Buying A Home? Avoid These Neighborhood Features to Ensure Maximum Appreciation

negative-factors-affecting-property-valuesThe beauty of the Outer Banks is like no other place in the world.  If you are looking to buy a home on the Outer Banks; as a rental investment, retirement home or permanent home; then you need to look beyond the sea and sound views to maximize the long term value of your investment.

Realtor.com released a study calculating the “drag” factor for of various neighborhood “negative” features.  For each factor, they compared the median home price of the ZIP codes with that factor with the median price for all homes in the same county. The items on the list are correlated to a lower price but not necessarily the cause of the lower price.  Kinda like the chicken and the egg thing.  Some items on the list may surprise you. 

Hospital – Drag factor: 3.2%

I remember when there was no hospital on the Outer Banks.  Now, that was a drag.  I’m sure many older folks decided to retire elsewhere due to the lack of health care facilities.  It may surprise you that living too near to a hospital can reduce the price you can sell by 3%.  I suppose the traffic and noise from ambulances or helicopter is the primary reason.  The key consideration is to be located close enough to medical facilities to get help when needed but far enough away not to be disturbed by any negative externalities. 

Shooting range – Drag factor: 3.7%

It is not surprising that locations near a shooting range would be a drag on property values.  This would apply to outdoor shooting ranges where the sound of gunfire would be disturbing to neighbors.  Another factor for outdoor ranges is environmental concerns with the potential of lead from spent shells leaching into the soil and water.  A closed gun club in San Francisco triggered $22 million in cleanup fees last year.

Power plant – Drag factor: 5.3%

I’m surprised the drag factor for a power plant is not higher.  Even though the perception of the dangers are probably higher than the actual danger.  Of course, it also depends on the type of power generated.  Nuclear compared to solar or wind would likely not be the same. 

One item not included in the Realtor study, was high tension electrical wires.  The issue dates back to a 1979 study which associated increased risk of childhood leukemia with residential proximity to power lines.  The issue has been studied frequently ever since.  The continued negative press, inconclusive results is enough to raise doubt in the public’s mind and would create a similar or greater drag on values.  Add to that, the unsightly nature of the lines and it becomes a factor to avoid with real estate investments.

According to Gary Zeman, ScD, CHP “…there are no known health risks that have been conclusively demonstrated to be caused by living near high-voltage power lines. But science is unable to prove a negative, including whether low-level EMFs are completely risk free. Most scientists believe that exposure to the low-level EMFs near power lines is safe, but some scientists continue research to look for possible health risks associated with these fields. If there are any risks such as cancer associated with living near power lines, then it is clear that those risks are small.”   

Funeral home – Drag factor: 6.5%

I get the creepy or ick factor.  Besides, who want to be reminded of one’s mortality.  Some other concerns are the traffic from funeral attendees and fear that smoke from cremation is toxic.  A fear does not have to be rational for a stigma to exist.

Cemetery – Drag factor: 12.3%

I find it somewhat surprising that the drag factor is so large for a cemetery.  After all, your “neighbors” are very quiet.  Similar to a funeral home, superstition and irrational fear have created a stigma. 

Homeless shelter – Drag factor: 12.7%

It is not surprising that homeless shelters have such a high drag factor.  After all, the perception is that unwanted misfits will bring more police and emergency calls into ones quiet neighborhood.  While a drug rehab center was not a part of the Realtors study, I would guess that the drag factor could be even larger.

High concentration of renters – Drag factor: 13.8%

For the major metropolitan areas covered by the Realtors study, the drag factor when there is a high concentration of renters was nearly 14%.  This would include areas where there is a large cluster of apartment buildings with the associated noise, congestion, traffic.  While the Outer Banks has a significant number of vacation rental homes, applying this factor to the Outer Banks would be a mistake of apples to oranges.

Strip club – The drag: 14.7%

No surprise that a strip club and the associated vices has an almost 15% drag on values.  The loud music, alcohol and the reputation of the clientele would certainly drive the perception and perhaps the reality that a strip club would not make for a good neighbor.

Bad school – The drag: 22.2%

Even if you do not have children in school, buying property in a “bad” school district is not a good idea.  On the other hand, buying in a top-performing school district is always a plus for your property value.

A common element on the list above is potential pollution – in the form of noise.  So, one can infer that living near an airport or train station would also incur a drag on values.  Similarly, pollution in any form, while not specifically included in the Realtors study, would also drag down values. 

The rule of thumb to buy the worst house in the best neighborhood applies and would likely avoid many of the scenarios above.  Also, keep in mind, things change.  Since real estate is a longer term investment knowing what likely changes may be coming in or near the location for your intended purchase can increase your potential profit.  For example, if you know the funeral home is likely to close after your purchase but before you resell an investment then you could boost the profit on the sale accordingly.  Evaluating future development in the area can reveal opportunities for greater future appreciation or depreciation depending on the nature of the development. 

Call the local experts at Eillu to help you maximize your investment on the Outer Banks.

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