Is Your Prospective Home a Good Asset Purchase?
Today, financial advisors believe that homes are either assets or liabilities. Technically, a liability is anything that costs money, and an asset is anything that creates positive cash flow.
From this definition, a home is technically a liability, because it costs you money—even if you’ve paid it off and are living in it debt-free. As long as you’re paying your utilities, insurance fees, etc,. your home is technically a liability that’s costing you money.
So, are we telling you not to buy a home? Absolutely not. Homes can be assets or liabilities—depending on their overall cash flow (or lack thereof).
Your home will require money as long as you live in it, making it an expense and liability. However, if your home eventually puts more money in your pocket than it costs you overall, it’s an asset.
Before you purchase your new home, consider if you will be able to walk away from it net positive. If you’re wondering what indicates a good asset purchase, read on:
Tabula Rasa, Tabula Conferta
If it’s been a few years since your last Latin class—or if you’ve never taken Latin—tabula rasa means blank slate and tabula conferta means packed slate. What does this have to do with houses, exactly?
Well, when you’re considering investing in a new home, you’ll want it to provide a blank slate. Of course, it should be immaculate, but more than that, it should allow you—and future buyers—to picture yourself in it.
Luckily, many luxury homes have amenities that appeal to a wide variety of buyers. If you’re attracted by the home’s expansive floor plan and large bedrooms, future homebuyers will be, too. Another important quality to look for is a large dining area. These spaces tell the stories of family and festivities, so ensure that these spaces are conducive to these narratives.
Conversely, luxury homes are generally designed with specific families in mind, meaning that some of them have features that are over personalized.
Here’s an example: years ago, there was a listing for a luxury home that had several personal touches. Although a handful of buyers were attracted to many of its features, like its heated floors, there was one thing that nearly every viewer didn’t like—the shower in the master bedroom was a horizontal shower.
The original couple loved its design and functionality so much, it was the only shower in their master. To them, it was perfect, but to others, it seemed like a poor utilization of space and function. Potential buyers were not at all interested in laying down every time they needed to take a shower.
The end of the story: even though people loved the rest of the home, they didn’t want to purchase it, only to renovate the entire master bathroom. Ultimately, the original family had to renovate their bathroom in order to sell the home, which cost them to lose money on the house overall.
In addition to evaluating a home’s features to determine if it’s a good buy, you should also evaluate its design. If you buy a luxury home with bright paint colors, you might need to repaint it with neutral or warm tones when it comes time to sell—a costly endeavor. If you can purchase a home with a more subtle paint colors in the first place, though, you’ll make a better investment.
In addition to checking the inside of the home for its features and design, consider the property’s outside spaces, too. Contemporary homeowners like to see that the outside of the home is an extension of the inside.
Many people are interested in creating outdoor seating areas in their luxury homes, so they seek out spaces with this potential when they are house hunting. Additionally, these spaces feel like “bonus space” for the home—increasing its overall appeal.
Location, Location, Location
Once you’ve considered the home itself, consider how its nearby amenities might affect its value.
First, determine if it’s by public transport. In New Jersey, homes that are close to train transit to New York City are a wonderful investment. For reference, properties that are less than a mile from public transport have better property values. In addition, data suggests that real estate next to public transit will continue to remain an attractive investment for years to come.
If you’re able to secure a home near public transport, you will be able to utilize the services while you live there—saving you money and providing peace of mind. You’ll be able to speak to their value when you eventually sell the home.
Public transport is safer than an individual vehicle. Additionally, public transit users are often more active than people that drive personal vehicles. Trains in New Jersey also allow you to arrive on time while cutting down on pollution in your community.
In addition to seeking out a home that’s near public transport, potential homebuyers will want to evaluate the home’s proximity to educational institutions.
According to Aol., living near a high-performing school can improve your home’s value by over $200,000. Whether you have a family or not, future buyers might. These individuals will want to move to a neighborhood with good schools nearby—nearby being the key word, here.
If you are so close to a school that your home is filled with the sounds of screaming, playing children and the commotion of parents trying to pick up their children after school, your home will likely be less desirable to potential buyers than a similar home that’s just one block farther from the noise of the school. The bottom line: it’s good to be within walking-distance, but you don’t want to be so close you can’t escape the educational facility’s noise and traffic.
Another locational advantage many luxury homes offer is their proximity to comfort amenities—like coffee houses and desirable grocery stores. Homes that are closer to these establishments have higher values—making them better investments.
Although a home will technically be a liability while you live in it, it shouldn’t make you lose out financially at the end of the day. Although taking the time to determine a home’s value is an intensive process, it shouldn’t be overlooked. When everything is said and done, these features might be the difference between a good and bad investment.
If you’d like professional help understanding other key indicators of a home’s future value, work with an experienced, local real estate firm. Not only will the agents work with you to understand what you want in a home, they’ll make sure it’s a sound investment for you overall.
* Image Credits:
- Featured Image, Unsplash