When one is in market for the waterfront property, the interest may be shown in it for several reasons. It could be for vacation purposes, like your primary residence, as you wish for a retirement dwelling, or as some investment option. Each one of the real estate options show slightly varied considerations that you would need to bear in your mind.

Most of the people initially consider buying the waterfront real estate mainly for vacation purposes. Probably, you may have taken some yearly vacations at prime pieces of waterfront real estate; could be on some river, lakes, besides some mountain creeks, or just next to a ocean. You may perhaps find yourself counting days till you could return back your waterfront vacation spot. One may have no interest trying other location for trips as they would want to return back to their favorite spot. When this is the case, it is good time considering buying the waterfront real estate. So, next when you are on a vacation, talk to real estate agents in town or the resort area you would like to go and check if you could get with the buying of your own small piece of the waterfront real estate.

But it could be possible that you own some vacation home and 1 or 2 weeks which you spend there is not enough at all. You may find yourself visualizing of the waterfront home in months before you could return. If you are plotting the weekend escapes to some waterfront property that you love so much, then perhaps it is time for considering the purchase of waterfront real estate as your primary residence. The current vacation home might well make you switch gracefully; however, you must consider carefully whether you could imagine yourself living there continuously day to day. Ensure to check if the appliances and other amenities are updated. You may be willing to tolerate some outmoded range or the lack of microwave in your vacation cabin; however, not in your primary residence. Know if the vacation real estate is large enough for sustaining the daily living. One honest appraisal of the current needs and if the vacation home would provide it could go a very long way to make transition to the waterfront living.

Quite a lot of people love ideas of the waterfront living; however, they are not willing to make any sacrifices as it may entail-long commutes, lack of few cultural opportunities, or living away from cities. If this is your case, perhaps you would consider buying the waterfront real estate for the retirement. When one no longer has job to report to everyday, idea of living quite a bit farther from the hustle-bustle would take on more appeal. Along with retirement, the life slows down quite a bit, and one would have the time for appreciating one’s waterfront real estate. It could be watching the seagulls dive and swoop, listening to the roar of ocean, or dangling the feet off some deck into cold mountain creek.

Then, there are options of buying the real estate for the investment purpose. It is usually a guarantee which says that the price of the waterfront real estate might start escalating. Sometimes the investors wish that they had bought the real estate many years earlier, when the prices seemed to be quaintly cheap. It could happen that the same property which once upon a time was charmingly inexpensive is now worth a little fortune.

Whatever is the desire in purchasing a real estate, there is always sure to be many options which would fulfill your needs.

Real estate value investors believe that real estate assets have an underlying intrinsic value that can be determined by analysis and evaluation. Opportunities for profitable investments become present when the purchase price of the asset is below the underlying intrinsic value of that asset.

Value investors evaluate an opportunity in an investment by understanding the relationship between value and price. Thus, the essential task of a successful value investor is to determine the intrinsic value to capitalize on inefficient market mispricing.

In determining the intrinsic value of investment assets, there are two generally accepted practices used by fundamental investors today. The first is to determine the replacement cost of the investment asset to assess a general valuation. Adjustments are then made to the general valuation for the impact of depreciation on an older asset relative to new construction. In addition, an adjustment must be made for replacement rents versus new development rents. The end result is the intrinsic value of the investment asset.

Replacement cost numbers are typically generated on rough estimates of cost per square foot suggested by development and contractor organizations. When assessing replacement cost on an investment asset, contact two or three reputable developers or contractors, familiar with your market and product type, to obtain replacement cost estimates. Make sure your estimates are an apples-to-apples comparison that include standard costs such as:

• Hard Costs (Site, building, parking)
• Soft Costs (Third party consultants, permits & fees)
• Contingency Costs
• Land Cost
• Fees (Developer, construction, profit)
• Marketing & Leasing Costs
• Financing Costs

Finding a property’s intrinsic value using the replacement cost approach is used most often in the industry. The current industry replacement cost for a particular market and product type gives investors a baseline for valuation purposes. For example, let’s look at a typical cycle.

The economy is coming out of a recession, and demand for residential and commercial real estate is increasing. The increase necessitates the need for more housing units and commercial space to accommodate the growth. A house that cost $100,000 to build and that sells to a buyer for $120,000 creates a profit of $20,000. As the economy continues to expand and grow, replacement cost may increase to $110,000 (increase in land and building costs) and selling prices may increase to $150,000, creating a $40,000 profit.

As the economy overheats and demand starts to fall, fewer buyers are available to purchase, causing home prices to fall. We enter a recession and the market is flooded with homeowners and home builders trying to sell their huge inventory of homes to fewer buyers, causing home prices to fall even farther. The replacement cost of a home now drops to $90,000 (lower land prices and cheaper commodities) and selling prices have dropped to $70,000. When the economy begins to pick up again, home prices increase as the large inventory of homes for sale decreases.

The best time to be a buyer of homes is when the replacement cost to build a home is above the selling price. Buyers can buy homes lower than it cost to build a new home creating value. If a buyer bought a home for $70,000 and the replacement cost (intrinsic value) is $90,000, then the buyer has captured, at least, $20,000 of value. When the economy picks back up, home prices need to get above $90,000 (the cost to build a home) to make a profit.

The rule of thumb is to be a buyer when prices fall below replacement cost, and a builder when prices get above replacement cost. Therefore, replacement cost is the line in the sand (baseline). As a real estate value investor, you dream of the days when prices fall below replacement cost because value opportunities are everywhere.