The Link Between Location and Real Estate Returns

By Ali Safavi

Sure, owning a home sounds great. It’s the American dream! But…should you? Maybe. But, maybe not. If you live in Kansan, it’s probably a good bet. New York, not as much. The more expensive the real estate, the more chance there is loss…big loss.

First off, there are a lot of hidden expenses. Think you know them all? There are more hidden. Shoveling, painting, plumbing, gutters, carpets, crime, the wind…the list goes on. So now you’re not just responsible for the mortgage, but for a never ending stream of fixes.

However, in many areas, it is still cheaper to own than rent. In many towns getting a home for $100,000 or less is commonplace. And the mortgage on that is less than you would pay in rent for the same location. Plus, chances are the home you’re buying is in pretty good shape – not too many hidden costs.

Cities like New York and Los Angeles are a whole different ballgame. There are more million dollar houses in those two cities than any other cities in the country. Just to get a two-bedroom condo in Hollywood will cost you at least $750,000. However, if you’re renting, especially in a rent-controlled building, you can sneak away with paying under $1,000 per month. The goal of owning can always exist, but all cities are not created equal. If you want to invest, go where the money isn’t.