People have varied reasons for investing in real estate. The best real estate investment model depends on whether one is investing for a regular cash flow or to keep the property. If one is not planning to keep the property for the long term, and just wants extra income, their focus should be on cash flow generated. If you plan to keep the property and sell it in the long run after a significant rise in its price, then you should focus on the property's appreciation.

Factors affecting rate of appreciation of a property

1. Land

Land is what drives appreciation of any real estate property. If a have an option of buying a small house on a large piece of land and a big house on a small piece of land for an equal amount, buy the small house. The land it sits on will give you more value in future after it has appreciated. As the population grows, more homes and houses need to be built, and this means more land will be bought, thus driving up the demand and price for the land.

2. Location

Location refers to a lot of aspects like; the neighborhood, the city, the state and even what part of the neighborhood the land is situated. Locations near places with higher populations or experiencing high population growth, good economies with good infrastructural development and are off major roads usually have high demand thus are more likely to appreciate quickly in the future.

3. Interest rates and lending guidelines

Home loans greatly affect the housing market. Any increase in the interest rates means a reduction in the number of people who can afford loans, thereby decreasing prices of real estate since there will be low demand as few people are able to afford homes or costs of buying one or land. The reverse is true. Tight lending guidelines usually disqualify potential buyers making it hard for people to access money to buy property. Loosening those guidelines means more people have access to cash to buy homes hence will push prices up.

4. Future development plans

Future infrastructural development plans about the area you have your property will affect its appreciation. If for example, the government plans to do major infrastructural developments like building a major highway next to where you have property, its value will rise. This true if major commercial development is set to take place next to or near the location of your land or property.

5. The physical structure

Smaller and less attractive real estate properties have a higher appreciation, this is because larger houses on the same piece of land are more expensive than smaller ones, yet the land appreciates t the same rate, assuming they are both built next to each other on the same piece of land. Thus smaller houses will give higher returns.

6. Features of the property

This includes how big the rooms are, developments close by, child-friendliness, and yard features. If you want a house, you should look for access to amenities like hospitals, stores, and schools close by. Unique features may also boost the value of your home depending on the area. A fireplace, patio, or pool can be bigger selling points than you might think. If you are looking into installing something on your property, you can easily start with a simple google search of “quality pool builders near me”, for example. Finding expertise is crucial in getting the most value out of the feature.

7. The economy

All economies; national, local and global greatly affect the appreciation of property, an improvement in the local economy results in an appreciation of the properties in those areas. If the national economy is doing well, it means more people will be employed, have money to afford loans and be able to afford homes, thus increasing the demand for property. This automatically translates to an increase in value for the property.

Summary

Investment in the real estate depends on the investor's goals. One can lease or buy property, leasing is better for short-term purposes where cash flow is the main aim. If one is looking to get a property to sell in future, then they should focus on property that will appreciate. Appreciation of property is affected by various factors like land, location, the economy, interest rates among others. It is best to invest in property that will appreciate in value since this will still ensure higher future cash flows.