residence, including the high-end ones, can be a good indicator of the overall economy of that area.

It’s true that there will always be businesses that come and go, no matter what the area. And just because certain stores or even chains go out of business, that isn’t always a sign of the economy overall. Some people start a business with absolutely no idea of how to run it properly, or chains and franchises can be poorly managed or maintained, or fail to offer a product that viable and profitable. Again, these factors aren’t necessarily indicative of an area’s overall economic growth.

However, it is a good idea to pay attention to local areas and its growth rate – or lack of it. If local stores and especially shopping centers are in decline, this may be a sign that the local economy is as well. After all, in areas where there is a tremendous amount of disposable income, stores and shops will follow. If they are not being maintained by a strong customer base, chances are that income just isn’t in the neighborhood to support strong real estate transactions as well.

Again, none of these factors are a guarantee that your investment property will sell or make a profit. However, if you consider what we’ve told you here and be sure to use some good common sense when purchasing, you’re much more certain to be able to make that investment property work for you.

Like this post? Publish It On Your Own Blog

Share and Enjoy: These icons link to social bookmarking sites where readers can share and discover new web pages.