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The Inextricable Link Between Property Value and Location

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Posted by Pete Evering on July 7, 2022
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The Inextricable Link Between Property Value and Location

You’ve heard it since day one — location, location, location. We all know that location matters in real estate. However, simply being aware of this mantra isn’t enough to help someone make an informed investment decision. Truly understanding the connection between property value and location is the key to a smart real estate purchase. And if not kept in the forefront of your mind, it can be easy to undervalue when you are admiring a beautiful house or property that could be yours. But, even if it is seemingly perfect in every way, any property could be a mistake if it’s not in the right place. So, what should really be considered about the location of a property, and why is it so important?

The reason that the age-old real estate mantra became so popular is because location is the only non-controllable factor about any given property. The land that you buy is yours to tamper with — the house or building on it can be reconstructed, remodeled, and upgraded at any time. The location, however, can never be changed, so it’s the one factor out of your control as soon as you buy a property. This is why the largest driving force behind property value is always location. You can see this concept in action by comparing property values within one city or zip code and properties in different areas; there will always be more price fluctuation between real estate in different places — but that seems obvious, right?

It’s important to consider a property’s location on every level, from the state, to the city, to the neighborhood, or even the block, within the city. The immediate surroundings of a property as well as the local market trends will impact the property’s value, so take everything into consideration. It’s also important to keep in mind that the environment around a property can, and will, change. So you not only should evaluate the current surroundings, but the potential changes that could take place in the area in the next 5, 10, or even 20 years.

What Makes a Good Location?

So, what should you look for in a location? The perfect location looks different depending on your needs, preferences, and the type of property you’re looking at. Here are some important factors that can indicate the value of a property’s location:

1. Neighborhood

If you’re looking at residential properties, especially single-family homes, the surrounding neighborhood and suburban area makes a huge difference in the property value. You should thoroughly investigate the local area and focus on three main factors: amenities, accessibility, and appearance.

Nearby amenities are a strong selling point for home buyers; they’re buying a place to live, not just a place to sleep. Local restaurants, commercial shops, and grocery stores can all impact the value of a single house. Consider the amenities that are specifically important to your target audience. If you might sell to families, then evaluate the local school district ratings.

Accessibility means transit routes and public transportation options for connecting to nearby cities or downtown areas. Daily commutes and ease of access to amenities can influence the value in a property — time is money, so more time spent traveling means a house is worth less.

Additionally, the appearance of a neighborhood influences a home’s value, regardless of the appearance of the house itself. People typically want to be surrounded by similarly valued homes, high safety ratings, and like-minded neighbors. The amount of greenery and natural space in a neighborhood can influence home value as well.

2. Centrality

The location of a property relative to the city as a whole is indicative of its value. As land is a finite commodity, cities develop outward as they grow. Areas that are highly developed with little room to expand will see higher property values than new or underdeveloped areas. It’s generally safer to invest in a highly developed area, because what you see is what you get. Areas on the city outskirts often have larger portions of undeveloped land that could see significant or unexpected change in the future. You can always try to predict how an area will develop, but that makes for a riskier investment.

3. Lot Location

Take a look at the immediate surroundings and neighboring lots of the property. Close proximity to a highway or busy road may decrease property value, whereas a nearby park, lake, or landscape view will make the property worth much more. Evaluate the properties that directly surround your prospect; well-kept houses will increase value, rather than vacant and unkempt homes or commercial buildings like gas stations and stores. Factors like street parking, noise, and traffic can all influence the value of a property lot.

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