Small Vs. Large Homes: Size Does Matter For The Return On Investment
Small Vs. Large Homes: Size Does Matter For The Return On Investment
Originally published on David Taran’s LinkedIn.
Does size really matter? Homeowners often ask the question of what size home will potentially have the best return down the line - small or large?
Will a smaller home give you the best investment? Will a larger home provide you with a greater financial return on investment when you go to sell it in the future? While most homebuyers are focused on the size of the home, they are missing out on one crucial facet of homeownership that is just as important - location.
The physical structure of your home will depreciate over time; it is the value of the land that actually appreciates as time passes. The home itself will not have a direct impact on the increase of land value. Instead, it is these areas that will influence the majority of your return on investment:
Quality of the surrounding school district and neighborhood.
Aside from the physical features of the home, the quality of the nearest school district and the entire feel of the neighborhood are at the tops of the lists for families who are looking to settle down. If the home is in an area that will provide their (future) children with a good education and both themselves and their family with a thriving community to connect with, that will be a desired property.
Proximity to amenities.
Millennials want to buy a home that puts them close to the social and active lifestyle they crave. Seniors want to be close to the essentials - a doctor’s office, the grocery store, the bank, etc. A home’s walkability to certain amenities can have a direct impact on the value of the home.
The size of the home.
From mansions to tiny houses, the ideal size of a home has fluctuated over the years. Once, larger homes were more popular due to their elaborateness and spaciousness. Recently, tiny houses that measured in at 1,000 square feet or smaller became the newest real estate trend. Now, smaller homes are sought after again as the younger generations begin to grow their families.
The Final Verdict: Small Vs. Large Homes
When all of these factors are taken into consideration, it seems that smaller homes offer the greatest return on investment. The down payment is much smaller when compared to larger homes, which means lower debt, and they often come off the market quicker as there is a larger number of families looking to settle on small- to moderate-sized homes.
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How To Opportunely Buy A Property In Any Major City
Originally published on David Taran’s website.
If you are looking to buy a property in any major city, especially if you are investing, it’s crucial that you are mindful of how strong the area’s domestic and international demand curves are. The international demand curve is what will influence the rise in prices during positive periods.
When you find a city that you believe has a lot of potential, there are a few other best practices to keep in mind before you finalize the property you envision yourself buying, whether it be for yourself or for investment purposes. Ask yourself the following questions – and if you can confidently answer “yes” to all of these questions, the property you have been looking at may be the best option for you:
Is it in an up-and-coming area?
While “up-and-coming” can often be interpreted as meaning an “okay” neighborhood, there are definitely variations of what up-and-coming is defined as these days. If there are signs that the neighborhood is actively improving, you may want to hit the sweet spot of purchasing the property before the area is completely polished up. Not only will you reap monetary benefits, but you won’t have to worry about your property being vacant for long since homebuyers will flock to your area to find their next dream home.
Does the property have a feature that makes it unique?
Just like every city is unique, so is every home. One property might be situated ocean-front, while another may be surrounded by a park. Even owning a property in a certain location, like in San Francisco, can be seen as an advantage. For every property you look at, be mindful of its unique features that set it apart from other properties around the area.
Are there reputable schools near the property?
A renowned and highly reputable school district will also be something that homebuyers will look for before buying a property. Even if they don’t currently have kids, they will want to invest in a home to settle into so that their future children will have the opportunity to get a good education. It also allows for a higher selling price since it is such a hot commodity.
Have you searched for properties in an unknown part of the city?
If you can find a property in a major area, you have found the most opportune investment. However, it is almost impossible to purchase a property in a neighborhood that every individual constantly has their eyes on. Don’t fight for these properties. Instead, look for beautiful neighborhoods surrounding these more common areas and purchase a property there. The homebuyers looking for a place in one of the major cities will begin to peruse your area once they realize how limited their options are where they are currently looking.
David Taran is the partner of Sunstar Capital, an investment management firm in San Jose, CA. He's spent 25+ years in the industry, developing, constructing, and acquiring properties. Deeply devoted to balancing a healthy work-life balance, David is an avid supporter of Project Happiness, a non-profit organization dedicated to helping others find empowerment through tools, resources, and classes. David lives in California with his wife, Randy.
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