Identifying a home that has hidden potential for value addition is the mark of a savvy home buyer. First time buyers often need to navigate various hurdles just to narrow down the list of potential properties, and experienced buyers know that the housing market comes with few guarantees.
If you're looking to buy a home for yourself or trying to get into the property development business, knowing a diamond in the rough could get you prime property at a bargain. It is estimated that 90% of millionaires made their first million from property, so it's no secret that you can win big by acquiring property and increasing its value. We look at what to think about when buying your new home to lock in value to your new home.
Getting on the property ladder
Getting on the property ladder has become increasingly difficult, especially for young adults and families seeking to break out of rental property. New homes in popular urban locations can be quite pricey and even more so with the rise in interest rates as most countries face inflation. Mortgage rates have surged since the beginning of the year, with low supply and the steady rise in interest rates taking the blame.
However, owning a home is still a big draw particularly with the increasing cost of renting. So, navigating the home buying process requires a significant level of attention to unlock the hidden value of the residential property. House prices change and flow with trends in the housing market, and property is particularly prone to volatile price swings. However, like other assets, house prices have “real values,” detached from artificial demand, and knowing the undervalued properties can unlock big gains for savvy buyers.
How do I add value to my property?
As a home buyer, you should strive to buy a home at a bargain, particularly in the current economic climate. This means purchasing property with a purchase price that is not over inflated alongside the opportunity to make improvements to increase the fundamental value in the long run. A few tried and tested tips can significantly increase your chances of success.
Identifying hidden value in residential property
As a savvy buyer looking to add value to a piece of property, you may choose from light, heavy or deep value additions depending on the state of the home. Some signs that a property may be a prime candidate for value addition include good location yet poor state of repair or buying in an up-and-coming area.
Consider the following:
â€¢ Is there space for a future extension or loft conversion?
â€¢ Are there cosmetic interior and exterior upgrades that can be carried out?
â€¢ Is there scope for adding smart features?
â€¢ Can better security features be added?
â€¢ Is there the opportunity for making the property more energy efficient and improving the energy efficiency rating?
Evaluating your price point
You should consider your available funding sources before committing to a property. Do a careful analysis of prevailing mortgage rates and talk to a mortgage advisor. They can advise you on the current market price of the property and the potential upside from value addition in the future. This initial step ensures you can commit to the purchase without straining your finances or affecting your quality of life.
Knowing your location
Understanding property trends in your local area is important to identify areas with high growth potential. Knowing valuation methods in the area you're interested in, and property prices can help you to make a better purchase. Talk to estate agents and property developers and invest in property whose inherent value is not obvious to other buyers. Using property listings which include sections like new build homes near me, auctions, and best buys are good reference points for research.
Identify the problems that are fixable
Many home buyers, especially first-time buyers, stay away from houses with obvious faults, such as lack of double glazing or poor property maintenance. Most of these problems are fixable and finding such properties could earn you a good payday. In fact, recent research from insurer Aviva found poor property maintenance could take off 14% from a house price which is to the sellers loss but a buyers gain. However, you should do a cost-benefit analysis first. Determine expenses like bathroom renovation cost, replacement costs, and other costs. Its also important to consider the scale of disruption of minor repair works versus a full scale renovation project.
Engage with professionals
Home ownership is a lengthy process that involves many experts along the way. Talk to a builder or surveyor who can give you a full report on the state of the property. Talk to an architect on future plans. Consult a mortgage broker. Speak to a conveyancer. Many professionals can identify hidden gems or hidden pitfalls and guide you throughout the process. Developing good relationships with estate agents also places you in a better position to learn more about the market.
On the road to being a savvy home buyer
Buying a home is a financial commitment, and buyers should strive to purchase at below-market rates and understand the ways available to increase the value of their property. Savvy home buying involves taking advantage of pricing and evaluating the true value of the property. This involves determining what you can change and the overall cost versus the real value in the market.
Get in touch with Home Legal Direct
If you are looking to move, then you can get your conveyancing fees organised by getting a free and fast conveyancing quotation from Home Legal Direct. We provide you with all the conveyancing information you need for your home buying journey.