Every neighborhood seems to have one: a tired, worn-down house. Perhaps the home is abandoned, with an overgrown yard, a broken window or two, and a sagging front porch in need of paint and TLC.
These properties have any number of backstories, such as an aging homeowner, lack of funds due to illness or unforeseen circumstances. In better neighborhoods, with manicured lawns and beautifully maintained houses, these unloved properties stand out, beckoning to potential buyers. These houses seem to shout: “Opportunity!”
Buyers know that although it is simpler to buy the newest house with all the latest accouterments, the pricing and competition for new construction or a well-maintained house will be steep in this market. Buyers who adhere to a budget, are flexible, have imagination and are willing to do some detective work on the background of the property are poised to benefit from buying the worst house and bringing it up to the standards of the neighborhood.
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Location, Location, Location
Older homes in need of upgrading, TLC or gutting and renovating offer buyers abundant charm, and in most cases, superior construction. Usually, locations that take advantage of established school districts, commutable distances, and mature plantings and yards are what many people might consider to be the best neighborhoods. “From an equity standpoint, the buyer is getting the property at a greatly reduced price because of the condition, therefore building equity at the start,” says South Brooklyn ReMax Elite’s Julie Thum.
“Location, location, location,” long the real estate industry’s battle cry, is never more applicable than when looking at house versus neighborhood. Who cares about a new kitchen, storm windows, a finished basement (all of which can be added to a house)? Desirable, longstanding, high-quality neighborhood amenities cannot be underestimated. Even something as simple as sidewalks and streetlights can take years to manifest in an up-and-coming area.
A childhood friend, who moved frequently when she was young, experienced this worst-house-best-neighborhood scenario firsthand with her family. She says that “the neediest house in the best neighborhood typically is not updated and is smaller than the other houses.”
However, rather than looking at the house, which can be helped, her parents paid strict attention to the neighborhood, taking advantage of wide streets, big homes, superior school districts and proximity to parks and recreation. These neighborhood amenities take years to establish and are not within a homeowner’s immediate power to upgrade.
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Do Your Research
Researching the history of the house, either from public records, asking neighbors and realtors or looking into the architect, year of construction and materials used, can be eye-opening for the buyer, even before the home inspection.
Buying the worst or cheapest home in the best neighborhood is not for the faint of heart, or those who lack ambition and fear hard work.
The Inspection
Home inspectors are essential when considering a purchase of a neglected or worn-out property. The financial investment of an inspection can save substantial amounts of renovation dollars later. When my family and I were shopping for our first house, we endured and financed three home inspections on houses that we thought were perfect, before settling on the best investment.
My favorite home inspection took place during a summer thunderstorm. The storm sewer on the street needed work, and a surge of water flowed into the basement as the inspector stood in ankle-deep water looking at the foundation. This was not the house we ultimately purchased. As a result of another house’s inspection, we negotiated a better price due to the house requiring a new roof.
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Cosmetic Help vs. Major Reconstruction
Houses that require cosmetic help only — such as wallpaper removal, floor refinishing, even new kitchens or baths and landscaping — represent the easiest category of homes that need work. This type of property allows buyers to transform their new home into their vision. “When a buyer purchases a property in need of total renovation, they can basically create the property from scratch and make it everything they want,” Thum says.
Buyers must be aware of the type and scope of the project they are undertaking in purchasing a fixer-upper. Inexperienced buyers looking for a bargain should be particularly cautious. Serial homeowners, or buyers who are transferred for career opportunities every three to five years, have the advantage over buyers with little experience in the real estate market, as they are aware of pitfalls.
If the house has been damaged by flooding or fire and suffered structural damage, major reconstruction may be required. This category represents the most extreme example of buying the worst home in the best neighborhood. A buyer with a construction background or contacts in the architectural, contracting and renovation communities may be ideally situated to act on a property in need of this kind of attention. This type of property will turn out to be a money pit to anyone who is inexperienced in renovation techniques.
This method of homebuying, renovating and selling has been an effective tool for homeowners to realize their goals, achieve greater wealth and improve their quality of life for a long time. Homebuyers who are careful, do their homework and proceed fearlessly are still benefiting from this tried-and-true approach.
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What to Know About Buying the Worst House in the Best Neighborhood originally appeared on usnews.com
