4 ms·

Whether you profit on land is less about the type of land and more about the location and what you do with it. Obviously, as a real estate investor, you know t

Whether you profit on land is less about the type of land and more about the location and what you do with it. Obviously, as a real estate investor, you know this. Buying a home in the 'burbs is often a terrible investment. These homes are not often built with old world craftsmanship or remarkable architecture and the land itself is usually nothing special. In twenty years, you'll end up with a dated, aging property, surrounded by other dated properties. The neighborhood may be treed but probably not with stately, slow-growing hardwoods. Compare this with an established early 20th century neighborhood in the central part of a city. You have classic Craftsman architecture and homes built by people with real carpentry skills, using hardwoods, brick, stone, and other durable materials. These homes, properly maintained, will last another hundred years. Chances are (in 2016, anyway), it's a gentrified or gentrifying neighborhood. If you can pick up a home in this neighborhood, you've probably made a good investment.

technofiend 10y ago
How right you are! Unfortunately the developers in my city (Houston) have a lock on city council. We have zero zoning laws and very little power to preserve architecturally interesting areas. In fact modern architects and builders here have a really negative attitude towards Craftsmen and similar styles: as far as they're concerned it's all old and boring. The result is predictable; neighborhoods are razed flat for profitable high density dwellings which frankly are one notch above Soviet Brutalist style, usually clad in the least durable and cheapest exterior possible. Houston has incredibly low urban density and I'm not above improving that in places. But it should done with an eye towards a beautiful legacy. The only thing beautiful about block upon block of stucco and aluminum siding townhomes is the builder's bank balance.
- mrcsparker 10y ago
  It seems like you want to live in another city. Part of what many people like about Houston is the lack of zoning. People tend to live close to where they work. The city doesn't really need a business area and a commercial area and a residential area. What neighborhoods are you talking about? I don't see anything near the Brutalist style anywhere in the city. A lot of the older parts of Houston have those three story townhomes, but they all look pretty nice. A lot of the homes that those places are replacing were pretty rough.
  - technofiend 10y ago
    LOL. Well call me a raging moderate but I feel like there's room between "Don't like it? Leave!" and HOAs and Historic Preservation Districts that require a committee meeting to allow an exterior color change. But many of the modern townhomes (and this is where you and I differ) are quite ugly to me and a massive downgrade from what they replaced. A home in "rough" condition can be renovated, but what's to be done once someone builds an ugly townhome? But I'm not exactly alone in criticizing the recent architecture found in Houston townhomes and condos. Check out this graffiti http://i.imgur.com/AxxvkU1.jpg http://i.imgur.com/AxxvkU1.jpg and the discussion of it on the Houston sub-reddit https://www.reddit.com/r/houston/comments/4td1y7/found_this_gem_in_midtown_near_hcc/ https://www.reddit.com/r/houston/comments/4td1y7/found_this_...
- pjlegato 10y ago
  Ironically, the bland suburbs that surround most cities are caused precisely by very strict zoning laws that mandate very low building density, large setbacks, large yards, high bathroom to bedroom ratios, low kitchen to bedroom ratios, etc. This is the major factor that makes rents so insane in prewar parts of cities, where the few remaining dense old neighborhoods in city cores are targets for gentrification. People want to live there -- and demand is rising as large numbers of millenials reject the suburbs -- but there cannot be any new supply built due to zoning laws. For example, almost all of the expensive dense old Boston inner suburb of Somerville would be illegal to build today under its present zoning laws: http://cityobservatory.org/the-illegal-city-of-somerville/ http://cityobservatory.org/the-illegal-city-of-somerville/
  - technofiend 10y ago
