Conventional wisdom says that you should buy the cheapest house in the best neighborhood. The thinking is that you will be able to buy an inexpensive house, make upgrades, quickly boost its value and sell it for a hefty profit down the road. That may not be true.
Reasons to Look for a House in an Up-and-Coming Neighborhood
When an area draws homebuyers and businesses, the local economy gets a boost. That effect eventually spills over into the surrounding area. An up-and-coming area is a neighborhood that is outside the most desirable area and that is beginning to see an influx of residents and businesses. As the process continues over time, property values generally rise.
You may be better off buying a house in an up-and-coming neighborhood than one in the most desirable area. If you purchase a home in a neighborhood that is growing and expanding and you stick around for several years, you may see your home’s value grow significantly and may be able to eventually sell it for a substantial profit.
If you check real estate data, you may notice that houses are selling quickly in a particular area. You may learn about an up-and-coming neighborhood by following local news or by talking to family members and friends who live nearby. If you visit an area, you may notice several trucks belonging to contractors who are making renovations.
When to Buy a House in the Best Neighborhood
If you want to live in a specific area because it’s close to your job, is in a good school district, or has some other feature that makes the location appealing, it may be a good idea to look for an inexpensive house in that neighborhood. If the house needs work or does not have a floor plan that suits your family’s lifestyle, you may be able to make renovations and still pay less in total than the cost of one of the pricier homes nearby. Your house may gain value, but it probably won’t appreciate as much as a house in an up-and-coming neighborhood.
Where Should You Look for Your Next Home?
Homebuyers have a variety of goals. If your primary objective is to find a house that will build equity quickly, you will likely be better off searching for a home in an up-and-coming neighborhood. If you want to live in a specific location, it may make sense to look for a house there, even if it won’t increase in value at a fast rate. Your real estate agent can discuss your needs and objectives, explain trends in your area and give you advice.
