By Jeff Adolph
Real Estate Tips and Know How
On many occasions the out-of-town investor can miss crucial details that are local knowledge when purchasing an investment.
For Example -- Philadelphia offers a university of Pennsylvania-sponsored program to its staff but only if homes fall inside a specific boundary, which ends at 50th Street. Therefore, a duplex on 49th Street worth $210,000 you can guarantee that the same duplex on 52nd Street is worth $30,000 less.
Hence, there are three specific elements that an investor should consider prior to purchasing in a new locality. These are:
Incentives -- many regions offer incentives like tax abatement, especially if the area is trying to encourage capital improvements and a greater population base. Philadelphia offers a 10 year tax abatement, which basically means that the investor who purchases a property for $45,000 and then makes $90,000 worth of improvements will still only be taxed on the original purchase price of $45,000 regardless of the appreciation the dwelling has incurred. this is fixed for 10 years and once elapsed this property will then have its value reassessed with the tax rate adjusted.
Eugene Davey, Philadelphia's Assessment Director said, 'Almost every type of structure that takes out a permit, whether for an addition or construction, can get some type of abatement.'
Regional Boundaries -- Know where the 'good' neighborhoods meet the 'bad', especially in areas of poor growth and avoid purchasing here. While areas like San Francisco have seen so-called good and bad merge because of monetary investment and high demand, other areas are not so fortunate. Typically, a 'bad' district will become increasingly more transient and offer a stark contrast to a more wealthier area.
Increased Risk -- If you're considering development investment make sure you have done your homework before investing or you may find that you've made a costly decision. Understanding past and current local trends will help you predict future ones. Research a locality, find out what is being developed and where, and observe what is happening in the area you're keen on.
Ilya Snyder, a 'microdeveloper' with the Karras Brothers Co., spent 5 years searching for the 'perfect city-center property'. His investment was 'a commercial building in Detroit only a couple of blocks from the river, and in the shadow of planned luxury condo developments.'
'There are pockets of neighborhoods were development is attractive,' Snyder said.
Overall, look at as many aspects of your investment as possible and weigh up all pro's and con's before committing to any contractual agreement, and if in doubt ask. By consulting a professional who specializes in the area you are considering you will save yourself time and money, and possibly from an expensive mistake.
Source: Geller, T (2007) Investing in America's Urban Rebirth; available online at http://www.inman.com
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