20 July 2010
Myths of Real Estate: #2 Location Location Location
Posted by Ryan Coffey under: Myths Of Real Estate .
Apparently, this “Location, location, location.” quote is originally attributed to a fellow by the name of William Dillard. This was his response to the question of how he made his fortune in what was recently considered the third largest chain of department stores in the U.S. He started with $3,000 of profit from selling his first location and passed away in 2002 with a fortune of $8.7 billion. Should we take what this man has to say about business seriously? Absolutely!
Except… it’s not real estate investing advice per se. If you’re opening a retail business of some kind, “Location, location location.” definitely is a huge concern, but when buying a home or most kinds of investment properties, this is just one of various very important factors. I’m not exactly sure how this got twisted into real estate advice that is repeated ad nauseum by media outlets and ironically by the odd Realtor who puts it in a listing to emphasize one that property’s finer points. (Listings are ads after all.)
Sure, you can buy a place as a holding property because the location is such that the density is increasing in the area, there is clearly some gentrification going on and it is the last place in the area with a really good view. But there are other factors that are at least as important. Is the particular property worth the money they’re asking for it? Will it need a lot of expensive things fixed/maintained over the next few years? What if you find out that there is an old buried oil tank on the property, that it has a lot of faulty wiring, or extensive mould problems throughout?
Now here’s the kicker, what if you can barely afford the property and you find out that any of the serious issues above are true? Are you still going to buy the property because it has a great location? That’s flirting with bankruptcy in my eyes.
There’s no need to reduce real estate to a single snappy saying. The broader principles aren’t that complex (keep sifting through this blog and they will become clear in time) but the specifics that apply to each transaction are in fact super complex which is why we have Realtors, Lawyers, Mortgage Brokers, CMHC, Insurers and Home Inspectors involved with nearly every transaction. Ask us professionals for information that will help you with the decisions you make. Making big decisions that are based on a generally misused proverb… is likely to end badly.
