Good Property Investment

Mr. X just got married and is scouting for the perfect house and lot package in which to raise his family. Meanwhile, Mr. Y who has just sold a piece of property and made a good profit out of it is also looking for another real estate he can re-sell.

Mr. X and Mr. Y are both prospective buyers and possibly may bid on same property later. However, their purpose in buying the property differs. Mr. X is buying for “end use” or personal use whereas Mr. Y is buying for profit by selling or leasing the property. Mr. Y is the classic example of someone engaged in property investment.

While Mr. X will put premium on the quality of the property, Mr. Y will have to consider both the quality of the property and whether or not it is a sound investment.

For the benefit of Mr. Y, it is imperative to define the criteria of a good property and sound investment.

What is a good property?

1. Location. Corner lots are generally considered better than mid-block lots.

2. Physical Attributes of Property. The physical characteristics of a property is paramount (e.g. regular shaped lots are very desirable).

3. Affordability. This include total costs, payment terms and interest rates. Affordability is related to the surroundings of the prospective property.

4. Saleability. Saleability is from the viewpoint of a seller whereas affordability is from the viewpoint of the buyer.

What is sound investment?

1. Low acquisition cost. The bottom line price is crucial when buying a property.

2. Potential capital appreciation or increase in value. Ideally, more mature developments have lower but steady capital appreciation while new developments have higher capital appreciation as well as risks.

3. Minimal development and maintenance costs. These costs consists of operating costs, taxes and interest rates of loans