I believe that the most important rule of residential real estate acquisition is to never settle. Buy properties you absolutely love and cherish living in, cause chances are the next buyer will feel the same. People are willing to pay top dollar for what they desire, and that’s not a broke down mess with potential.
When I first began acquiring real estate sixteen years ago, the prevailing wisdom was ‘buy the worst house on the best street”. When it comes to residential real estate, I discarded that strategy and chose to do the opposite. I bought the best house on a street with lots of potential or in a neighborhood a little out of the way. Why? Cause I’m not handy and I didn’t want to live in a broke down house with problems at every turn. I tend to drive nice cars and need the extra phone time, so I don’t mind an extra fifteen or thirty minutes in my car. I felt it was worth it to get the home I really wanted to live in. I watch people bid up these really shitty houses in the “right neighborhood” and I just shake my head. They might come out ahead in the end, but they have to live in that shitty house for years first.
I wanted to live in a beautiful home with no problems. To accomplish this, I was willing to live in a neighborhood a little further away or in one with potential. I’m against over paying for residential real estate. Call me crazy but do you really want to become Mr. or Mrs. Repair person with all your free time? I’ve seen couples do this, and when I stop by for a visit one of the spouses always has a look of terror in their eyes, like they made the biggest mistake of their lives. Also, kids don’t even play in the neighborhood any more. I wish they did, but it’s true.That is a thing of the past, so why does it really matter if you are in the best neighborhood anymore unless it’s a school choice or safety decision. I’m buying the best house, the one I love, in a “good enough” neighborhood.
These days I can afford to buy the best house on the best street, but I choose to keep using this same strategy as it has never let me down. Every residential property Lori and I have bought (7 in 16 years) has appreciated by several hundred thousand within just a couple of years. That’s incentive to move a LOT, which we have, all the way to the bank. We are residential real estate speculators for sure. Most couples focus on good neighborhoods, good schools and so forth. And they are willing to overpay egregiously to get these things. They are willing to live in houses they don’t even like to have these things. That’s one way to go, but I can tell you this truth. I have never regretted living in any of our beautiful homes or the neighborhoods they were in.
Pictured below is a home we got the pleasure of living in for four years recently. It was a fifty-five minute drive to work in Redwood City, but it was so worth it. Most of our friends leveraged everything they had to live “nearer to work in the right neighborhood”, paying over $2 million dollars for fifty year old houses with constant repair problems and such little living space they had to use their garages for all kinds of creative solutions. You could have built these shitholes for less than $300k if you knew how to build. When I see these overpriced houses I think a person would be way better off investing in crypto and continuing to rent.
On the “too long drive” to visit (I mean judge) our house for the first time, to see where the Lochtefeld’s made a mistake moving to, suburbanites would probably make jokes about how we lived in the sticks, in a city known for garlic. But, when they arrived and saw the property for the first time, their jaws would drop and all decorum would go out the window as they quickly asked, “Wait, how much did you pay for this place?” realizing we paid roughly the same amount as they did for the house they secretly hated living in. In fact, we saved so much money buying in a perceived “undesirable zip code” that we could afford to buy a Ferrari and park it in our six-car garage. How you like them apples snobby suburbanite?
I felt like I lived in luxury in Tuscany for four years in a dream like state. I had more friends visit than when we lived in a desired zip code. They called staying at our house a vacation. We absolutely loved living there. Our guests loved their excursions in the Ferrari, all made possible by this unconventional strategy.
We bought the home for $3.1 (plus another $200k for a robust wine making business and tons of equipment) and sold it for $3.75. The wine business spit off another $250k in profits, taking our exit to $4 mm. If we bought this property thirty minutes closer to work, you would have to add a zero to it’s price and we could not have afforded it.
When we sold, we took with us our amazing memories, 6000 bottles of good wine and enough profit to flip it into a dream home in Hawaii and a short term vacation rental on a beach in the South. We also sold the Ferrari for near what we bought it for. Not too shabby for a four year investment.
Out of a commitment to decorum, I won’t compare the results of the folks who are snobby about their zip codes. I’m sure they are working on a new repair job at this very moment. 😂
And, if you’re a parent thinking the surbonite play is all about sacrificing for your kids. Ask me what I saw our neighbors kids doing with their free time living in an undesirable zip code? They played outside! They weren’t inside playing video games. Because they had exciting yards to play on. Actual land! They spent their weekends riding horses, riding ATV’s, waiving at crossing deer, or playing hoops on their full court basketball sport courts. What is growing up, getting a chance to play outside worth?
Buy the house you really want to live in. Quit overpaying for zip codes. Fuck conventional wisdom. I hope you’ve enjoyed this and learned a different perspective on real estate.
