A well-planned community generally has land uses that are segregated. For instance, a residential
neighborhood might have main thorough fares surrounding it so that it is completely separated and
insulated from industrial property. What you want to do is find a homogeneous neighborhood
where the land uses are more or less the same, where the homeowners are in the same basic income
bracket, and where there is a similar family mix so that the attitudes are harmonious. This scenario
lends itself to growth far more readily than areas with an incongruous mix of people and
property.
As far as lot shape, you want a shape that's usable. A long, narrow, or irregularly shaped lot might
present problems and prevent optimum use. A lot for commercial use that is only 25 feet wide is
really difficult to use because it is important to have adequate frontage. In many cases a buyer
won't even know what the actual dimensions are until a surveyor is hired to physically determine
them. In many situations where people thought they were buying something they didn't get. Concerning
lot orientation, it's generally considered desirable to have a house facing east with the bedrooms
toward the west because it allows sunlight to filter into the bedroom in the afternoon while allowing you to sit in the coolness of the living room, where you are more likely to be that time of
the day.
A neighborhood usually reaches its peak value and will begin to decrease when about 85 percent of the
area is developed. That's when the initial enthusiasm will start to subside and when the original
families in the neighborhood will want to look for something better. When that happens, the secondary
owners move in. The second wave of owners generally will keep land values at a constant level for a
period of time.
After that, property values will either go up or down, depending on what happens to the community. If
the neighborhood deteriorates from undesirable activity, they will go down. If people start acting in
a negative manner--parking on lawns, installing cheap awnings that detract from appearances, letting
yards go unattended, putting up with potholes, changing their cars' oil in gutters, tolerating
excessive loitering--the neighborhood will cease to be a desirable place to live. Conversely, if
everyone in the area has an attitude toward bettering the neighborhood, then the neighborhood
will improve. Just as negative attitudes and actions will make property values go down, positive
actions will make them go up.
A neighborhood that is about 85 percent developed may still continue to rise in value, but you know
that the potential is there for it to start to level off. If the neighborhood is fully developed,
then some of those people are going to think of moving somewhere else. Americans are always looking
for the next best thing; they're always trying to design a better mousetrap or achieve a better life-style. In my opinion, the only way to solve the problem of affordable housing is to continue to
build new houses, because the people who live in the upper level generally want to live in new
housing. It's a chain reaction.
In performing a neighborhood analysis, you don't measure the real estate as such. Instead, it is more
important to measure the actions, attitudes, and thinking of people. It may not be as easy to do, but
if you think of psychology as part of the business of real estate, then you will be light years ahead
of other investors.
For example, I own five apartment buildings with a total of 26 rental units on the oceanfront. When I
have the opportunity, I ask people why they choose to move here because it gives me a better idea how
I can advertise and attract the right type of tenant for the area. I want to know why they want to be
here, why people buy houses 150 feet from the beach, why they will pay almost as much for a house on
a walk, street up from the beach as they will for a house right on the oceanfront. If you can
commingle the attitudes of the people who live in a neighborhood, you'll have a much greater
understanding of the forces that determine value.
Monotonous tract development, where there are hundreds or thousands of homes built all at once in
uniform fashion, turns me off. It's like tenement housing. Every building is practically the same. I
think it destroys the beauty of the landscape. I like to stay away from it unless you can get a real
bargain, because mass-produced housing projects usually appreciate at a slower rate than custom
homes. There's no feeling of uniqueness, and that limits your options. This also applies to
condominium projects that take on the appearance of row houses. Developers are just creating future slums
by building structures like that. A unique design is going to be worth more over time, not prefabricated, mass produced one.
