Property :

A FEW QUESTIONS TO THINK WHILE YOU BUY INCOME PROPERTY

- N.George

                  Income property is supposed to provide a return on your investment. Its worth is based on the economic principle of anticipation. Buying income property is different from buying a house. It pays you back in two ways. First, it produces rent. Second, it pays you back when you sell it. The value of income property can be defined as the present worth of all rights to these future benefits.
Sales and listings’ history
                 When you plan to buy an income property you can enquire about the history of sales and listings like, what did the property sell for in the past? Why is the owner selling? Whether he has made money on the property, or, has the owner paid too much? Has the property been listed for a long time without any serious purchase offers? Has the property previously been in escrow one or more times, while the prospective buyers failed to quality for a loan? These are the indications that the property may be over priced or has defects.
Tenants and leases
                 Properties with vacancies raise several important questions. Why are there no tenants? Why did the previous tenants leave? Has the property been poorly managed? Were the rents too high? Is the property defective in some way? How long, how much money and how much effort will it take to find and keep new tenants? And how much rent can you expect to receive?
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 Local market conditions and trends
      Real estate markets are rarely in balance because supply seldom equals demand. Everyone would like to buy at the bottom of the market and sell at the top. It’s easier to observe current market conditions and trends. An over supplied market lowers real estate values and undersupplied market raises them.
      Long listing times and a high ratio of listings to sales indicate an oversupplied market. Short listing times and a low ratio of listings to sales indicate an undersupplied market. Real estate value is affected by other trends as well inflation, unemployment, interest rates, consumer confidence levels and global financial markets.Neighbourhood or district
The neighbourhood or district
      probably has the single most significant influence on property value. The word ‘neighbourhood’ usually refers to residential areas, while the word ‘district’ normally describes commercial areas, but the concept is the same.
      Is the district declining, or is it showing signs of improvement? Property values tend to fall when a district is deteriorating and rise when it is recovering. Commercial buyers should study the district where the property is located. Is it a central business district, a hospital district, a commercial strip or a land in a village? Adjacent and off-site uses can also affect property value.
   Boundaries
           Lot lines should be clearly established on paper and marked on the ground. Locating the lot lines is important for two reasons. It allows you to calculate the exact lot size, which is essential for estimating land value. Also, it may reveal potential boundary line disputes and building encroachments which can reduce value.
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Easements
           Easements can also influence value. Easements, like property boundaries, should be clearly established on paper and located on the ground.
Planning and zoning
           The zoning ordinance will help you find out if the property can be divided or assembled with other lots to increase its value. If the zoning ordinance does not allow exactly what you want, the city council or local authorities may grant a variance or use permit.
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