Most will tell you, given the two choices, take the worst house in the best place. That advice dates back a long time — at least back to 1957, when Larry Eisinger wrote “A $30,000 home mixed in with a group of $20,000 homes can only accent the value of the latter,” in the book “How to Build and Contract Your Own Home.”
And while real estate values have obviously changed a lot, the advice remains largely true. But there are times when the appeal of the bargain mansion on a street full of bungalows can be the right move.
Let’s talk about how to know when.
Seeing both sides
Why would you choose a fantastic house in a less-desirable neighborhood? It boils down to bang for your buck. You can get more house for your money, or a house that’s in better condition, by choosing a nice place in a neighborhood without Grade-A appeal.
Such a neighborhood typically has a lot of homes for sale at deflated prices. It also has fewer homebuyers interested in them and less Realtor traffic. So a great place might go unnoticed, be priced below average based on square footage, and have motivated sellers willing to cut an even better deal.
But Realtor.com offers a hard-and-fast rule: Don’t buy the best house in the neighborhood. “When you’re in the throes of buying a home, it’s easy to forget that the place you’re busy buying will someday be the place you’re selling. And when it comes time to sell, unloading the priciest home on the block will be a challenge,” says Jamie Wiebe.
Again, there are exceptions we’ll talk about in a minute.
On the flip side, it’s pretty easy to see the pros of buying a less-appealing house that’s in a great neighborhood. You can get your foot in the door, so to speak, of a great location — be it parks, access to public transportation, good schools, a gated community, or whatever appeals to you — at a lower price than your future neighbors did.
Just keep in mind that the house has a lower asking price for a reason. Maybe the house is smaller than others there, or its design is unappealing, or there are too few bathrooms, or it has a major structural issue that must be addressed in the near term.
Breaking the rules
So, you can’t win, right? On one side, you have to live with an eyesore in a nice subdivision, feeling the disdain of your neighbors through their friendly waves; on the other side, you’re the uppity new residents of the fancy house on top of the hill.
That’s hyperbole, of course, and the easiest answer is to get a very good house — but not the best house — in the best neighborhood you can afford.
But let’s get to a couple of key exceptions, and they’re both based on the key concept that real estate values fluctuate, based on the overall market and trends in specific neighborhoods. That means that:
- If your potential neighborhood is “coming around,” or undergoing gentrification or revitalization, it might be a great investment to buy that best house in the bad neighborhood. Just remember that gentrification can take decades, so don’t expect to flip it for fantastic profits soon.
- If your ideal neighborhood is stagnant or on the decline, owning the worst house in that neighborhood is the kiss of death. It might be impossible to see without realizing a loss.
There can be nuances behind the housing trends in each neighborhood, too. As Eisinger said, way back in the ‘50s, “Unless you know the area thoroughly, check with your local real estate broker.”
That’s good advice, and Carter & Associates is here to help you understand the impact of your potential purchase, whether it’s the best house in the worst location, the worst house in the best location, or somewhere in between. Just give us a shout.