Since I was a child I have always been intrigued by real estate, and what my parents always said “Location, Location, Location” – I have carried that lesson forward in my life, as a REALTOR and an Associate Broker in Delaware, I see examples of this rule every day, but realize that most consumers don’t really understand what that means.
The first thing to consider is the value of your time. Depending on your profession, your social relationships, education, and interests there are certain things you will find more valuable than others. Typically people value their free time, that time when they are not working, over the time they do work. How does this come into play when we are discussing real estate? It’s fairly simple really.
It matters a great deal, more so than any other factor, to better understand let’s look at an example. The best example of the rule of location in real estate is to look at any major City in the world. For this example let’s take New York City.
I went to high school on Long Island and college there as well as in Manhattan (what most consider New York City to be, but the city proper is an area that consists of five separate boroughs – Manhattan, Queens, Brooklyn, The Bronx and Staten Island), so I speak from experience.
The closer you are to Manhattan’s primary business districts, the higher the cost is for real estate. Once within the City limits, in any community, the closer you are to public transportation the more premium is placed on the value of the real estate.
This rule follows to the commutable suburbs as well. For instance if someone worked in Midtown Manhattan (The area defined as between 34th Street up to 57th Street) and lived on the Upper East Side of Manhattan, you would have the quality of life that is most desirable to those who work and live in Manhattan. The convenience and proximity of your home to your workplace, as well as the convenience of access to Central Park, the East River, great restaurants, stores, etc. You could be at your office within 10-15 minutes with little effort or inconvenience, or expense. For this you could be paying well over $5,000,000 for a reasonably sized condo, even more for a private home (aka Brownstone).
The other end of the spectrum is the individual who works in Midtown Manhattan and lives in the suburbs, whether on Long Island, West Chester County, or a multitude of New Jersey Counties, you would be looking at 10-15 minutes from the train station in Manhattan to your office, add to that the 45-90 minute train ride, plus the drive to the train station if you don’t live within walking distance, and your quality of life drops significantly. You are potentially spending 1.25-2 hours per day, each way, commuting to your office to work. If you work an 8 hours day, that ends up eating a huge portion of your day, and therefore leaving very little time for anything else.
Most of my friends who work in Manhattan and commute leave their homes before 6:00am to get a train and guarantee they are at work by 9:00am. Then on the return home, some will stay in the city for events, meetings, meals, or just to avoid the rush hour squash of the commute, and get home after 9:00pm. To then get a reasonable amount of sleep to be able to wake and do the whole thing the next day leaves very little time to do anything else.
This is where the rule of location comes into play, and should be extremely obvious to you now. The closer you are to your place of business, the less time you have to spend getting there and back, the more time you have to enjoy the quality of life afforded you by working.
When I help my clients review their options for locations, one factor that I always try to review with them is what their goal is for their real estate purchase. We will review a list of things that are important to them in their life, and also what their goals are. Frequently people are steered toward the shiny new construction projects which tend to be a lot further from the business hubs where they work.
Everyone wants new and shiny, but most consumers don’t understand that there are more important factors in a real estate purchase than the gloss of the finish. The value of location has a direct impact on the cost of real estate because the convenience of being close to the places you want to be, or need to be, does hold a premium to many.
If you have two identical 3,000 square foot homes, what would the price difference be if you were in the Wilmington, Delaware area and purchasing in Delaware (we have quick access to Pennsylvania, New Jersey and Maryland, so I don’t want to stretch out of the New Castle County Delaware area).
Let’s say that the first house is 3 miles from your place of work, was just built in 2014, has 4 bedrooms, 3.5 bathrooms, 3 car garage and a half-acre lot. All the finishes are high end, a gourmet kitchen with granite and top of the line cabinets, hardwood floors throughout, iron banister for the stairs and cat walk, a stone two story fireplace, and architectural details throughout. The cost at the near work location is $750,000. From this house you have the option of going home for lunch.
The second house is about 35 miles away, and you have to cross the Chesapeake & Delaware Canal to get there, it is identical to the first house as it was constructed by the same builder, but in this location the cost is $375,000. Better pack your lunch – maybe even dinner, definitely a snack, with traffic, construction and congestion you will be lucky to make it home in time for dinner.
If price didn’t matter, which would you choose? Hopefully this has helped demonstrate the true value and reason behind the old saying “location, location, location”.