Buy in “good” locations to hedge price drops..
1 November 2006In the last week, I’ve been real interested in absorbing the latest real estate news from local news papers, real estate bubble blogs, business websites, the personal investor magazine (just came out), and Arizona paid subscriptions of market analyses.
One observation I’ve made is that you need to be very careful interpreting market “averages”. The bottomline, real estate markets are local, not national, and prices can/are strong in some cities, but will be weak in others. One source said, “If you have your left foot in freezing water and the right one in boiling water, on average are you comfortable? ” Of course not!
Everybody and their grandmother know that the real estate market is equalizing. How effected will you be? Well, if you live in a great area like carefree in Phoenix, Arizona you may not go down at all. However, if you have a property in a neighborhood that is less than desirable, expect declines.
I have a friend that told me a true story the other day. She has a friend in Tucson that is currently under contract with a builder. The builder is selling the same house for 40k less than she bought several months ago. That’s a 17% percent price reduction in my town! Ouch! However, it is one of those cookie cutter homes by the airport. More specifically, the ones in-between a prison and a land fill (no, those aren’t mountain views!) . And its right under the flight path of the airport. At first I was shocked that this is happening in my town (and I have my own new house under contract), however, I have to remind myself that the area I bought is in a much better neighborhood on the Northwest side. Will my house drop in price? Probably, but I should not expect the same trends as the southside. I’m glad I did a good job negotiating price!
Anyway, the punch line of this post is to: “Buy in “good” locations to hedge price drops.”
I would be concentrating my marketing efforts in better neighborhoods. Another thing I have found out is, your life as a landlord is much better if you have quality tenants. And to have quality tenants, your properties need to be in good/great locations!
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