Thursday, November 15, 2012

Myths of Real Estate, So many

We've all heard it. So many times. Especially on the news: "Location, location, location!" It's to the point where even Realtors, who should and probably do know better, are using it in their advertising when a property's main selling feature is its location. But like most things in life, it's just not that simple. There is a lot more to a property's value than its location. In Nanaimo, for example, it's not unusual to see a home next to another that is 100k higher or lower.

This "Location, location, location." quote is originally attributed to a fellow by the name of William Dillard. This was his response to the question of how he made his fortune in what was recently considered the third largest chain of department stores in the U.S. He started with $3,000 of profit from selling his first location and passed away in 2002 with a fortune of $8.7 billion. Should we take what this man has to say about business seriously? Absolutely!

Except... it's not real estate investing advice per se. If you're opening a retail business of some kind, "Location, location location." definitely is a huge concern, but when buying a home or most kinds of investment properties, this is just one of various very important factors.

Sure, you can buy a place as a holding property because the location is such that the density is increasing in the area, there is clearly some gentrification going on or because it's the last place in the area with a really good view. But there are other factors that are at least as important. How big is the property inside and out? How many beds and baths does it have? How old is it? Will it need a lot of expensive things fixed/maintained over the next few years? What if you find out that there is an old buried oil tank on the property, that it has a lot of faulty wiring, or extensive mould problems throughout? What if it had a grow up in it until just last month?

Now here's the kicker, what if you can barely afford the property and you find out that any of the serious issues above are true? Are you still going to buy the property because it has a great location? That's flirting with bankruptcy in my eyes.

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