How often have you been advised to avoid buying the biggest or most expensive house in a neighborhood? Somehow the assumption is that the larger, more expensive house will not appreciate as much because of the surrounding smaller, less expensive houses. Therefore, when it comes time to sell the larger house, you will receive less profit due to a lower appreciation rate. If you really think about this concept, it doesn’t make sense.
Let’s say the smallest house appreciates at a rate of 6% per year, and the largest house appreciates at a rate of only 2%. Over time, the smaller house would have a higher resale price than the larger house, which of course would not happen. Implementing the rules of compound interest, we find this assumption to be false, as is the claim that the best communities always appreciate the fastest.
It would be rare to find a situation where a larger house in a community sold for less than a smaller house. I would be looking at quite a few properties in a neighborhood to validate this fact. Whether the largest house in a community is a good value for you depends on your needs, your goals, and the price of the house compared to those around it. If you can buy the bigger house for a little more than a smaller one, it might be a good deal. But if you have to pay 50% more for the bigger house, it won’t be worth it.
When you find the largest and most expensive houses in a neighborhood, pay special attention. Don’t assume that the bigger house wouldn’t be a great opportunity. Instead, spend time carefully analyzing whether it’s a good value. Determine if you’re getting a lot more for your money. You could uncover a hidden deal.
It is also important to research the size and features of the larger house and compare it to the object and future goals. If you have many children or plan to set up a home office or just want to live comfortably, the largest house in a community of smaller houses may be the best value for money.
Think about the possible options you have with all that extra space. What features have you always wanted in a home but never had the extra space for? Have you ever dreamed of setting up your own home art library or home gym or arts and crafts area? Would you be able to rent out part of the house to roommates for additional income or convert part of it into an in-law suite?
As you shop in the local real estate market, take the time to look at the largest houses in a community of smaller houses and analyze each one for its money-making potential.