Appreciation, Cash Flow or Tax Shelter. These are the three ways people use Real Estate to make money & a good Real Estate investment may harness all three of these yet many quality investments specialize in just one.
This post talks about appreciation – the easiest methods to make money from your home yet the most commonly misunderstood. Appreciation is the slow increase in the value of your home, it’s often cited as 2-3% on the macro scale, yet people forget that is just an average! There are many neighborhoods in Edmonton appreciating at 5-7% (Per Year) while others may never appreciate a single % over a 10 year period.
As an investor, or current home owner, what indicators will tell you the percent of appreciation to expect from your investment?
Location – The location of your property is the main aspect of appreciation. So how do you tell if you’re buying in a good location that offers high appreciation?
- Crime Rate: Check Edmonton’s Crime Mapping service to see what sorts of criminal activity has been going on in your neighborhood. This will give you an idea of the levels currently and in the past, is it going up? Or down? this will give you a good idea as to whether or not your neighborhood is ‘on the rise’ or slowly become a less exciting neighborhood to raise a family in.
- Development Permits: Check the cities Weekly Building Permit Report or simply drive around your neighborhood. Is there any new development going on? This is a good sign! A redeveloping neighborhood such as Grovenor or Forest Heights is appreciating at levels of to 5-8% per year!
- Transit Development: Is transit actually good for your neighborhood? It will definitely make the area busier but it can also largely increase the value of your home. Check the Cities Transit Projects to see if you’re in luck! The year after an LRT stop is built even 7-10 minutes from your house expect a 15% bump in the value of your Land.
Appreciation of your land is constantly fighting the Depreciation of your house.
Your LAND appreciates your HOUSE Depreciates, if you’re not maintaining your home as it grows older, that beautiful 3-12% appreciation gets eaten up. Let me explain this from a commercial buyers perspective: A rent-able house allows for ‘land banking’ which means holding their purchase for a few years before building and it also keeps their GDS the same as the company does not have to take on non income generating debt.
To get the most out of appreciation ensure: Your Home purchase is in an up & coming neighborhood, the government is putting money into the area I.E Transit, and you maintain your house as to ensure it can maintain renters once you choose to sell!