When buying, you need a strategy to find a home that is both a good place to live and a solid investment. Location, location, location is one rule, but there are others.

One of the obvious keys to buying a home that will be a good investment is the location. You are looking for a neighborhood with good schools, low crime and so on. That being said, what type of home do you look for when you find the neighborhood in question? The answer is the cheapest home on the block so long as it is not a disaster.

Why buy the cheapest property? It all has to do with valuations. Every neighborhood has a valuation range. The range extends from the cheapest home in the area to the most expensive. When you buy a home, it is vital to understand that it will be hard to raise the value of that home much beyond the value of the most expensive home in the neighborhood.

Assume you like a neighborhood with homes ranging from $350,000 to $450,000 in price. You go ahead and buy a home for $400,000. You come into some serious money and do $500,000 in improvements [gym, pool, 2nd floor, theatre, etc.]. Is your home now worth $900,000? Nope. It is probably going to appraise for $500,000 or so. Simply put, you have spent more than the neighborhood will support.

Taking this example further, you can see why buying the cheapest house on the block makes sense. It gives you room to improve the home and gain the equity appreciation. If you buy a beat up home for $350,000, just cleaning it up may increase the value to $400,000. A few substantive improvements can punch the value up from their. The point is you have room to move on the price.

Is there an occasion when buying the cheapest home does not make sense? Of course. The situation typically involves a home with a major defect. If the foundation is crumbling, run away! You are going to spend so much money fixing it, you will never see a buck of profit.

Once you find the neighborhood of your choice, establish the value range for the properties. Find the cheapest home on the block that has no major problems and buy, buy, buy.