Is buying the cheapest house on the block still a good investment strategy?
At first blush, yes, but my answer comes with caveats. More expensive houses in your neighborhood should pull up the value of your home. But you and your Realtor really need to address the bigger question of why the house is being sold at a “discount?” Is the home just an ugly duckling in need of a paint job or some fresh landscaping or are the defects more serious, i.e., in need of a new foundation, new roof, new plumbing, complete rewiring or a perimeter wall that will cost far more money than a cosmetic touch-up.
If the latter, simply get bids for the work that needs to be done and see if the potential deal pencils out. If the fixer-up is going for $325,000 on a street of comparable homes selling for $400,000, and your anticipated repairs and improvements will cost $50,000, then you might have found yourself a bargain.
Of course, location is that other critical factor you have to consider. Your potential home could be comparable in condition and square footage to other homes in your neighborhood, but it’s location may not be nearly as ideal as those other higher-priced homes. Maybe the home is located too close to a busy or dangerous intersection or an ugly storm drain or backs up to a busy cemetery from which you can easily view the funeral processions from your second story. Perhaps the house is located too near an easement that you feel will infringe on your privacy or security.
There are bargains out there to be sure, but make sure you know what the incurable defects are first before you pull out your checkbook. To get the right home, you still have to do the home-work.