Should I buy near a school or not?
Posted by markharrison on January 8, 2011
I recently joined Quora, which is the new kid on the block for Internet questions and answers. One of the questions I tried to answer was whether someone should buy one of two properties in Silicon Valley.
Now, I’m no expert in the different areas of the Valley, but the question basically boiled down to a smaller property in the catchment of a good school, or a larger property somewhere else. The questioner didn’t actually have children, and was asking which was “better” for him to buy to live in, not to rent.
What is “better” depends on two things: firstly, whether you are viewing the property as an investment which you happen to live in, or for its “utility” (the economics term for how you, personally, value the benefit of being able to live there); and secondly, your personal circumstances and outlook.
If we consider the question from a utility point of view first.
In general, the Townhouse would be a better option for you. The reason for this is that, in a good school area, you are competing with more potential buyers. Some of these potential buyers will have children, and are therefore prepared to pay a premium for a property in an area with good schools. The value of these schools is, therefore, built into the property price, and effectively you are being asked to pay a premium for some features that you don’t need.
By avoiding paying the schooling-district premium, you can choose to spend that money on something else that you value highly – the obvious one being a higher square footage. However, considering proximity to your employer / business / clients is also important. An extra 30 minutes commute each way adds up to 5 hours time per week – only you can make the decision as to whether you would rather 5 hours or, say, a big garden.
Consider also whether you intend to have children in the near future. If you do, there might be utility benefits to you of buying a place now that would suit your future family as well as your current circumstances.
If we turn to the investment prospects, then the overall argument is that the premium for a particular area is already built into the pricing, and will continue to be built into the pricing the properties. The question, therefore, is not whether the area is “good” or “bad”, but whether it is “improving” or “declining” relative to the surrounding areas. As such, neither option is inherently better than the other.
On investment, however, the areas you have listed are in a notoriously cyclical market. I strongly recommend that you look at recent price movements and determine whether the timing is right in the area(s) in question
To go a little further than what I said on Quora – from the perspective of someone buying with a view to letting out the property, the question is really down to achievable rent, and likely demand… go and ask a lettings agent what you might get, and work out which has the better yield.
If you use Quora, feel free to follow me – http://www.quora.com/Mark-Harrison-2