When you’re house hunting, finding an amazing house in your location of choice that doesn’t require much additional investment seems like a huge score.
But is it really? Before making an offer on that picture-perfect home, take a look at the surrounding houses. If they’re all in disrepair—or just obviously less nice than the one you’re considering—you might be buying the most expensive house in the neighborhood. Here’s a few reasons why this may actually be a BAD idea.
Someday you’ll need to sell it
When you’re in the throes of buying a home, it’s easy to forget that the place you’re 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.
Someone might buy it—after all, you did—but there’s no way to increase your equity in the home. With your house already significantly nicer than its neighbors, any upgrades (however minor) will send it into the stratosphere. That quality mismatch between your home and the surrounding homes will lead most buyers to pass on it. If they’re going to spend that much money, why wouldn’t they buy a home in a more desirable neighborhood?
The best you can hope for is your home holding its value. The worst-case scenario: You can’t sell it.
You need to leave room for improvement
The best investments have the most room for improvement. Ideally, you’ll be adding to the home during your ownership, building equity in hopes of a payoff when you (eventually) sell.
For this reason, we actually recommend buying the worst house in the best neighborhood. Yes, you read that correctly. If you’re choosing between an awesome house in a crappy location or an awful house in a great location, choose the latter.
Note that “improvement” doesn’t necessarily entail a complete renovation. Even small changes such as regular maintenance, refreshing the paint, and fixing the odds and ends can add value to a home. But if your home is already priced well above the rest of the neighborhood, those tiny changes won’t make a lick of difference.
You can’t bet on the neighborhood to improve
If you’re buying the nicest house on the block hoping the neighborhood will improve, you’re putting a lot of stake in a volatile market—and you’re more likely to be disappointed.
Ideally, the chain of events goes like this: You buy your nice home in an up-and-coming neighborhood. Over time—thanks, gentrification—the homes around you improve until all of your neighbors are pretty much on the same footing. Because the area has improved so drastically, your home’s value will still increase.
It’s a wonderful idea, and it is certainly realized occasionally. But for each time this strategy works, there are a dozen others in which homeowners end up with an overpriced, unsellable home in a middling neighborhood.
If you’re looking for a home in the Las Vegas area, our real estate experts are standing by to help you with your search! Call 702.545.0020 or contact us to get started.