The Wealthy Home Owner

Identifying great investment opportunities
Check out the neighbors: Look for neighborhoods that have started to experience a rise in both retail and home revitalization activity in the last year or so and then check out the less attractive homes in the area. These are probably the better candidates for upgrading and a price boost. It may not be where you want to live but will be ideal for someone else. Neighborhoods improve over time not overnight. 

Figure out the income potential: If you are looking for an income property, the greater the difference between the housing prices in a premium area and its neighboring areas, the greater the income potential. Research the average listing and closing prices, historic levels of capital growth, average vendor discounts, length of time to sell a property and the local rental rates.

Demographic changes and gentrification: If an area’s median age is decreasing with young families while numbers and household incomes are increasing, growth is on the way. Other signs include an increase in cafés, upmarket bars and restaurants, more boutiques and “disposable income” shops, medium- and low-density housing such as townhouses as well as renovation projects on older homes. Also look for the closing of lower-rent service provider shops, such as dry cleaners and the opening of higher rent service providers such as drug stores and, of course, Starbucks.  

Infrastructure development: New or improved roads, rail and bus links, medical and education facilities, shopping facilities and employment hubs are all indicators of growth. Municipal websites and local business associations can be good sources of information – monitor them for planning alerts, community news, streetscape changes, new development starts, and rezoning.

Look for signs of distress
Real estate investing is an exercise in optimism. Even distressed areas can bounce back! And while it may be uncomfortable capitalizing on others’ misfortune, areas going through temporary tumult can be great sources of highly profitable investments. If you can see past the effects of localized job loss or layoffs, you can be there when things pick up.

Distressed properties: Peeling paint, overgrown yards, boarded-up windows, and notices posted on doors, junk mail, and uncollected newspapers are signs of a neglected home. They are indicators that the owner has given up trying to maintain the property. Sometimes the owners can’t afford to maintain a home, or have other things on their mind. These might be signs of a motivated seller who is ready to accept a lower closing price.

Motivated sellers: Find out why the property is being sold and the seller’s circumstances. Maybe they’ve already bought somewhere else and are in a rush to move, maybe the property has been on the market for months, and maybe they’re experiencing financial trouble or going through a divorce. In any of these circumstances, they might be ready to close on a fast sale rather than hope for a better price in the future. Public records searches can be a useful source for this information.

Other resources: Probate courts are another way to find distressed properties, including those left behind because of a divorce or death in the family. Those inheriting the home may not want it and might jump at the chance to sell the property quickly. Unsuccessful auctions also provide investors with a great opportunity to identify a bargain.

Be prepared!
Get pre-approved for a mortgage: If you’re ready to make a credible offer on the spot, you can scoop up the best deals and avoid competition and bidding wars.

Get an inspection: Visible neglect can be a sign of more serious structural issues. Before you agree to purchase, get an inspection on the house so you know what kind of repairs are required and their cost. Then you can factor repair and holding costs into your planning to be sure to come out ahead!

To build wealth by buying undervalued properties and re-selling them to make a good profit, you must be prepared to spend time researching real estate opportunities and then arrange for the property upgrades that will enable you to re-sell the property at a profit.