Capital growth (appreciation) is, in my belief, the most important wealth building principal. The best way to get appreciation is to acquire property where everyone wants to live. Home values rise in areas where people want to live and relocate to. As the economy finds its bottom, more and more people are looking to realize the wealth building principal of appreciation. Over the past few years, while the economy was in a free fall, investors were settling strictly for cash flow. We all know that cash flow is paramount to any and all investments. A few things that create demand and items you will want to consider when buying for capital growth (appreciation) include:
- High demand areas such as warm climates, lake, mountain, waterfront and golfing communities. These places have baby boomer appeal and will sustain the growth.
- Locations with job diversity. The more options for work the more desirable the location and sustainable the ongoing work force will be.
- Areas with local government diligently working to attract new jobs. Jobs are desirable and provide sustainable growth.
- Warm and inviting climates or areas with much entertainment value. Warmth and entertainment are very much in demand and provide sustainability.
- Under valued markets. Markets that have all the above and are also currently undervalued means you can buy cheap today and ride the wave of appreciation tomorrow. This is not only very sexy, it is also very sustainable.
- Cold and old are versus warm and new. Cold area and old properties can make great cash flow where newer homes in warmer areas are in high demand. AND newer properties tend to be more economical to maintain.
- High owner occupied areas will sell to an owner occupied buyer, which will lead to higher returns than selling to another investor.
I could go on all day here but I believe the message is clear. Think about what it is the largest majority of people want. They want desirable locations that will sustain their lifestyles. When you invest in areas where people are relocating to, you will be able to ride the wave of economic prosperity.
Being purposeful with your investments means you look for the above mentioned criteria before even looking at property. As I always say you can find an attractive investment in any city in the U.S.A today. But does it pass the high demand sustainability test. If it does not, that investment is only as good as the paper the pro-forma was written on.
Always make sure the investment is in a high demand area and the investment is sustainable long term. Capital growth or appreciation is a wealth building principal that will allow you to have great cash flow in the long run.
Search our list of cash flow and growth real estate investment properties for sale.