It is by no means as simple a matter to select investments in real estate in large cities as in farm lands. When once a thorough knowledge of the fertility of agricultural land and its nearness to a market has been gained, there is a fair basis for safely determining its value for the purpose of outright purchase or as collateral for loans. But it is necessary to apply different methods to city property. Location, the density of population, and other factors in each urban community, have much to do with its value. Under favorable conditions and environment a parcel of city land may undergo a phenomenal appreciation. Again, changes may occur to cause a sharp decline, especially where property has gone up too rapidly. Real estate booms are not always the healthiest thing for a community; sometimes they peter out fast.

The congestion of population in certain localities has been remarkable, so much so as to result in making the owners of property fabulously wealthy. That was because the land, being a stationary quantity, always located in the same place, had to serve the requirements of a multitude instead of a few. It stands to reason that the more the land is required by a population, constantly growing in density, the higher prices it will command.

We see and we wonder at the prevailing tendency, bo noticeable in our large cities, to build high up in the air. But there is really nothing mysterious about it; where land has become valuable, as happens to be the case in our many large cities, it has become, from an economical standpoint, much cheaper to reach up than to spread out over the ground.

Nowhere have we a more striking illustration of this development than in New York City, situated as it is on a small island, its growth restricted on all sides by water. Almost all the available property is already occupied. The city's area is insufficient, and each year is growing more so, to provide comfortably for the density of the population. The natural outcome is that the city has become a city of skyscrapers, each vying with the other in a frenzied effort to pierce the clouds. Nor are these tall structures confined to the business sections; residential property also has become scarce enough to force the community to erect row after row of tall apartment houses, providing homes for hundreds of families as a measure of relief from the pressing demand for living quarters. Similar conditions, in a less degree, prevail in our other large cities.

Where land is in such demand, the natural evolution will be a continuous enhancement in value. To what astonishing lengths this appreciation can sometimes reach is illustrated by a sale made a few years ago of a small piece of property in the financial district of New York, barely large enough for an ordinary sized dwelling, at a price of $600 a square foot. By erecting on this property a tall office building the investment was made to pay. It was not difficult to fill the structure with tenants willing to pay rents high enough to bring a satisfactory income on the money put into the building.

Four hundred years back, the whole island of Manhattan could have been purchased for the present price of one square foot of this property, for the value of the trinkets Peter Minuet turned over to the Indians in order to acquire possession of it, was hardly more than $600. Yet were this land not serving a dense population and situated where it could be used only for agricultural purposes, it would be almost worthless, so rocky and barren is the soil.

The growth of our urban population has opened a field for the exploitation of capital on a scale, the magnitude of which is almost inconceivable. It has made it necessary in the purchase of a great deal of such real estate to depend in a large measure on borrowed capital. Savings banks especially find it profitable to place a greater part of their deposits in loans on city property in the form of first mortgages. But as a safeguard they confine their loans to improved property already used for either business or residential purposes and bringing an income. Laws have been passed restricting the savings banks to loans of this character, to prevent their deposits from being tied up in property not producing any revenue. The idea is that this last-named class of property is not quickly salable.

Titles To Real Estate

Where the individual investor places his capital in loans on city real estate, whether he assumes the entire loan or but part of it, he should exercise the greatest care in selecting the property which is to serve as his collateral. The title to the property should be without a flaw, otherwise a cloud will be upon it, acting as a bar to its free and quick transfer. Without a clear title no loan should be made. Again all loans ought to be confined to a certain proportion of the appraised value of the property to provide a sufficient equity to protect the loan. Real estate values can easily be ascertained, for every city keeps a careful record, for the purpose of collecting taxes, of all transfers of property, and these records are open to inspection.

Even here modern methods have simplified this necessary work of investigation. In every city of importance, institutions have grown up which make it their business to search real estate titles, for which service they charge a nominal fee. Their records are so complete that their abstracts of title are accepted without question. When they guarantee their titles, as most of these companies will, they insure their clients against loss from any flaws. They have reduced the work of searching titles to such a degree of accuracy that today few sales or loans are made without a guarantee of title from them.