I have always been told by respected investors that you make your money when you Close the first time on the property- you buy with equity in the property.
I have changed my opinion within major sections of Cincinnati this last year. I believe within the Sellers market regions of Cincinnati, you buy equity in the neighborhood. Equity in a neighborhood is the upward mobility of your immediate area- your neighbors.
There are rules to this theory and I believe they are bound by these three rules: the market search of the neighborhood, how close the subject property is to the core of the neighborhood and does it have the housing features of the typical house in that neighborhood.
First, the market search is critical. People are not creative when purchasing a house, if they want Hyde Park- they don’t want Oakley, Evanston or Norwood. Some areas of Cincinnati’s MLS simply don’t get searched and their values do suffer because agents and the general public do not know what that neighborhood is named!
Second, how close the house is to the core of the neighborhood. Context is everything- your proximity to the center of the neighborhood is critical. A community core can be an obvious “square”, it can be “that house” on the block, it can be adjacent to an iconic park- it’s a place where people want to be.
Lastly, the housing features- these are critical. If you buy a 2 bedroom in a 4 bedroom neighborhood- it’s a out of market house! Buy the same style of house that everyone wants or has. If you buy a 2 bed in a 4 bedroom area, you should make sure to have the money to add those additional bedrooms and make it nicer than your neighbors.
So don’t get frustrated by the marketplace, accept it, negotiate nimbly within it, but don’t forget- its not a bad place to be on successes’ coat tails! Be careful buying out there!