    We don't have that problem in Houston - it's easy to get a zero lot line waiver and jam 5 stucco box townhomes into a few thousand sqft lot. Unfortunately the building codes around here aren't much more stringent than the zoning laws and the build materials and quality are quite low. See the recent reddit discussion https://www.reddit.com/r/houston/comments/4td1y7/found_this_gem_in_midtown_near_hcc/ https://www.reddit.com/r/houston/comments/4td1y7/found_this_... for a sample of anecdotes.
    - pjlegato 10y ago
      Could some developer decide to leaglly build a prewar-style dense urban neighborhood in Houston? It sounds like an opportunity to make a killing.
refurb 10y ago
Buying a home in the 'burbs is often a terrible investment You realize the burbs can become highly desirable areas right? I've lived in a number of cities where the butbs in 1960 became hot areas in 1990 due to population growth.
- twblalock 10y ago
  Exhibit A: Silicon Valley. (The actual geographical Santa Clara valley, which does not include San Francisco in any traditional sense of the term.) People who bought houses here for $100-200k in the 1980s can sell them for more than $1 million today.
- chrissnell 10y ago
  I believe that this is the exception rather than the rule. There aren't many 1980's-era suburbs that I'd want to move into today.
white-flame 10y ago
I think you missed the entire point of the parent. Who cares about the resale value of the house? What you should care about is if it's a good rental or not. In the 'burbs, you'll have more stable families, people who care a bit more about their house, people looking for longer term places to raise a family in a good neighborhood, and you can get some great tenants. Now, in X years when it's dated and some things needing repairing, you've got cashflow to cover that, factored into your money model. Multiply that by a few properties, and even if the "investment" hasn't budged a dime in value, you're making money. At a scale where you can hire a management company to take care of the details for you, it's even simpler.
- chrissnell 10y ago
  You're talking about the rentals game which is another story altogether. I'm talking about buying property--for my personal use as a primary house--and making money on it. Your statements about the stability of the 'burbs are not a blanket truth. It entirely depends on the city and location. You may do well in a suburb of D.C. or San Francisco but a Las Vegas, Albuquerque, Denver, or San Antonio suburb is an entirely different story. In places where there is essentially infinite room to expand (i.e. all cities that aren't super-expensive), there's little reason for someone to buy your 10 year-old home when they can build a brand new one for the same price. Thus, some of the neighborhoods lose value and go to crap. This is especially true if the original construction was unremarkable and cookie-cutter. I also think you gloss over the difficulties of being a landlord. Great tenants are the exception, not the rule. There is good money to be made in the rentals game but the markets in which you can do this are limited and strongly favor the landlord who has owned for decades and bought in at 1970s prices (SF, LA, etc.). For most people in average American cities, the best you can hope for is to cover expenses and build a little equity. It's no slam-dunk for the average Middle America landlord.
  - white-flame 10y ago
    Property that you buy for your own personal use is always going to be a money sink, and therefore shouldn't be looked at as a monetary investment. Sure, it might be an investment into your family or your lifestyle or whatnot, and that's a reasonable expense to manage for that reward. But it still is an expense. There's a chance that you'll come out 10s of K "ahead" at the end in selling your own family home, but divide that over the number of years you've lived there and subtract out all the repairs and related expenses, and it's not great in the vast majority of cases. Heck, subtract out all the interest you paid on your mortgage, and you're nearly guaranteed to be in the red, if you're not buying places for cash. The only way to look at a house as a monetary investment is to actually seek to make money directly off of it; namely flip it or rent it. Don't sit on it and think it's going to be a significant financial positive for you. Value it as your home, and as an expense you deem worth it.

