October 1, 2020

Aging like wine: How and Why properties are valued better over time

When wine is stored in a cellar, its taste gets even better. Therefore, making its value go higher than what it used to be. Just like wine, properties, in fact, always age well as to how they are valued and how much their worth are. But this brings up questions as to why it happens in the first place and how its value increases.

Properties are best kept longer; they just get better over time

Unlike other assets like cars, gadgets, and furniture, real estate properties have a higher potential of increasing their value over time. These properties are bound to have better worth, making them more desirable in the real estate market in the long run. 

This phenomenon is known as Property Appreciation. This takes place whenever there is an increase in the value of property due to a number of factors. This is an important thing to familiarize yourself with especially if you are planning to buy and hold properties.

But why is that so? Let’s go over to our first point:

The Reason Behind Property Appreciation

You may be thinking, why do property values continue to increase even if the house built upon the land wasn’t even that good. Inflation does have part to the reason why this happens, but the majority of it is because of the increasing demand.

As time goes on, the demand for land increases as more houses are built. Meaning that we can’t necessarily create land where we can build, then it makes the land more desirable. Now since the buildable land gets scarce, but the demand for it continues to arise, then the value goes up. 

However, property appreciation still varies as real estate values are all local. It means that values always depend on the city where the property is located. The real estate market from Austin may have completely different property values than those of Dallas and Houston. With this, we should always take into consideration the real estate market trends of the local city where we are looking forward to investing.

It is important that you have the proper set of tools on making sure that the risks that you will be taking are calculated. Here at Real Estate IQ, we can provide you tools on gauging the market, and possibly minimizing risks on your property investments.

Now, you may be wondering, what are the best methods of taking advantage of property appreciation? Let’s find that out with our next point:

The Best Approach with Property Appreciation

If you are an investor looking for a long-term strategy for investment, then your best course of action is with buying and holding property.

Also known as “buy and hold”, buying and holding properties is a popular approach for real estate investing. It is a passive investment strategy, where you look for potential properties to keep and maintain them until the value of the land increases significantly. You have the anticipation that the value of the property increases overtime, similar as to when you buy stocks. In that case, you also want to purchase the best properties, just like how you pick stocks at the stock market.

However, it is important to understand that, while it has a significant benefit of increasing value over time, it also has risks that you should look out for. For instance, taxes and maintenance costs will impact how much money you will make when you’re going to sell it in the future.

The Key Takeaways

Knowing the benefits of property appreciation and understanding how you can fully take advantage of it is a neat thing to do. However, by the end of the day, it is still important to have the right people to work with in every step of the way to make sure that you are on the right track. With the buy and hold approach, it is best if you can get professionals to work with you, as there are a lot of twists and turns in buying properties. 

In conclusion, if you want to invest long-term in properties as they get appreciated, many things still have to be considered as there are a lot of moving parts involved when buying a property. Given that you are keeping them for a considerable amount of time, it’s crucial that you have a great team of professionals to guide you through ins and outs before investing in such property.

At Real Estate IQ, we have a diverse and growing community of real estate professionals and investors, where you can learn a lot and interact with. You can definitely join our community to learn more about the business!

Just like wine, properties do increase value over time, but that logic does not follow all the time. Real estate properties should still be maintained and checked to make sure that it is in the best condition possible. Wine tastes good as it ages well, but it still depends on what kind of fruit you are using, what is the quality of it, and how you keep them stored in a cellar. Similarly, you have to be sure that you are not settling with mediocre materials and efforts when you keep real estate properties. There is an old saying, “what you will sow, you will also reap”, which tells if you start having a mindset that you should not settle for less, then you will be rewarded with the best things you can imagine as an outcome of your own efforts.

The blog articles are intended for educational and informational purposes only. Nothing in the content is intended as legal or financial advice.