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Blog Posted in avatar   D. Sidney Potter's Blog

6 Tips on Property Lot Selection

By D. Sidney Potter
Posted May 7, 2012 in Business
Criterion 1—Property Evaluation. Take notice of adjacent lots to the back or front of the property and whether or not the house comes with or without a view fence. The absence of a view fence, if appropriate, may be a desirable or undesirable attribute, and this depends largely upon the degree of privacy that your potential lot has since this would obviously affect the home’s future marketability.
Criterion 2—Setback. Ideally a deep property line setback is a plus since it provides a larger front yard. However, does this footprint take away from the backyard? Reading this and the other important sections on the criteria noted above, you soon understand that there is a “ying and yang” of appraising economic upside to a piece of property that you will only hold for a very short time.
Criterion 3—Feng Shui. The art of feng shui is foreign to most Americans, which is lucky for those buying in North America since most homeowners do not take into account the importance of feng shui. For definitional purposes, feng shui is a primeval system used by the Chinese that emphasizes the inter-play of Heaven and Earth and how that affects the atheistic of a property. The objective of feng shui is for the occupier of a building space to be the direct benefactor of positive karma. If this concept were more remarkable in this country, you would inevitably see more US homeowners affixing a slight premium to their home based upon the principles of feng shui. However, unless you’re buying a home in a place like upscale Arcadia, California, which is approximately 50 percent Asian-American, I wouldn’t place an overemphasis on the artistic spirituality of feng shui.
Criterion 4—Site Plan. Look at the site plan to assess the location value of your potential investment. Is it closely located near natural boundaries that abut near pristine settings? This is assuming that there is a nature play. If it’s not a nature play, a site plan will at least give you a bird’s eye view of the geographical pros and cons of your investment. And lastly, are there any nearby farms, factories, etc., that would cause noisome and fetid smells to be caught in the backwind?
Criterion 5—Freeway Retaining Walls. Once thought to be a detriment, Fortunately, retaining walls have become somewhat more visibly enjoyable by having aesthetically pleasing and/or colored concrete.
Criterion 6—Square Footage. Don’t be fooled by the perceived premium and price in a larger home in terms of square footage. Although the price per square foot usually drops in a given development the larger the home is, put yourself in the future buyer’s shoes. If the buyer can get a benchmark 2,000 square-foot home with four bedrooms at $250,000, then is he really ready to bump up to 2,500 square feet for $320,000? Maybe, but probably not. He’ll likely make do with the 2,000 square-foot deal, squeeze his family into it, instead of paying an extra 30 percent to 35 percent more in price in order to have the perfect home. In terms of how the scenario affects you the investor, if the answer is no rather than yes, this will make the flip less marketable. Usually, there’s less demand for higher-price product as in our example of the $320,000 home versus the $250,000 home.
On the converse, be wary of overpriced, less commodious runts (a.k.a. super small homes), in the specific development that you’ve targeted to buy. Even though the price per square foot is typically higher for these smaller homes, given the sunken costs (i.e., land value, mortgage construction debt to the builder, materials, etc.) to the developer, these costs are spread out in the larger homes in the development, and, as a result, there is an overall smaller per square foot cost to the larger homes. For this reason, the smaller homes in some cases can just be wholly inadequate and may be overpriced relative to what else one can buy for a slightly higher price. Be cognizant of this marketing ploy. As an investor, your modus is to hit the sweet spot in terms of the most sellable models in the development, and to acquire those model types at the best price you can.
To be prudent in assessing the property in the community, the more vanilla of a property you can buy, the better. Remember that you want to buy a home that has the widest degree of market appeal as possible, which means buying as prudent as possible during your property selection process. This is not to say to take a “pass” on a premium lot if it’s a slamming good deal, makes sense, and has none and/or little premium markup the builder has added, in comparison to other lots at the same development. If it’s a good deal, by all means, take it! But notwithstanding that improbability, you should be able to determine after kicking in the tires of numerous other tract housing developments, of what is and is not a fair and reasonable price point for property sites