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26
Location, Location, Location – First Time Buyers Beware
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26
Location, Location, Location – First Time Buyers Beware
If ever there was an adage more important and imperative in real estate it is this: Location, Location, Location. No matter what size property you purchase or what the cost is, the most important consideration should always be the Location of the property.
A recent Blog article at Career Ramblings by condo buyer Jane outlines some of the pitfalls of making a bad Location choice. As a resident in South California, Jane gave herself a 3 year timeframe for which to live in the property, and, rather than rent, she decided it would be a wise idea to buy a property.
Jane bought a 2 Bed 2 Bath condo (+Loft/Den) in a “not so great part of town†in order to be able to afford the apartment. She elected to stay out of the downtown core due to the lack of parking.
This is the first pitfall that many first time buyers fall into – buying a property in a not so great part of town due to its affordability. Although at times it may be a wise investment to buy a lower price property in an up and coming area, it is best to avoid an area with no short term.
When asked about the pros and cons about location, location, location, I generally advise the following. If given a choice between the Worst House in the Best Location or the Best House in the Worst Location, I Always advise buying the Worst House in the Better Location. Why? It’s quite simple actually.
A property in bad condition in a good neighbourhood can easily be fixed up so that its condition can match the comparable property values in the area. Whereas, a good property in a bad location can sometimes be over-improved or over-valued. As a result, a buyer has to wait for the area or neighbourhood to increase in value in order to meet the value of the property purchased.
This is Jane’s second mistake. Jane decided to take on some hefty renovations in order to improve the kitchen, bathroom and living space of her condo. Generally, renovations to the bathrooms and the kitchen add the most value to any property. However, it is very seldom that such improvements add much value to a property in a not so good location.
Jane’s third mistake was paying for the renovations using credit cards. At exorbitant interest rates, sometimes as high as 18% / year, it is never a good idea to renovate on plastic. If a quick sale is in the books, and as a result a quick flip, it is not so bad. However, for someone looking to stay in the property for a few years, credit card renovations should be avoided at all costs.
When is it wise to buy a property in a bad location?
There are at times good opportunities to be had in buying properties in bad locations. If a neighbourhood is turning itself around, becoming less crime ridden or simply being renovated and improved, it is perhaps a wise investment to buy a property for future holding. However, buyers need to be aware that it sometimes takes years for the revival of a neighbourhood to be complete and only long term investors need to consider this gamble. For if a neighbourhood redevelopment ever stalls, so do rising property values.
Jane’s articles: A Diamond in the Rough Part 1 | Part 2
For more information, contact:
Radu Medan
Sales Representative
Coldwell Banker Case Realty, Brokerage
416.250.9000
rmedan@trebnet.com
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January 26th, 2007
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