Courses for would-be real estate investors often give the advice: “Choose the worst house in the best neighborhood.”
It’s good advice for future homeowners as well. Perhaps not the “worst” house – but unless there’s one that’s a derelict or half the size of the others, it’s wise to at least choose the least expensive house.
I know – that probably won’t put you in the most updated home on the block. It probably won’t have all new top-of-the-line flooring, cabinets, and appliances.
What it will have is potential for enormous appreciation.
What home buyers often don’t understand is that the neighborhood has a huge impact on the value of the individual homes. This works both for and against individual homes.
If a home is larger and/or more expensively appointed than the homes surrounding it, it’s value will be lower than it would be if it was in a neighborhood of similar homes. Interestingly, if one home is vastly different, it may be a long time on the market before finally selling at a rock bottom price.
People who want McMansions – and can afford to pay for their upkeep – want to live in neighborhoods filled with McMansions. They don’t want to live in a mid-range neighborhood.
On the other side of the coin, if a home is perhaps smaller or older, but still of good quality and in good condition, it’s value will be higher than it would be if it was in a neighborhood of similar homes.
(Remember what your Mom said – you’ll be judged by the company you keep. It’s the same for houses.)
Thus, as long as the neighborhood is good, if you can find a bargain in a home that perhaps needs a new coat of paint, new flooring, or updated appliances, the work you do will reward you handsomely.
A second advantage: If you purchase a home that already has new flooring, appliances, etc. you’ll be paying for those updates. Unless you’re fabulously wealthy, that probably means that you won’t want to replace them, even if they aren’t quite your taste.
If you purchase a home that needs those renovations, you’ll not only gain the appreciation in monetary value, you’ll be able to choose the colors and styles that please you.
Once you’ve made a purchase, the one thing you can’t change is the neighborhood.
So take time to look at the surrounding homes. Are they well maintained? Are they mostly owner or tenant occupied? Are there renovations going on? Is the neighborhood served by a good school system?
Ask your agent to look back to see how much homes in this neighborhood have appreciated over the past few years. Then ask if he or she knows of any new developments in the area that will affect home values.
Choosing the least expensive house in the best neighborhood can be one of the best investments you’ll ever make.
Call me – I’ll be glad to help you find it.