THREE FOOLPROOF WAYS TO CHOOSE YOUR NEIGHBORHOOD AND UP YOUR VALUE

Written by Jaymi Naciri 

Deciding where to buy a home can be one of the most difficult decisions to make. If you have a built-in reason to choose one area over another (it's close to work; it's where you grew up and you're emotionally tied to it; there's a rumor about a professional football team coming soon), it can be easier. But for the rest of us, a multitude of factors can make the choice challenging.

So how do you know where to buy if you've got value in mind? Here are a couple schools of thought.

Go where the rich go.

A recent feature in CNN Money noted that "The United States is the top destination for those worth more than $30 million buying residential property valued at a million or more, according to a report from Wealth-X and Sotheby's International Reality."

New York is the leading city worldwide for wealthy residences, they said. Los Angeles and San Francisco are also in the top five. Within those cities, individual neighborhoods cater to moneyed buyers. So what do you do if you can't afford those premium neighborhoods? You live close by.

"There's a neighborhood in Southern California called Coto de Caza that was popularized on Real Housewives of Orange County and is one of the most desirable places to live anywhere in the states," said real estate advisor Sara David. "Several years ago, a developer came in and built a community of substantially smaller but still very attractive production homes just outside the gates and marketed the property as 'Coto de Caza adjacent.' It was a huge draw for buyers, who have seen their home values explode over the years. It's not a unique situation. There is a long history of 'adjacent' neighborhoods gaining in reputation and value simply because of what they are next to."

Go where Starbucks goes.

"Confirmation that Starbucks is boosting more than your productivity," said Apartment Therapy. "Higher home prices actually follow Starbucks, rather than the other way around."

Yes, call it "The Starbucks effect," said TIME magazine. "Proximity to a local coffee shop has a very real, and positive, effect on home values," with data over 17 years showing that "homes adjacent to the local Starbucks almost doubled in value, up by 96%. Those further out appreciated by 65% over the same period."

Go where the schools are.

It's an obvious choice to look for good schools for homebuyers that have a family or are planning for one. In fact, in some cases, buyers are willing to forgo other amenities to be in a top school district.

"Homebuyers are willing to pay more and give up certain home features for a home located in their district of choice,"said AOL. "They are especially willing to give up accessibility to shopping and nearby parks and trails among other amenities, to reside within school district boundaries of choice."

But being near acclaimed schools is important even for childless couples.

"Living near a high-scoring school can increase your home's value by over $200,000, according to the Brookings Institution," said AOL. "That's not chump change. There are plenty of attractive advantages that come with proximity to a school, including increased police protection, personal use of school facilities and living in a 'Drug-Free School Zone.'

"Even those couples who don't have kids yet but are planning to are worried about the quality of schools in the neighborhoods where they are considering buying," said Stacie Staub of Live Urban Real Estate. "High-scoring or popular schools do raise property values and demand for homes, no question."

How did you choose your neighborhood? 

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This illustration assumes annual investments made at the end of each year through age 65 and a 6% fixed annual rate of return. The rate of return on your actual investment portfolio will be different, and will vary over time, according to actual market performance. This is particularly true for long-term investments. It is important to note that investments offering the potential for higher rates of return also involve a higher degree of risk to principal.

The examples do not take into account the impact of taxes or inflation; if they did, the amounts would have been lower. They are intended as hypothetical illustrations of mathematical principles and should not be considered financial advice.

All investing involves risks, including the possible loss of principal, and there can be no guarantee that any strategy will be successful. Past performance is no guarantee of future results.

-Martin Porter