Purchasing a home is one of the biggest investments you can make, and you want to make sure it’s a solid one! Evaluating a home’s potential can ensure you get a return on your investment in the future and then some.
Evaluate Location
Perhaps the most determinate factor in a property’s value is its location. Homes located in high quality of life areas with access to amenities come with a bigger price tag. However, if you manage to spot a home in an area with growth potential, you can get a better price on the home than if you were to buy in a fully developed area.
Access to amenities: What kind of amenities are in the area? Is there construction underway for new amenities, or are there plans to build more in the future? If you stumble upon a home in an area that’s surrounded by heavy construction, it’s not always a bad thing. You’ll likely be able to get the house at a better price than once construction is complete and all the amenities nearby are set.
Environment: Some areas have more natural environmental risks than others. For example, is the home located in an area that tends to flood, or one that has heavy pollution? Areas that are scenic tend to have steadier growth over time.
Schools: A major factor for buyers is the quality of nearby schools. You may not need access to schools if you have no children or children that are out of school, but it’s wise to research what’s in the area purely in the interest of your home’s growth potential.
Crime rates: Areas with higher crime rates understandably sell for less than those with lower crime rates. Purchasing in a safe neighbourhood will help ensure the long-term stability of your home.
Look Deeper
When viewing a house, it’s easy to fixate on the things that immediately catch our eye. These can be bad things like cosmetic flaws or good things like modern fixtures; either way, they are surface level features that can distract you from the real issues that may be hiding in the home.
Your main focus should be on the nuts and bolts of the house such as the structure, roof, heating/cooling systems, etc. If you see a home with cosmetic flaws but is otherwise solid, then you may be looking at a hidden gem.
Speaking of the nuts and bolts, here’s what you should be on the lookout for:
Structural issues: Look for cracks in foundation, uneven floors, and water damage. Inquire about past repairs and take note if there's been a history of foundation repairs made.
Roof: The roof should not be sagging or leaking and should be in good condition. A roof that’s in bad condition and needing replacing can be a costly addition that you may not have been expecting.
HVAC: Inquire about the age of the heating and cooling systems and if they’re energy efficient. Systems older than 15 years are likely due to be replaced, which is a cost you'll incur when purchasing the home.
Electrical: Electrical issues may be difficult to spot if you don’t know what to look for, but take a look for ample outlets in each room and see if the breaker appears modern. You can always have the electrical fully inspected during a home inspection.
Plumbing: Again, these are not the most obvious issues for the untrained eye to identify, but you can easily check things such as water pressure and inquire about the age of the plumbing system. Also be sure to keep your eyes peeled for any leaks.
Tip: If you decide to put an offer in on a house, have it inspected to ensure everything is up to code. You can make your offer conditional on the home passing an inspection.
Think Ahead
While it’s great to assess the home as it currently is, part of spotting hidden potential is looking toward the future.Community and Demographics: One of the best ways to identify future growth is to look at demographic trends within the community. Take a look at the age groups in the area—is it mostly young professionals and families? Retirees? Check to see if there is a good mix of amenities catering to these various groups and lifestyles.
If the location has a bustling economy with low employment rates and a variety of industries, it’s a good sign that the area has growth potential.
Similarity, look to the community and its local facilities. Are there community projects underway? Does the community seem interested and invested in making the area better for everyone? Active communities tend to see better growth as time goes on.
Infrastructure: While it’s important that the current infrastructure of the area is set up well, keep your eye on what the city has planned. Important developments such as new transit systems/routes, new roads, and commercial projects can all point to positive growth in an area.
Urban planning: If you really want to see what your city has planned for an area, you can contact your local town hall and inquire about future developments.
