Will Your Home Purchase Make a Good Investment?

Will Your Home Purchase Make a Good Investment?

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Buying a house will probably be the biggest purchase you’ll ever make. You may be buying a house because you’re tired of paying your landlord each month and you want a place you can call your own. But will the house make a good investment? It depends on several factors.

Is the home an asset or liability?

You may be thinking that you only need a house. But what you don’t realize is that you’re choosing between having a good investment and bad liability. Of course, nobody wants to end up having liabilities. We all want a better life, right? An asset or investment is anything that will put money in your pocket. A liability is something that will only take money out of your pocket.

If you’re searching for a new home to live in for a few years, make sure it’s a great long-term investment. So, here are three things to look for when deciding if your home purchase will be a good investment.

  1. The property is in a growing market.

Search for local news about fresh jobs entering the market like new companies moving in for expansions. Also, try to check for some population shifts in the area. These are just a few of the essential things you need to check to know if the property is in a growing market.

Good sources of information about the population in the area are government, provincial, or city websites. Search for information such as the number of households, schools, and etc. You also want to find out the direction of those numbers to see if the market is shrinking, growing, or fairly stable. If the numbers show it’s growing, you have likely found a great investment.

  1. The area is improving or has recently improved.

Alongside a growing market is an improving area. Established areas are often expensive. So, find some potential areas that are still improving. Look for new infrastructure projects like roadways and public transit lines. Other signs of improvement are people renovating their homes, new stores like Starbucks, government investments like new roads and parks, as well as land developers coming in.

Buying a house in a bad area will only make your property go down in value. And later on, it will be impossible for you to sell it. However, just because the place seems to be improving, it still doesn’t guarantee you a great return on investment. So, make sure you do your research before deciding.

  1. The vacancy rate in the area is low or is dropping.

This factor is geared towards your long-term goals. One day you may decide to rent out the property. A low or decreasing vacancy rate will help keep your property rented for a long period of time. This will be a good cash flow. More so, this will greatly improve your credit and bank financing. But if the area has a vacancy rate of 25% with no signs of improvement, you’re only putting yourself at risk. A long-term investor has to know how to discern if the vacancy rate will remain high or if it will drop in the near future. Your goal is to hold properties with high demand for rental.

Conclusion

Buying a house can be a daunting task especially if it’s for a long-term financial goal. Based on the above factors, you’ll be able to decide what’s right for you and your family.

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