Real estate has historically been a great option for investors. There are many reasons why real estate is such a wise investment decision. One of the reasons why homes increase in value is because of the large land holdings the government has in their possession. The federal government holds high percentages of land in the United States of America. In fact, since the 1930’s, the federal government has held onto up to eighty percent of some states. So as available land becomes less and less available, and the population continues to grow, then the worth of the available land continues to increase.

This concept is called scarcity. An individual is willing to pay a large amount for diamonds but relatively nothing for water. Water is essential to live and diamonds are good for very few purposes. This is because water is super plentiful and diamonds are extremely rare. If the roles were switched, and water suddenly became rare and diamonds become plentiful then water would be called extremely scarce and worth a whole lot; much more than anything else.

This is the case with the real property on the ground. The amount of land remains fixed while the number of people who want the land continues to grow making the land itself increasingly valuable.

The case is not the same with the physical structure on top of the ground. The human made building will lose value unless it is not kept up. Because buildings lose value, the trick comes into play of being able to buy the right property that will increase in value enough to be worth investing in.

First, old homes or structures that are in the heart of any city are a nightmare. Even though the real estate is increasing in value, if the structure above it is worthless than the property might actually be a complete waste of investment capitol as it will simply cost too much to actually make a profit on.

So buy the property in a fairly new neighborhood and choose the home that is not on the high end of the neighborhood. The home that is the most expensive and nice on a street or in a neighborhood will be the less likely to return a profit or increase in value the most. Buy a home that is modest and watch as it increases in just as much money as the big home thus earning a larger percentage return.

Lastly, the most important thing when buying a home is to buy when the home is on the way up in price. Nothing is worse than taking out a huge loan to buy a home and then have that home lose its price value because it was overpriced and being stuck in a situation where to sell means to lose thousands and thousands of dollars. The best way to know if a home is overpriced is to see its growth. A homes value will or should not increase in value quicker than a few percentage points per year. If the home grows too fast, then don’t buy it, it will lose its value just as quick.

Author Bio: Juhlin Youlien writes about Chandler real estate and Paradise Valley AZ homes and other real estate like Scottsdale Golf Properties and Fountain Hills Real Es