Right up there with “Location, Location, Location,” “Buying the worst house on the best street,” is possibly the most used saying in property. Where did this idea come from and what does it mean?
There’s only so much in life you can control. If you buy an “as is, where is,” ‘fixer-upper’ or even just a very humble home, you can have an impact on that property, but not on its surroundings.
Let’s say you buy a fantastic property in a rough neighbourhood. There may be some renovations or alterations you can make, but overall the house is pretty good. What happens when you go to sell it? So often people going through the open home will judge your property based on the suburb and surrounding neighbours.
Tip: Investing in rental properties? Check the number of building consents issued
Is the neighbourhood characterised by overgrown lawns and unmaintained properties? Is the property unnervingly close to a busy commercial area, electrical pylons or substation, or directly underneath a flight path? Potential buyers probably won’t want to live in or near that environment, and there’s very little you can do about it.
When it comes to choosing an investment property, it is important to consider who your target audience is. If you buy the best house in the worst street and spend $25,000 overhauling the kitchen and bathroom, you’re unlikely to gain much of an increase to the rental return, simply because the market won’t be able to support it.
Conversely, what happens if you buy the ‘worst house in the best street’? There are probably more opportunities for you to add value. By adding an ensuite or a separate toilet, opening up a living area, adding insulation or introducing a deck and landscaping can increase the value and rental return of that property. By that logic, your property shouldn’t be the worst house anymore. When you go to sell it and reap the return on your investment, the value of the surrounding properties in that neighbourhood should help you get as close to your asking price as possible.
Food for thought: Do-up fetches similar price to done-up
The people looking to buy or rent in a specific area generally want to be in that school zone, be closer to an area’s amenities, or be nearer to work; and they are willing to pay for that privilege. They see the value in a whirlpool bath, heated flooring, six burner stove top and a large open plan entertainment area and are looking for those features to “Keep up with the Jones’s.”
Where are you going to get the biggest return on your investment? Some people might exaggerate this advice, or promote buying the worst house on the best street as a sure-fire investment. It’s still possible to have too much of a good thing, and nothing is certain the property market. As with any investment, seek advice and do due diligence before you commit, and take any cliché with a grain of salt.
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