In our previous post, we uncovered five tips investors should research when evaluating the potential value of an investment property. Below are five final factors that will round out our top 10 criteria for investors to consider.
VALUE IS IN THE DETAILS
Many things can impact the value of a house, for better or worse. Don’t overlook the details that might impact the desirability of a property in the eyes of potential buyers.
Location, location, location. Find out where a property is located within the subdivision (Google Maps is a good tool source). If the home backs up to a major highway, it will not have the same value as a house that is nestled within the subdivision on a quiet street. External things such as busy streets, power lines, and railroad tracks can negatively impact the value and appeal of a house. It’s called buyer resistance and it’s something every investor needs to understand.
School districts. Elementary schools have a big effect on the value of houses. A quick way to obtain the ratings on schools is at School Digger.
- Some subdivisions may have different schools, so make sure you know the right school for your neighborhood.
- Many buyers want a particular neighborhood because of the school district. Know your school systems and the ones where families are hoping to land when looking for homes to rent or buy.
- Schools can affect houses in all price ranges, but it has the strongest impact in the higher price ranges such as $250,000 and up.
Neighborhood amenities. Nearby parks, community swimming pools or neighborhood clubhouses can enhance property values.
Financial red flags.
- Check to see if the seller gave cash back at closing. You may be in trouble in a situation where, for example, a home sold for $100,000, but the seller gave back $10,000 in cash. This situation would indicate the home is not worth the selling price of $100,000 but instead only $90,000.
- Pay attention to seller paid concessions. An appraiser will deduct these every time he finds them.
Negative events. If a property has issues like mold, fire or if the property was the site of a violent crime, it could be a harder sell and it will bring a lower price.
There are many more technical factors that an appraiser may look for in a house, such as elevation, roof lines, additions, flow of the home, and livable square footage, but the tips we have provided are things that every investor can use to get a good idea of what the after-repair value of a property.
Contributing editors include Adam Williams- Real Estate Broker and Longhorn Investments Loan Consultant- and Ed Nichols- Appraiser with Common Sense Appraisal. If you have questions concerning the appraisal process, Adam or Ed would be happy to speak with you.
ABOUT LONGHORN INVESTMENTS
Longhorn III Investments, LLC is a direct private lender offering short term acquisition and renovation capital to real estate investors for both residential and commercial assets. We operate in major metropolitan areas throughout Texas, Missouri, Indiana, and North Carolina. Highlights of our loan program include:
– Up to 70% of ARV (after repair value)
– Finance up to 100% of cost
– Close in 3 – 5 business days
– No income requirements
– Streamlined, simple approval process
– No pre-payment penalty
Longhorn was formed in 2008 and has funded over 1600 loans since inception. Our complementary businesses include a title company and real estate law practice operating out of our corporate office. Our wealth of experience puts us in the unique position of being able to help investors through all aspects of each transaction.