Most people have heard the real estate adage of “Location, Location, Location”. Just what does that mean, and how does it apply to sound real estate investing? It means that identical homes can increase or decrease in value as a result of the location. It’s the number one rule in real estate investing, and it’s often the most overlooked.
Home buyers can make the mistake of buying the right home, but in the wrong location. Homes can be remodeled, layouts can be altered, gardens can be planted, but you can’t really change the location.
What makes a desirable location? The best location can depend on amenities of the area, local preferences, and geographic factors. As a general rule, the best locations are those that are:
- In Economically Stable Neighborhoods: Pride of ownership should be evident in the area. Neighborhoods that have withstood past economic downfalls will be more likely to survive future ones.
- Close to Outdoor Recreation, Oceans, Rivers, Lakes, Parks, and Public Lands: Properties adjacent to these amenities are more likely to hold and increase in value due to the appealing settings, and distance from neighbors.
- In Highly Rated School Districts: Families are concerned about their children’s education and often pay more for a home that is located in a highly desirable school district, even if real property taxes are higher.
- Near Jobs, Health Care, and Public Transportation: Buyers generally don’t want long commutes to work, the airport, or the dentist’s office. Homes in locations that shorten travel time are often more desirable.
- In areas with views: Homes sell quicker and hold their value more if they provide panoramic views including mountains, golf courses, waterways, and open space.
- Near shopping and entertainment: In many cities, homes that are located within walking distance of restaurants, stores, movie theaters, and nightlife can be more desirable than those that are a significant distance from those amenities.
Locating in an undesirable area is a prescription for disaster when it comes to resale. Those areas that are considered to be undesirable locations are:
- Close to environmental hazards: This can include anything from a sewer plant to a transformer, to a major highway, landfill, or nuclear power plant.
- In areas with a high crime rate: Homeowners want to feel safe from personal harm and burglary. Properties in areas with high crime rates can be nearly impossible to resell.
- In economically depressed areas: Pride of ownership is easily evident in a neighborhood. Lack of maintenance, junk cars, couches, old appliances on curbs, and poor landscaping will make buyers think twice above moving into an area.
- Next to industrial and some commercial areas: Noise and air pollution from industry adjacent to homes (without a buffer zone) is considered undesirable. Nobody wants to listen to delivery trucks in the early morning hours, or smell the byproducts of a manufacturing plant.
- Near airports and railroad tracks: While you might personally get used to hearing these sounds, potential homeowners will want to stay away from the noise of airports and railways.
When house shopping, not only do you want to find your dream home, but be sure to think about location factors for resale. While you might like watching the airplanes overhead and appreciate any lack of pressure to maintain your yard, future buyers may not have the same desires as you do.