Small homes in big home neighborhoods.
Time after time I try to tell people it is always better to buy the smaller least expensive home in a neighborhood of large expensive homes. Vice versa is also true. Never buy the largest most expensive home in a small home neighborhood. I know what you all are thinking….why? Well it is simple. The surrounding homes can either drag up the price of your home or drop the price of your home but not for the reasons you may think. The reason is simple math. For example say we have two homes. The first home is a large home, let’s say 5,000 square feet. The second home is a smaller home of 2,000 square feet. They both sit on properties worth $30,000 and are located in the same neighborhood. Each home is very nice and built at a cost of $100 per square foot. Now its math time…and I rarely do math.
Home #1 Home#2
5,000 S.F. x $100 = $500,000 2,000 S.F. x $100 = $200,000
$500,000 + $30,000 = $530,000 $200,000 + $30,000 = $230,000 (Home plus property)
$530,000/5,000 S.F. = $106 $230,000/2,000 S.F. = $115
When you go to sell home #1 it will only be worth $106 per S.F. When you go to sell home #2 in the same neighborhood it will be worth $115 per S.F. That is why it is always wise to buy a smaller home in a neighborhood of larger homes and to never buy a larger home in a neighborhood of smaller homes.