Look at Comps
In today's market, potential buyers - having weathered the real estate bust and the recession - should take one look at the biggest, best house on the block and say to themselves: "No way."
From an investment standpoint, owning the biggest house on the block has never been a good strategy. Home values in a neighborhood are intertwined because comps are so important in determining how to price - and what to pay for - a home. So the value of your McMansion will be limited if it's surrounded by homes of considerably lesser value.
For similar reasons, you should avoid buying a house on a block with a parking garage, one full of apartment buildings,or rented homes. It is thought that renters don't care for the properties where they live, as are absentee property owners. Their indifference can only hurt the value of nearby homes.
Buy the worst house on the block best instead
A better strategy, no matter what kind of market, is to buy the worst house on the best block. You can always improve the property and therefore increase its value. And because it's on a great block, improvements you make to the home will be practically guaranteed to give you a top return on your investment.
Just don't get carried away and turn the worst house on the block into the biggest and most expensive one.
- Why Your First Offer is Your Always Best Offer
- Advice for Buyers Bidding on Home With Multiple Offers
- Why Sellers Shouldn't Be Present at Open Houses
Brendon DeSimone is a Realtor® and real estate expert based in San Francisco and New York. He is a contributor to Zillow Blog, has collaborated on multiple real estate books and is often quoted by major media outlets. Follow Brendon on Twitter.
Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.