4 Factors That Determine a Good Location

A good location can mean different things to different people, of course, but there are also objective factors that determine a home’s value. Depending on your personal needs and preferences, you may not be able to buy a home with all of these factors. And that’s OK. After all, a home is much more than just an investment.

When you are home-hunting, pay attention to nearby amenities. Buyers usually want convenient grocery stores, dry cleaners, and entertainment. Consider trains, roads, and public transportation for transportation, such as bus stops, subway stations, and public bike-share locations. Proximity to amenities will typically improve a home’s value.

However, the next time you’re shopping for a new property, keep five factors in mind:

1. Centrality

Where you choose to live in a city or town will undoubtedly affect how much you pay for your home. Land is a finite commodity, so cities that are highly developed and don’t have much room for additional growth tend to have higher prices than cities with too much room to expand. Some of these communities have many uninhabited homes and areas that have fallen into disrepair.

When sprawling cities experience a population exodus, it’s the outlying areas that tend to suffer the most severe declines in property value. This is part of how location impacts the fundamental economic tenet of supply and demand.

Research whether anything is going to substantially change the area, such as any planned developments or construction or new housing starts. A location may seem ideal only to undergo sweeping changes in the near future—of course, some changes could be positive ones that improve an area’s desirability.

  • Neighborhood

The neighborhoods that appeal to you will essentially be a matter of personal choice. However, a truly great neighborhood will have a few critical factors in common: accessibility, appearance, and amenities. Your neighborhood may also dictate the size of the lot on which your house is built.

In terms of accessibility, you should look for a neighborhood near a city’s major transit routes, which has more than one entry point. Commuting to and from work is a big part of many people’s days, so a house with easy access to roads and public transportation will be more desirable than one tucked away and can only be accessed by one route. Shady trees, quality landscaping, and nearby parks or community spaces tend to be desirable.

You can also judge the neighborhood’s popularity based on how long homes in that area stay on the market; if turnover is quick, you’re not the only one who thinks this is a desirable place to live.

A great neighborhood should also include essential amenities such as grocery stores, shops, and restaurants. Most people like to frequent places that are convenient. Research the local public schools even if you don’t have kids or plan to have them. A reputable public school district can boost an area’s home values and figure into the profit you can realize when you want to sell. Also, you’ll want to attract the greatest number of potential buyers. Many buyers target neighborhoods with strong public schools.

3. Development

It is not just the present amenities that matter, but future ones as well. Plans for new schools, hospitals, public transportation, and other civic infrastructure can dramatically improve property values in the area.

Commercial development can also improve property values. When you’re shopping for a home, try to find out whether any new public, commercial, or residential developments are planned and consider how these additions might affect the desirability of the surrounding areas.

A neighborhood that has a low crime rate and is an inviting and safe place to be outdoors and socialize with neighbors is the type of place where most people want to live.

4. The Home You Purchase

There’s one aspect of house hunting that tends to surprise people. Let’s say you’ve narrowed your choices to two homes that stand side by side in a great neighborhood. One needs repairs and updates but has a huge lot. The other is in tip-top shape but sits on a lot half the size of the fixer-upper. The prices of the two homes are similar. Which do you choose? In most cases, the house in need of repairs is the better investment.

The reason: your house is a depreciating asset. On the other hand, the lot will maintain its value (or likely appreciate) relative to the house. If you bulldozed both houses, the larger lot would sell for more. So, if you can, choose a bigger, better-shaped, or better-situated lot over a nicer house. A less attractive house can always be updated, added on to, or replaced altogether, but the lot can’t change.

The Bottom Line

Location isn’t entirely subjective—in fact, it’s based on a fairly static set of criteria. When you set out to shop for a new home, make sure the neighborhood isn’t just desirable to you but has objective qualities—such as attractive amenities, good schools—that will help ensure your investment appreciates in value over time.

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