Rising
home prices are often due to an overlooked factor, which is the growth of
development restrictions in a certain area. This happens the most in areas that
in which a rapid growth prevails, due to advantages such as climate, scenery or
location conditions. Usually, these areas are predisposed to an overflow of
people seeking these advantages. This is why sometimes the most important
factor in development restriction increase is the human nature.
A
good real estate investor seeks economic activity in
the region, population growth, industrial and commercial activity and quality
of life. All these conditions will influence the development of the area after
which unusually comes home price appreciation. If the building is not being
adapted to the population growth, we expect rental growth as well.
As
the government becomes more involved in approximately all stages of our lives,
another key factor that needs watching in an area is government regulation and the
impact this has on building and real estate development. A main reason for most
price appreciations was in California government restrictions on development
and construction. Anything growing construction costs will also increase home
values.
Some
examples of restrictions and covenants that increase the cost of building new
homes are:
- Minimum home square footage restrictions
- Minimum size of lots
- Increasing obstacles lot lines, reducing usable space than
- More green space, always dedicated to open land
- Mandated Building Envelope
When
the minimum dimensions of lots are taken, the number of lots that may exist in
a drop zone. The price per square meter or acre of land increases, thus
increasing the cost of home finally built. Similarly, more green space,
greenbelts, and permanent space set aside as open ground lead to increased land
prices. Creating more space between houses is also achieved by increasing
failures decreases lines. These lots of land available for new construction
usually results in much larger sizes as well.
Many
restrict subdivisions also houses a minimum square meters, and exterior
building materials and aspect are also commonly written in restrictions and
covenants. There are usually good reasons, at least for those currently living
in an area for these restrictions. However, this natural human trait to close
the door behind them when they find their house future residents cheaper to
build. The first inhabitants of the area who want to keep their property values
moving in a positive direction so that they adopt restrictions and covenants
which ensure at least the same size and quality residences in the future.
A
smart real estate investor will track the progress of
government restrictions and subdivision in the area. When the trend is
supervision and regulation, it may be assumed, usually a corresponding increase
in construction costs. Here is the opportunity appreciation above the average
property in the future.
A positive cash flow is desired by any real
estate investor. However, the upside potential of properties is just the cherry
on top of the cake. Opportunities in real estate investments may often be found
in locations situated at the beginning of the request rise curve. People
overflow equals demand and an increase of real estate investments. Although
this is true, development restrictions follow any rapidly growing society,
increasing prices and costs. This increase brings after itself the opportunity
of increased rental revenue. By being aware of this human tendency to not close
the door behind will make a difference in the return of a real estate
investment.
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