Home Real Estate Breaking Down the “Location, Location, Location” Principle

Breaking Down the “Location, Location, Location” Principle

by DIGITAL TIMES
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When you ask what the most important factor is when buying a piece of real estate, whether it is a primary residence, a second home, or an investment property, their response will often be the old adage: “location, location, location.” It’s a well-known, trusted rule that emphasizes the importance of choosing the right location when buying a property. A property in a good location will usually come with a higher property value, higher appreciation rate, and will offer a better quality of life.

Who Said It First?

When putting this article together, I was hoping to go down the rabbit hole and uncover an interesting backstory on the origin of this famous buying tip, but I was surprised to learn that nobody knows for sure where the phrase originally came from.

Some journalists have reported that Lord Harold Samuel, a real estate tycoon from Britain, was the one to first use the phrase. But that was debunked by The New York Times when the newspaper found the phrase first used in a real estate classified ad in the Chicago Tribune in 1926.

Regardless of the origin of the expression, it has been and always will be one of the most important considerations when buying property.

Factors to Consider

There are a handful of factors to consider when it comes to picking a property in the right location. These include:

  • Proximity to work, schools, friends, and family: How close is the property to your office, your kids’ school, or other destinations you plan to visit often?
  • Safety: You should research the safety of the neighborhood by using a tool like NeighborhoodScout to learn more about crime rates in the area.
  • Amenities: Consider proximity to amenities like grocery stores, gyms, barber shops, hair salons, shopping, healthcare, parks, and restaurants.
  • Transportation: Accessibility of public transportation, freeways, and proximity to the airport are other important factors.
  • Future development: Are there developers in your area working on any big projects that could impact this area’s desirability in the future?

The House Itself

Once you know you have picked the right submarket, there are some other location factors to consider after you have honed in on an opportunity.

  • Neighborhood: You need to understand the neighborhood that you are buying in. Look at the age of the homes, whether the community is governed by an HOA, if it is a gated community, etc.
  • Negative external factors: Think about whether there are any negative external factors that could impact the house that you are thinking about buying. Examples include if there is a nearby commercial building, traffic noise, or if the home is in the flight path of a nearby airport.
  • Sun exposure: Sun exposure should be a big consideration, especially when buying in desert climates. The home’s sun exposure will impact utility bills and natural light within the home. In a desert climate like where I live, a north/south sun exposure home is the most desirable.
  • Neighbors: Do the neighbors surrounding the home you are thinking about buying have pride of ownership? If the neighbors have a bunch of clutter in their driveway or their lawns are not well-kept, that will impact the desirability of your home.

The Location’s Significance

The significance of a property’s location can’t be understated or ignored. Just some of the ways it will impact you as a buyer include:

  • Property value: The location of a property has a major impact on its value. A house in a sought-after neighborhood, close to desirable amenities, and in a good school district will generally command a higher price than a similar property in a less desirable area.
  • Investment potential: When you invest in a property as a flip or a rental, a great location can lead to significant appreciation in your property value over time.  
  • Quality of life: Your surroundings have a huge impact on your quality of life. Picking a property in a great location can ensure that your life (or your tenants’) will be enhanced due to these conveniences and amenities. 
  • Resale potential: If you plan to hold your property for the long term, picking the right location to begin with will prove to be valuable. A property in a strong location will be more desirable to buyers while increasing the likelihood of your home selling faster and for more money.

The Bottom Line

This old “location, location, location” saying is a timeless, invaluable rule that we all need to be mindful of when buying real estate. There have been a few times in my real estate investing journey where I have ignored this principle and bought a property in a location that did not check all the boxes because I was eager to do another deal. In both instances, I faced challenges with achieving my investment objectives because I ignored this cardinal rule.

How much emphasis do you put on location when looking at an investment opportunity?

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

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