As a property investor, you’re probably aware of the classic real estate mantra, “Location, location, location.” I love the British show by that name! However, beyond the physical attributes of a property or its location, the quality of neighbors can significantly affect your property’s value and the overall success of your investment. Good neighbors can be a wonderful asset, while bad neighbors can reduce property values and even keep your tenants up at night.
We receive commission on purchases made through links on this page.
I think everyone will agree that when buying a home to live in, they want to find out what the neighbors are like, but when buying an investment property, they might not be as keen to know who’s living nearby. Considering that we don’t plan to be around the investment property often, it might actually mean that having good, trustworthy neighbors is even more important than when buying our full-time residence. I was inspired to write this post while recently feeling gratitude for the amazing sense of comfort and ease we experienced with one of our investments in Croatia. Knowing our neighbors were taking care of my flower gardens all summer while we traveled was amazing. Of course, we took them on a fun trip to the Croatian coast to reward them for their amazing efforts. Since then, they have handled a water problem in the first-floor apartment and even recently cleaned all the debris off the steps and tidied what was left over after autumn in the garden. Amazing neighbors!
The Value of Good Neighbors
Great neighbors are an essential asset to any property. They can maintain a watchful eye over your property, contribute to the neighborhood’s overall appeal, and even increase your property’s market value. Their attention to detail and watchful eye on the neighborhood can be a fantastic experience for homeowners and rental tenants alike.
Good neighbors can provide a layer of safety and security, especially for rental properties. They’re often the first to notice suspicious activity and can promptly alert authorities when necessary. Additionally, an active neighborhood watch group can act as a significant deterrent to potential crimes, contributing to the overall safety of the area. Cameras on homes or alarms are also great for catching criminal activity.
Responsible neighbors who maintain their properties can indirectly influence your property’s curb appeal. A well-kept neighborhood exudes a sense of higher standards and personal pride and can help maintain or even increase property values in the area. A strong sense of community in a neighborhood can be an appealing factor for potential buyers or renters. Good neighbors can foster this sense of community through regular interactions, mutual respect, and community activities.
Disagreements over property boundaries, shared amenities or noise levels can be common in close-knit communities. Good neighbors can help resolve these issues amicably, avoiding the need for legal intervention that could negatively affect your property’s value or reputation, not to mention your pocketbook.
Identifying Good Neighbors
As an investor, it’s vital to evaluate the neighbor factor before buying a property. Four signs you have good neighbors are:
- Home Condition:
The state of their home and yard can be an indication of responsible homeowners who take pride in their property. This is often a sign of someone who respects the neighborhood and contributes to its overall appeal.
- Friendly Interactions:
People who engage in friendly conversations or wave when you pass by can be an indication of a welcoming and warm community.
- Community Involvement:
Neighbors who actively participate in community events or local initiatives indicate a strong sense of community. These are the neighbors most likely to collaborate with you and cooperate if compromises of any sort must be reached.
- Respectful Boundaries:
Good neighbors understand and respect privacy. They keep noise levels reasonable, control their pets, and respect property boundaries. My grandmother had a property in the mountains of Pennsylvania with a restaurant on the lower Main Street facing building. The property came with a large parking area and driveway. She had an arrangement with some neighbors and a museum to allow them to use her driveway for their access. They had an access road to the back, but her driveway was easier for them.
In the mid-1990s, a woman bought the church to the restaurant’s east, which didn’t come with a parking lot, just the access driveway to the back and a small grass plot. She could have made a parking lot. Instead of asking my grandmother for access to the driveway she sued my grandmother for access to the driveway and use of her parking lot. Nuts!
Ask around the neighborhood about any challenges or disputes; this information can help you make your decision about buying there. Even though my grandmother’s headache came later on and quite unexpectedly–as do many neighborhood personality conflicts–being aware ahead of time can help reduce challenges early on.
The Negative Impact of Bad Neighbors
Just as good neighbors can boost the value of your investment, bad neighbors can drag it down. Neighbors who neglect their homes can lead to a decline in property values in the neighborhood. Potential buyers or tenants might be deterred by the unsightly view or concerned about the possibility of pests like rodents or insects.
My husband’s family home in Slovenia is smack dab in the middle of two decaying homes. The one on the northeast was bought thirty years ago as an investment and then left to decay. It’s so sad because it’s an Austrian-Hungarian style farmhouse that could have been renovated thirty years ago, but it’s too late now. To the south of the house is a four-unit apartment building also bought by someone thirty years ago and then left to decay. Of course, this is a family home so no plans of selling, but can you imagine? If you bought a home for top dollar and then over time your neighbors abandoned their homes and just left them to decay, your property value is going down with theirs. Not cool!
Excessively noisy neighbors, domestic violence, and other crime or illegal activities can be a huge nuisance, particularly in densely populated urban areas. This can significantly affect the livability of your property and may discourage potential tenants. Neighbors involved in illegal activities can ruin a neighborhood’s reputation and make it unattractive to potential tenants or buyers, potentially causing property values to plummet.
As a property investor, understanding the importance of good neighbors and the impact they can have on your investment is crucial. By taking the time to evaluate a neighborhood and its residents before purchasing, you can increase the likelihood of a successful investment. While you can’t always choose your neighbors, you can choose the neighborhood, making it a critical factor to consider in your property investment strategy. Sure, it’s going to take you a few extra hours per property you look at, but a few extra hours is way better than a disaster down the road. I prefer to spend time now than waste time later. Stay safe.
If you have a rental property or plan to, check out SmartMove by TransUnion. We have an affiliate link and would appreciate it if you use our link to sign up for better tenant screening. Using our link won’t cost you anything extra. We get paid by SmartMove, and you will get the same price as if you signed with them directly. Your purchase helps us manage this website and pay for the wonderful people who work on it. Thank you.
Subscribe for more business, investing and sales posts. Have a lovely day.
