The decision to purchase a home can be motivated by many things: the need for more space; frustration with increasing rents; the need to downsize; relocation due to a job, retirement, or to be closer to family, etc. Additionally, once the decision to move has been made, where and what you decide to buy is often centered on two things: affordability and desires for your new space. However, the latter is what tends to facilitate the search in many instances - the desire for open and upgraded kitchens; larger square footage; huge, fenced-in lots; separate rooms for an office, dining, entertaining, etc. Although these are very important features to consider when searching for a home, there is another crucial element to your home purchase that is often overlooked and/or put on the back burner: Will the home purchase be a good long-term investment?
When considering your next home purchase, it is crucial at all times and under any market condition to carefully balance what is desired now as opposed to what will be an even greater benefit to you later. One of the questions often asked of homebuyers during a buyer consultation is what are their deal-breakers? What must the home have that is non-negotiable in order for them to uproot themselves and/or their families and sign on the dotted line of a mortgage; and, what are the things they desire to be in the home, but that they can live without or that will not keep them from purchasing if most of their needs have been met? Sometimes the answer is space, or sometimes it is location due to work or schools, among other things. Affordability is always at the helm of the decision. Once needs and wants are discussed, many real estate professionals will research the market for homes and incentivized options that will meet the buyer's needs and most of their wants within reason, while also measuring in the important factor of affordability and investment. You may find your dream home in this market, but always ask: Is it a good investment? This question can be the difference between selling at a nice profit when or if you need to, as opposed to lower returns, barely breaking even, or being under water in shifting market conditions down the line.
If you are in the market to purchase your next home, here are some insider tips on how to make your decision with the perspective of a savvy real estate investor to ensure that your decision will meet your day-to-day living needs and long-term financial goals far beyond closing day:
- Look for new construction homes and/or new home communities. According to a recent article published by Augusta CEO, "Out of all states, Georgia is building homes at the 14th fastest growth rate." (New Homes Growth Rate in GA, June, 2023). A lack of inventory or resale homes (homes that have previous owners) on the market is fueling the demand for housing inventory. Where there is demand, there is appreciation. We have found that new construction homes, or homes in new home communities are still appreciating at competitive rates, compared to their resale counterparts that are experiencing stabilizing appreciation in price due to market inflation and higher interest rates.
- Look for economic growth. Buying new is not the only factor to consider. Even if purchasing a resale home, what is important, is what is going on around your potential home. Take a drive around the outskirts of the neighborhood (or use Google maps if you are relocating), and look for "coming soon" new business signs; new schools; new construction office/commercial spaces; infrastructure development for transportation (ie. addition of lanes or widening of highways and interstates), new gas stations, etc. These are tell-tale signs of strong economic growth within the area that you plan to purchase, and favorable ingredients for healthy appreciation in your home.
- Be conservative in multiple bid situations. Though demand is high, do not allow emotion to cause you to over-bid on a home to win a multi-offer situation. Paying more for older homes that are in built-out communities can hurt you in the long run, especially if you sell your home in another 5-10 years; or if the need to sell is unforeseen in the future.
- Due-Diligence is never negotiable. Exhaust your best efforts to inspect the home and neighborhood wherein which you plan to buy. The major systems of the home are always top priority, including: roof, HVAC, electric, and plumbing. Other considerations are flood zones or how the property is impacted when there is a huge rain or storm; potential plans for huge commercial projects in the area that will affect your quality of living; consulting with your closing and/or personal attorney if there is a potential for title issues (estate/probate sales, foreclosures, encroachments, etc). Ensure to negotiate due diligence contingencies in your contracts to allow adequate time to research these crucial areas of interest and hire knowledgeable, licensed and insured professionals to inspect your property BEFORE you purchase.
Investors and primary home buyers are two different types of real estate consumers who purchase for different reasons. Investors purchase primarily based on profit and return over emotion, which can be difficult for primary home buyers, as the house is more than an investment, it will potentially be their home. However, if you implement the above professional tips in your home search, you will be employing the basic principles of purchasing your home like a true investor! After all, the primary home purchase can be one of the greatest investments you will make in a lifetime.
- Akia Stone White, Broker/Owner of Fourth Stone Realty Consultants LLC