How much the surrounding neighborhood can affect a property's value over time?

Question

Has anyone else noticed how much the surrounding neighborhood can affect a property's value over time?

I'm curious how other investors handle situations where an area starts declining—more vacant homes, neglected properties, or increasing crime. Do you hold and wait for things to improve, invest in upgrades anyway, or decide it's time to sell?

I'd love to hear some real-world experiences.

Joseph Cacciapaglia · Answer

The neighborhood has a huge impact on any property's value. This is why I always try to either buy in long established neighborhoods or in those that show signs of improving. If I'm buying a property that I'm planning to improve, the neighborhood would ideally have at least a couple of other renovations happening already. I also only invest in markets with strong population growth, which helps prevent decline.

So far this has worked for me, and I haven't been stuck with a property in a declining neighborhood. However, if/when that time comes, I'll be very quick to sell and move on. Unless you see an opportunity to buy up the neglected properties, there isn't a lot you can do to counteract the decline on your own.

Joseph Cacciapaglia · Answer

In many markets, like where I am in Texas, the population has more than doubled in the last 50 years, so "most" neighborhoods here have not been around nearly that long. Many people wrongly assume that a subdivision full of brand new homes will remain in good condition, but we sometimes see a sharp decline after only a few years. I'd rather be in a neighborhood that has remained strong for 20+ years than invest in one that looks good today, but was only built 5 years ago.

Even in markets with relatively stagnant or declining populations (like many parts of Ohio) neighborhood conditions change over time. If the neighborhood had a recent revival, but isn't still on the upswing, I'd rather not invest there. I like to find an area that has been strong for the long term, or one that's currently improving.

Bruce Woodruff · Answer

Heck yes, the neighborhood is crucial to property value. I will buy in an area that I think is getting ready to 'gentrify'. That is where the big money is made IMHO. So of course it works in reverse too.....

I've not experienced a declining neighborhood, but if I felt it coming and saw the signs that I look for, yes, I would sell and get out....

How much the surrounding neighborhood can affect a property's value over time?

How much the surrounding neighborhood can affect a property's value over time?

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