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Importance of Location Location Location

The cliché “Location, location, location” has been tossed around in the real estate industry quite often.  But there is a reason because of that – Location is the single most important factor that determines the value of a piece of real estate

Consider which you would prefer: a home located close to the center of the tract or a home at the end of the tract that backs up to a busy street?  Most people would choose the house in the center of the tract.  This immediately gives it greater value.

Similarly, would you prefer a home that is closer to many amenities compared to an identical home that isn’t?  In more cases than not, you would choose to be in closer proximity to amenities because it equates to convenience.  This is the reason why real estate in cities has more value than those in rural areas.  It is the reason why real estate in more populous state like California is more valuable than less populous states like Arkansas. 

Just to drill the point home.  Would you prefer to own a home in a community with a thriving diverse economy or one with a failing single-industry economy?  While you may end up paying significant less for real estate in the latter scenario, you probably would not want to live there because there is very slim hopes of that property appreciating (unless the economy there becomes revitalized).  This just highlights the importance of location, location, location!     

All other things being equal, a home in a desirable location is more valuable than an identical or similar home in a less desirable location.  Location becomes an immensely important attribute especially if you’re considering selling your property or merely buying real estate strictly for investment purposes.      

Now that it has been established that not all locations are created equal, and anyone who has moved around in their lives can tell you that.  So what makes a location good?  

  1. Demand – if the real estate market in that location is in high demand, it will increase the value of properties there.
  2. Schools – Studies have shown that real estate in close proximity to schools has greater value than those that are farther away.    
  3. Urban Areas – this is inextricably linked to demand, since urban areas are more populous, there will be more competition for real estate areas in urban areas compared to suburban and rural areas. 
  4. Quality of Neighborhood – these include how good municipal services are, how safe the area is, and what zoning area surrounds the neighborhood.  For example, a house in the middle of a residential area will have more value than a house on the fringe of the area close to industrial use. 
  5. Economic Vitality – obviously an economically healthy location is more desirable than one that is stagnant.  An indicator of this is whether many investment into that locations (i.e. presence of companies). 
  6. Transportation Outlets – while it is not desirable to have a home right by a major highway or airport, it is very desirable to be relatively close to major transportation outlets, mainly major highways.  This probably holds more true for commercial rather than residential real estate.