External Location Factors: Could These Buyer Deterrents Hurt Your Investments?
I lost a contract yesterday over something I consider absolutely silly. We are just finishing up a new construction property and had listed the property for sale the day before. We figured we would get a lot of traffic on this particular property because it’s located in a hot area with a really good school system. The next day, we get a full price offer — but with a very strange question attached to the offer: “Is this property built on a cemetery?”
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For whatever reason, Google Maps decided that it would display the location of the cemetery right on top of the house we had just built. In reality, the cemetery is about 25 yards away, attached to an old church and clearly not on the same property as our house. However, for this buyer (and probably other buyers as well), the thought of living next door to a cemetery is just too much to handle. The agent contacted us yesterday and informed us that after thinking about it, they were going to terminate the contract.
Interestingly, I had never even considered the cemetery as a potential deterrent or impediment to selling this property. However, there is a apparently a segment of the population that we’ve now lost as potential buyers because of our proximity to this cemetery.
Unfortunately, I have another new construction property in a different neighborhood with a similar deterrent. This time, however, it’s the proximity to a landfill that’s hurting sales. When I bought the lots, I could see the landfill in the distance, but didn’t think much of it. However, after having built two houses in this neighborhood, we’ve received a good bit of feedback from potential buyers that they just can’t bring themselves to live that close to a landfill.
Ultimately, I know the cemetery house and the remaining landfill house will sell, but not without a little extra holding cost and potentially less margin than anticipated. As an investor, it’s critically important to understand the external factors around a particular property that can hurt (or help) the future sale of that property.
External Location Factors That Could Hurt Your Investment
Here are just a handful of examples that I think can have a negative effect on sales price and potential buyers:
- Property located on a busy road (double yellow, or divided highway)
- Property that backs up to a shopping center
- Property that backs up to a high crime housing development
- Property in close proximity to a busy road or freeway (noise)
- Property in close proximity to industrial sites
- Property near areas with interesting smells (pastures, chicken houses, water treatment plants, paper mills, stagnant water, landfills, etc.)
- Property next to abandoned or dilapidated properties
- Property near train tracks
- Property located in flood zones
While some of these are obvious deterrents, it’s still important to remember their potential effect on your selling price when considering a property in one of these areas. It’s not to say that you can’t buy a property in an area with a negative external factor; it’s that you need to take it into account when you evaluate the deal and consider your sales price and holding time. Doing so can potentially save you from making a bad investment or at the very least, set your expectations appropriately regarding potential profit.
What about you? What kinds of external factors have you found that have hurt the sale of one of your properties?
Share your stories and tips below!