Jul 07

Whether you’re in the market for a personal residence or an investment property, it’s all about location.  In every area, there are neighborhoods that are sought out by home buyers.  These are the neighborhoods that experience better appreciation over time.  It could be due to proximity to education facilities, city centers or recreation.  Whatever the reason, these neighborhoods should be investigated for real estate investment.

 

The challenge when evaluating homes for purchase in these desirable neighborhoods is to locate or negotiate a bargain.  Successful real estate investment begins with the purchase price.  Sellers in these neighborhoods rarely are in the dark about the desirability and market prices.  So, how do we buy into a great area at a below market price?  We look for the worst home in the area.  It could be due to condition, size, location or style, but it is not up to the “standards” of the neighborhood.  This is where opportunity lies for the astute investor.

 

The fact that this is a popular area in which to live draws our interest as investors just as it draws many buyers who are stretching their ability to afford to live in this area.  If we can locate a home at a below-market price, rehabilitate it to be a better fit for the neighborhood, then we have the potential for a successful investment.  Dean Graziosi, in Be A Real Estate Millionaire, clearly advises to “Buy the worst house in a great neighborhood rather than the best house in a bad neighborhood.”  The quality of a neighborhood can raise the value of just about any home, no matter the shortcomings.

 

How do homes fall into this “neighborhood sub-standard” category?  Sometimes it is because owners have moved away, and they are renting out the property.  Tenants have let the home fall into disrepair, and the cost to bring it to its original condition will be in line for a good return on investment.  The seller just wants to end their landlord status, and they don’t want to do reparis.  Perhaps all the homes in the area have garages, and this one doesn’t.  Couple that with condition issues, and it could indicate affordable improvements for an excellent return on investment.  Whatever the reasons, if you can locate a home that is clearly beneath the neighborhood norms, but has the potential to become a “fit” for the area, you’ll likely have a candidate for a very successful investment.

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