Tip #17 in our series of 70 ways to save money when buying a house is to buy the worst house in a good neighborhood rather than the best house in a so-so neighborhood.
The reason why you should do this is simple. The worst house will appreciate (go up) in value much faster than the best house because of the neighborhood. It will also be easier to sell when you need to move, and it will sell faster.
The value of the house in the so-so neighborhood will be kept down by the other houses in the neighborhood. The schools might not be as good either because of lower property taxes due to lower house values.
You might paying the same price for a smaller house that needs more work, but if it is in a good neighborhood, than the value of the house will appreciate. The better neighborhood is more desirable. The more people want to live there, they more they will be willing to pay.
On the other hand, a so-so neighborhood can be cheap to but into. Your house might be the best around, but if the house next door is much cheaper, than someone could move in who does not take care of the house as much. That will lower your homes value as well.
Better neighborhoods also have stricter zoning rules and a homeowners association.
A home is a so-so neighborhood has a good chance of going down in value. At the very least it will not appreciate until all the homes in the neighborhood start to appreciate, and that could take a long time.
Research studies have shown that neighborhoods will good schools appreciate the fastest.
While you might get a larger home for the same price in a so-so neighborhood, if you think about the future, your best bet is to get the home in the better neighborhood. Even if it needs more work. Any work you do to improve it will quickly increase the value.
This tip is not exactly a way to save money when buying a house. But it is a top to help you make more money by buying a house. Buy the wrong house and your hopes of a higher home value might not materialize.
Take for example the neighborhood of The Woodlands, north of Houston. There are thousands of homes in this area and many smaller neighborhoods. My son owned a rental property in one area where the prices did not appreciate for the four years he owned the house. If he had bought a rental just a few streets away he would have gotten at least 5% appreciation a year. The neighborhood cost him about $20,000.
Make sure you do your research and buy in a good neighborhood.
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