technofiend 10y ago

How right you are! Unfortunately the developers in my city (Houston) have a lock on city council. We have zero zoning laws and very little power to preserve architecturally interesting areas. In fact modern architects and builders here have a really negative attitude towards Craftsmen and similar styles: as far as they're concerned it's all old and boring. The result is predictable; neighborhoods are razed flat for profitable high density dwellings which frankly are one notch above Soviet Brutalist style, usually clad in the least durable and cheapest exterior possible. Houston has incredibly low urban density and I'm not above improving that in places. But it should done with an eye towards a beautiful legacy. The only thing beautiful about block upon block of stucco and aluminum siding townhomes is the builder's bank balance.

mrcsparker 10y ago
It seems like you want to live in another city. Part of what many people like about Houston is the lack of zoning. People tend to live close to where they work. The city doesn't really need a business area and a commercial area and a residential area. What neighborhoods are you talking about? I don't see anything near the Brutalist style anywhere in the city. A lot of the older parts of Houston have those three story townhomes, but they all look pretty nice. A lot of the homes that those places are replacing were pretty rough.
- technofiend 10y ago
  LOL. Well call me a raging moderate but I feel like there's room between "Don't like it? Leave!" and HOAs and Historic Preservation Districts that require a committee meeting to allow an exterior color change. But many of the modern townhomes (and this is where you and I differ) are quite ugly to me and a massive downgrade from what they replaced. A home in "rough" condition can be renovated, but what's to be done once someone builds an ugly townhome? But I'm not exactly alone in criticizing the recent architecture found in Houston townhomes and condos. Check out this graffiti http://i.imgur.com/AxxvkU1.jpg http://i.imgur.com/AxxvkU1.jpg and the discussion of it on the Houston sub-reddit https://www.reddit.com/r/houston/comments/4td1y7/found_this_gem_in_midtown_near_hcc/ https://www.reddit.com/r/houston/comments/4td1y7/found_this_...
pjlegato 10y ago
Ironically, the bland suburbs that surround most cities are caused precisely by very strict zoning laws that mandate very low building density, large setbacks, large yards, high bathroom to bedroom ratios, low kitchen to bedroom ratios, etc. This is the major factor that makes rents so insane in prewar parts of cities, where the few remaining dense old neighborhoods in city cores are targets for gentrification. People want to live there -- and demand is rising as large numbers of millenials reject the suburbs -- but there cannot be any new supply built due to zoning laws. For example, almost all of the expensive dense old Boston inner suburb of Somerville would be illegal to build today under its present zoning laws: http://cityobservatory.org/the-illegal-city-of-somerville/ http://cityobservatory.org/the-illegal-city-of-somerville/
- technofiend 10y ago
  We don't have that problem in Houston - it's easy to get a zero lot line waiver and jam 5 stucco box townhomes into a few thousand sqft lot. Unfortunately the building codes around here aren't much more stringent than the zoning laws and the build materials and quality are quite low. See the recent reddit discussion https://www.reddit.com/r/houston/comments/4td1y7/found_this_gem_in_midtown_near_hcc/ https://www.reddit.com/r/houston/comments/4td1y7/found_this_... for a sample of anecdotes.
  - pjlegato 10y ago
    Could some developer decide to leaglly build a prewar-style dense urban neighborhood in Houston? It sounds like an opportunity to make a killing.

refurb 10y ago

Buying a home in the 'burbs is often a terrible investment You realize the burbs can become highly desirable areas right? I've lived in a number of cities where the butbs in 1960 became hot areas in 1990 due to population growth.

twblalock 10y ago
Exhibit A: Silicon Valley. (The actual geographical Santa Clara valley, which does not include San Francisco in any traditional sense of the term.) People who bought houses here for $100-200k in the 1980s can sell them for more than $1 million today.
chrissnell 10y ago
I believe that this is the exception rather than the rule. There aren't many 1980's-era suburbs that I'd want to move into today.

white-flame 10y ago

I think you missed the entire point of the parent. Who cares about the resale value of the house? What you should care about is if it's a good rental or not. In the 'burbs, you'll have more stable families, people who care a bit more about their house, people looking for longer term places to raise a family in a good neighborhood, and you can get some great tenants. Now, in X years when it's dated and some things needing repairing, you've got cashflow to cover that, factored into your money model. Multiply that by a few properties, and even if the "investment" hasn't budged a dime in value, you're making money. At a scale where you can hire a management company to take care of the details for you, it's even simpler.

chrissnell 10y ago
You're talking about the rentals game which is another story altogether. I'm talking about buying property--for my personal use as a primary house--and making money on it. Your statements about the stability of the 'burbs are not a blanket truth. It entirely depends on the city and location. You may do well in a suburb of D.C. or San Francisco but a Las Vegas, Albuquerque, Denver, or San Antonio suburb is an entirely different story. In places where there is essentially infinite room to expand (i.e. all cities that aren't super-expensive), there's little reason for someone to buy your 10 year-old home when they can build a brand new one for the same price. Thus, some of the neighborhoods lose value and go to crap. This is especially true if the original construction was unremarkable and cookie-cutter. I also think you gloss over the difficulties of being a landlord. Great tenants are the exception, not the rule. There is good money to be made in the rentals game but the markets in which you can do this are limited and strongly favor the landlord who has owned for decades and bought in at 1970s prices (SF, LA, etc.). For most people in average American cities, the best you can hope for is to cover expenses and build a little equity. It's no slam-dunk for the average Middle America landlord.
- white-flame 10y ago
  Property that you buy for your own personal use is always going to be a money sink, and therefore shouldn't be looked at as a monetary investment. Sure, it might be an investment into your family or your lifestyle or whatnot, and that's a reasonable expense to manage for that reward. But it still is an expense. There's a chance that you'll come out 10s of K "ahead" at the end in selling your own family home, but divide that over the number of years you've lived there and subtract out all the repairs and related expenses, and it's not great in the vast majority of cases. Heck, subtract out all the interest you paid on your mortgage, and you're nearly guaranteed to be in the red, if you're not buying places for cash. The only way to look at a house as a monetary investment is to actually seek to make money directly off of it; namely flip it or rent it. Don't sit on it and think it's going to be a significant financial positive for you. Value it as your home, and as an expense you deem worth it.