Study Local Pricing
The first things to study are the current price trends
in the area. For example, a potential investor should look to see if the price
of homes is accelerating faster in one area than in others. Next, check to see
if the average home price is more than in other neighboring towns. This will
provide an idea of where the biggest demand is. Another reason to study these
trends is that, over time, you will start to develop a sense for which prices
are "fair" for certain properties and which are overpriced. For
individuals looking to buy properties at the lowest cost possible, this
knowledge can be invaluable.
Realtors and real estate agents are a terrific
source for this information given their access to the Multiple Listing
Service (or MLS). The local newspaper, the internet, and the town hall may
have a record of recent sale prices as well.
Get Pre-approved for a Mortgage
There is a host of benefits you can enjoy by getting pre-approved
for a mortgage. Chief among them are financial benefits. For example, most
lenders will lock in an interest rate for you once you are pre-approved for a
mortgage. This lets you enjoy the benefits of a lower interest rate if interest
rates rise while you're house hunting. Further, if you are able to be
pre-approved for a mortgage prior to finding your dream home then you become a
preferred buyer in the eyes of the seller because you've demonstrated you have
serious financial backing.
Look for a Catalyst
One sign that an area is up-and-coming and that it will be
desirable in the future is the development of new infrastructure. When you
see new roads and schools being built, it's a sign that the community is set
for a growth spurt. Investing in a growing community can be very profitable. In
addition, certain types of development, like new shopping centers, may be
extremely attractive to homebuyers, and may also help keep the tax
base low.
Spotting new developments can be as easy as looking out your car
window as you drive by. Telltale signs of land clearing, surveying or the
beginnings of construction in and around major roadways are pretty big
tip-offs. Also, look for widening of traffic lanes, the installation of
turnaround lanes and the erection of new traffic lights. All suggest the
possibility of increased traffic flow.
Next, visit town hall at the municipality or the county level, and
speak with the road and the building departments. They should be aware of any
major projects slated to begin in the area, and they may even be able to
provide you with a connection at the state level so you can find out if any
state-owned roads or properties are slated for development as well. Real estate
agents also have a general idea of what new projects are about to be
undertaken. (For added insight, see Profit with Real Estate Land
Speculation.)
Explore Low-Tax Alternatives
If there are two towns side by side - one with high property
taxes (or with progressively rising property taxes) and the other with low
property taxes - the one with the lower taxes will usually be more in demand.
Real estate agents can help you determine which areas have the
best and worst tax structures. In addition, a simple call to the local tax
assessor can reveal how much the town charges in taxes per $100 of house.
The assessor can also let you know when the last time the area was evaluated by
the township. Also watch to see if a reassessment is set to take
place in the near future, as it may mean that property taxes are about to go
up. Beware of towns and communities that are becoming overcrowded. Signs
include schools filled to capacity and inferior roadways. This could mean the
town will have to do some major construction to accommodate the influx of
people. And how do they pay for that construction? Tax dollars. (For more on
property tax, see Five Tricks For Lowering Your Property Tax and Tax Tips For The
Individual Investor.)
Check the School Rankings
Nearly every state ranks its schools by how well students in each
district fare on tests in math and English. Sharp-eyed investors should look
for schools that are moving up or are atop the list. These areas are often
desirable to parents. Access to quality education is a big selling point to new
home buyers.
There are several ways to find this information. Check your
state's board of education website. Also, PSK12.com has public school
rankings for most states in its free section. Visiting the schools, yourself is
also a good idea. Schools that rank the highest are usually quite eager to
provide information.
Watch the Outskirts
If the properties in a major city or town have become overpriced,
the areas on the outer fringes most likely will soon be in demand. Areas in
close to major bus and rail transportation are even more desirable Nearly any
area that is about to install a major train stop or a new major bus route will see
its proverbial stock go up in value.
To find out what's planned, you can check with the local railroad
or bus company to see if they will be expanding service in the area. The local
town hall or planning department will also have this information.
The Bottom Line
It pays to do your homework and to tap local resources to
determine which areas are hot now and, more importantly, which ones will be hot
in the future. Much of the information is out there and free for the taking.
You just have to be willing to do the leg work.
Source: http://www.investopedia.com/articles/pf/07/five-real-estate-tricks.asp
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