Which is a better investment? An incredibly beautiful home in a bad area or a house the needs a lot of work in

Question

Pro’s and Cons of each:

Beautiful home is in a historic district, within minutes of my new job and is ready to move in. Crime is high- within blocks of the house. My family is very concerned about my choice which may impact how often they visit me (I really like my family). With no work required and just maintain it in good condition I can sell it and move when I finish my college studies in 2 years and if I no decide to change my job again. I would own this by myself with a mortgage (in addition to maintaining my other home).

House in ill repair; it needs to be gutted and completely remodeled (which my family and I have done before in out last home with very good results). Beautiful homes with manicured lawns surrounding it that are worth more than I will ever afford, but this house with its large half acre lot is low because someone must buy it out of pocket. It is about a half hour (during heavy traffic) to my new job. I would need either to gut this house and make many repairs or (the township) wants it demolished and a new home built there but will allow me to place a temporary nice mobile home there to live-in in the mean time- my family feels this is the better thing to do and will go in with me on the cost and ownership and try to sell it within 2 years.


I moved here for a new job and I am in college taking a full semester study load. I will be living in the house alone, but I have family that lives in the area.

Answer 1

The problems going to be selling the house in the rough hood. Although it might serve your purposes now you most likely will not make money in 2 years. I don't foresee any major market increases in the next 2 years so I'm thinking you will lose money. Let's think about it...in 2 years you will have paid down maybe $2000 off the principal, so your payoff wont be much different, you will have 2 years of wear and tear, have to pay 6% Ccommission to sell the house, give back probably a years RE Taxes if your State pays taxes a year in the rears, closing cost of about $2000.00, etc. So you will end up owing more then the house will be worth is my guess. Now maybe I'm wrong and you live in a hot area where values are increasing nicely. Yeah right..we would all be moving there! So for investment reasons buying the lesser home in the better neighborhood is the answer. It's never good to own the highest value house in the neighborhood. Might be good for the ego but bad for the pocketbook! (We have technical terms for this, but I will spare you those gorey details) Surely there has to be something in between these 2! Find a good Realtor that will go knock on the neighbors doors and find you another house to buy!

Good luck!
Vicki Watzlawick
Broker Owner
Exit Platinum Realty
w3ww.vickisdreamhomes.com

Answer 2

That depends on the changing demographics in the "bad" area. For instance look at the relative price increase in homes in the area, are they going up? Are their strong community groups in the "bad" area that are pushing for reforms? Do some research and see if any upward trends are available in the "bad" area. If signs of upward movement exist then it may be a great investment. Capitol Hill in Washington DC was run down not even 15 years ago in many parts, and now the market has gone through the roof. On the other hand if theres no impetus for this place to get better (cough , detroit , cough) then run away as fast as you can and get the fixer upper in the "nice" area. Remember sometimes its more about the land under your feet than the roof over your head when it comes to home prices. If you cant walk out your front door without getting mugged, and nobody ever visits you who cares if your house is awesome!

Answer 3

You don't say where you're located, but selling anything - even in the BEST neighborhoods in my city is almost impossible now, nevermind the fixer-uppers and homes in crappo areas. You'll have to look at the home sales in your area and see what, if anything, is selling and for how much and what the demand for rental housing is. Do research, and make an informed decision. Hanging onto it and renting it out to keep a flow of income isn't a bad option, but do yourself and your neighbors a favor and screen the tenants WELL - you don't want your place getting trashed , especially since it's already been refurbed once. Don't be tempted to buy something else until this one gets sold unless you KNOW you can handle 2 mortgage payments just in case your tenants flake out or your sale falls through.

Answer 4

The three most important rules in real estate. Location, Location, Location.

I doubt the township would allow a mobile home on the lot if it is nice, I would check that again because that is unusual. If you want to live in that area after college or keep it as an investment, I would buy the old home and then sell it to a rehab company when your done.

Answer 5

You certainly do have a difficult decision. It depends whether you want to spend the time fixing it up. Conventional wisdom says that buying a bad house in a good neighborhood and fixing it up will be a better investment.

Answer 6

If you are only going to spend 2 years why even buy property? Just rent something and I would say close to the school you are attending. You can always buy something later.

Answer 7

Take the nice area. I'd gut it and resell. YOU DO NOT want to live in a bad area. Trust me.

Answer 8

location, location, location

any real estate agent worth his salt will tell you that location is preferable to other reasons when considering resale.

Answer 9

location,location location