There is a lot of advice out there and a lot of that is dated, some we should update and some we should completely forget. This one tip that a lot of real estate agents and brokers have touted for years probably isn't the best advice. So what is it?
Buy the worst house in the best neighborhood.
Should we be buying the worst house in the best neighborhood? The short answer is no. Everyone once the deal but this common piece of advice is not for everyone. This used to be the mantra that many real estate agents touted making it the back door entry to a ritzy or high established area. You might think you're getting a good deal or a bargain property and on the flip side, getting in good with the neighbors or in a good school district. This might be an incentive to buy a home in an otherwise good neighborhood. But data says that this is not necessarily the way to go.
Zillow has promoted this type of thinking for decades. But recent studies show that the bottom 10% of houses would need to perform better than the more expensive homes in their neighborhood. Faster appreciation would indicate that buying the cheapest house in the best neighborhood is a strategy that pays off but in the long run, it doesn't. Only rarely does the bottom 10% outperformed the top 90% of homes in a certain area.
Read More: The Top 5 Buyer Mistakes
When you compare price your neighborhoods to other neighborhoods in a large metro area, the pricier areas tend to underperform as a whole. Buying the worst house in the best neighborhood can actually backfire on you. The more affluent a neighborhood is, the worse the home in its bottom 10% tend to perform. Hence, the better the neighborhood, the bigger the myth.
So what should you be looking for?
It's just slightly different than this old advice, look to buy the cheapest house in the hottest neighborhood.
Homes in hotter neighborhoods tend to appreciate in value more than those that are simply in an affluent neighborhood. If you do this, you can enjoy both higher home value and a neighborhood with many of the same features that you once had to travel for. [Source]
So, look for the least expensive home in the hottest neighborhood for the best value and the best appreciation.