Location Location Location, or...?

A bad location is usually an incurable weakness with a property & a key de-valuer, growing disproportionally over time. A house that is half the price of one is a better location will usually maintain that % difference, even when the market strengthens, making the problem worse over time.

de Damian Galvin la categoria Editorial

Publicat la 06.09.2010 | 344 vizualizări | 0 comentarii

Property location is often the most important factor in property value. A house in a poor location (adjacent to disused factories, train tracks, a waste dump, gypsy district, downwind from a chemical plant, built on marsh) clearly won't rise in value compared to stronger locations. 

A bad location is usually an incurable weakness with a property & a key de-valuer, growing disproportionally over time. A house that is half the price of one in a better location will usually maintain that % difference, even when the market strengthens, making the problem worse over time.

Many people overlook that. Think back 20 years. Property prices ranged from low to high in relative terms, but those same properties now have differences hundreds of times greater than the original delta, making them very wise purchases over the long term.

That means it cannot be "fixed" -- it will always be a bad location, all things being equal.

On the other hand, a great location can make up for a bad property. There will always be buyers who want to buy run-down houses in great locations, because they can restore the property.
In fact, a rule of real estate investing has always been to buy the "worst house in the best area" and obtain your potential value from the neighbors.

The inverse of this is to buy the best house in the worst neighborhood, which is a poor investment approach, because your house will take its value from the neighbors. A bad area usually only gets worse!

There's a saying in real estate: LOCATION, LOCATION, LOCATION. 
Location is key to successful real estate investment and is a primary driver of price!

However, there area  great many investors around the world who have become multi-millionaires because they spotted up-coming areas previously ignored by everyone else. I know of one land owner who sold a small plot of land for 5m Euros to tesco, simply because it divided their land & prevented them building a superstore.

So, there are 2 choices. If the area is already developed & has limited scope for improvement, location is more important than almost every other factor. If the area lies close to an undeveloped area however, investors could do well to take the gable. Ask yourself, are the surrounding eye-sores likely to be knocked down in the next 20 years? If not, run away fast!