The Truth About Discount Properties

Posted by Chris Clothier on Sun, Jul 15, 2012

truth about discount propertiesIn the midst of the slowly recovery from the recession and housing crisis, there are some amazing deals to be had. However, not all of these deals are as good as they look on paper. If you are looking at discount properties for personal use or for use as investment properties, be sure that you look closely before you leap.

According to a recent Fiscal Times article by Steve Yoder, not all available, affordable properties are created equal. Indeed, properties located far out beyond the suburbs, in the so-called exurbs, are especially cheap specifically because they are so undesirable. According to Yoder, McMansions located in the exurbs involve extremely long commutes and very high heating and cooling costs, which are just two of the many factors that make these properties hard for homeowners to sell.

At the same time, investment properties located in older, run-down parts of the city or even parts of the city that are struggling through the economy are priced especially low right now, but that does not mean they are good investment deals.  In many urban areas, investors are looking for investment properties that are in the perfect sweet spot.  These properties are located close enough to downtown areas with lots of amenities, yet still far enough away to develop their own identity and draws for renters.  Simply thinking that pricing is the key to good properties is a great way to get in trouble!

You can ask any good real estate investment firm. If you are hoping to make money purchasing and renting out discount properties, then you probably don't want to buy too far out from a city center. Why? According to Yoder, more people want to live closer to the city these days. Indeed, "more Gen-Yíers than Gen-Xíers are willing to live in a smaller space if it means they can walk to work or shops. At the other end of the age spectrum, baby boomers are now selling their houses as they retire and are looking to live nearer urban amenities."  When this group is retiring, many are looking to rent in areas that they want to live and while pricing is so low and renting makes sense, they are taking advantage and looking to be near cities with great amenities and attractions.

The desirability of discount properties close to a major urban area can be viewed through the lens of household size, as well. The article explains:

The average household size continues to drop, with a lower proportion of households raising children now than in the past and the percentage of single people at an all-time high. That's important, since smaller households prefer to live in walkable, higher density places.

Perhaps most importantly to the investor hoping to purchase discount properties through a real estate investment firm, the properties that hold their value the best are those properties that are closest to major urban centers.

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