How to Know If a House Is a Good Investment

How to Know If a House Is a Good Investment

good house investment

You want to find a house that is not only a comfortable fit for your family, lifestyle, and budget but also, ideally, a solid investment. When you purchase an investment-worthy home, you’ll have the option to rent it out, draw on your equity, or sell it for a profit when your family is ready to move on to a different house. Here are some tips for determining if a specific house is a good financial investment:

Average Days on Market (DOM) Is Low
Keep an eye on the average DOM for your area. If the average is steadily decreasing over time, with buyers snapping up houses more and more quickly, then it is more likely that a house in that area will be a sound investment. If, on the other hand, most houses seem to be lingering until listings become stagnant because supply outstrips demand, you may want to consider a different neighborhood or even a nearby town for your home purchase. You may get a good deal under these circumstances, but your home value is unlikely to increase anytime soon, and if you need to sell in the near future you may end up taking a loss.

Located in an Up-and-Coming Neighborhood or Growing Market
Sometimes the ideal home investment is in a neighborhood that used to be a little rough around the edges but has recently become more popular. This scenario often leads to getting a good deal now and a quickly appreciating home value in the near future, a true win-win situation. Your home will be safe and comfortable for your family and you won’t have to spend a fortune. Neighborhood features to look for that show your home will only become more desirable to prospective renters or buyers in upcoming years include the following:

  • Gourmet grocery stores, trendy coffee shops, farm-to-table restaurants, and boutiques

  • Good public and private schools

  • High degree of walkability and cycling trails

  • A charming main street, “old town,” or downtown area in proximity

Growing markets are also a sign of a good investment. Is the home in an area with low unemployment and great job opportunities? Are more businesses moving to your city? This is not only great news for your family in the short term (since it means excellent job prospects if you decide to switch companies or careers) but also bodes well for your home’s value increasing.

Solid Structure and “Bones”
If you are in the market for an older fixer-upper, this can be a savvy way to get a great house at a bargain, as long as the structure is sound. Sinking money into serious foundation issues, all new plumbing and electrical, and fixing old water damage and mold remediation can quickly eat away at your investment until your new home becomes a money pit. In general, if your older home only needs cosmetic updating but is in otherwise great shape, it may be a solid investment opportunity and a home you will never regret purchasing.

By knowing what to look for in a real estate investment, you can snag a great home for your family now and gain long-term financial growth.