Home Valuation in a Dodgy neighborhood
"Bad areas are tough to value as a owner-occupied property, because the business model for being a slumlord is to rent apartments in absentia, usually to tenants receiving goverment subsidies such as Section 8 vouchers. The vouchers are based on a prevailing rent, which are often on par with nice suburban apartment complexes due to how that ""prevailing"" rate is calculated. So the value of the house is really an annuity calculation. You figure out the potential rental cash flow and apply whatever your local market premium is. The point is, doing an apples to apples comparison is going to be tough, and justifying the cost of repairs that aren't remediating health and safety issues probably won't be recoverable from a home valuation standpoint. A buyer would probably rip out your central air conditioner and sell it! If I were in your shoes, I'd look at the time horizon that you think you're going to be there and amortize the cost over that period. Assuming your mortgage is small and you're staying for about 5 years, spending $10k costs you about $170 a month. Your reward is a modern A/C and heating system. Compare that cost to the cost of moving and your desires and see if it's worth it to you." Over the last ten years you have reaped the benefits of a good financial decision. (Presumably your low mortgage has freed up money for other financial priorities.) There would be no harm in making a clean break by selling as is.  On the other hand, the resale value would probably be rather low considering the condition and the neighborhood. I don't want to assume too much here, but if a potential buyer is interested in the house by virtue of not being able to afford a house in a better neighborhood or better condition, their finances and credit history may make it difficult for them to be approved for a mortgage. That would reduce the potential buyer pool and further reduce the sale price. If you can pull more in rent than the mortgage, you definitely have an opportunity to come ahead. Maybe window A/C units and a repaired chimney are enough if you're renting. Your rental income would pay for that in less than a year even while paying your mortgage for you. (Of course you don't want to become a sleazy slumlord either.) I wouldn't personally spend any money on an appraisal.  Spend some time yourself looking at Zillow.com and maybe Realtor.com and other sites to review recent sales in your specific area.  Not the houses a mile away.  Try to find comparables to yours.  The key factor is dollars per square foot.  See if the trend over the last couple of years is upwards or downwards in dollars per square foot of living area.  If it's downwards, I wouldn't invest for sure.
I was down in San Diego recently and talking with a friend while at dinner. I was complaining that the housing in my area had gone up and a starter 3/2 was getting into the ~415k range.  I guess houses in not even good parts of SD are in the 600k range minimum. "I hope you're not blaming the banks for the housing price inflation.  It's called supply and demand, and is mostly caused by people, possibly like you, who have unreasonable expectations about the future value of real estate, and thought it would keep rising unrealistically forever.  The bank's ""crime"" was to lend money recklessly, to people who could not really afford it.  The buyer's ""crime"" was to buy a home they could not afford with the expectations that it would go up in price and they could either flip it or refinance.  The real ""criminals"" might be the real estate agents who convinced the buyers they could afford it, and helped them find an avenue to get the money.  There were (are?) a lot of unscrupulous, or simply bad, real estate agents out there. But they, too, were naive enough to think houses would continue to rise.  tl;dr.  We are all to blame.  Calling owners ""slumlords"" and blaming them and the banks for your misfortune will only hurt you and make you forever the victim." There's a company called IdealSpot (I haven't used them, just heard of them) that will do that kind of analysis for you and suggest locations. Also, Census data is free and a good resource for demographic data when it comes to neighborhoods. Also, if you have a local SBDC they may have those numbers handy and they also can really walk you through the loan part of the process as well. That's a place you can't just buy one house you must buy a few blocks and develop it to change the way things are there! Heck they have 5 dollar houses  in those parts with homeless and all scrap metal taken out of them heck of a place. "In some cases perhaps, but in others not.  Several homes near me were sold over and over again during the bubble years (at incrementally higher and higher sale prices) -- the last owners in nearly all cases defaulted and the banks (after dragging their feet for a couple of years) finally foreclosed and sold the homes off cheap.  In all but one of the ""distressed sale"" cases, the people buying the houses now ARE in fact moving into them as their primary home (the exception being a current resident who bought the adjacent home with the intentions of fixing it up &amp; renting it out, I believe at least initially to a family member); but in ALL cases (in no small part due to the fact that they were able to purchase the properties cheap) these new owners are investing substantial money into fixing them up (new roof &amp; gutters, new windows &amp; doors, paint and/or siding, often all new carpeting, some landscaping, etc).  Also, from the perspective of our homeowners association, all of these new people think our annual HOA fees are a ""bargain"", whereas the previous bubble-era ""homeowners"" (if, having invested almost nothing, they could truly be called that) did nothing but whine and complain (well, and once they began defaulting on their mortgages, they also defaulted on their HOA fees).  So it's a win-win for our neighborhood. We're getting good, solid residents who are planning on taking care of their properties... the exact opposite of what you are claiming.   (The ""house-flippers"" you decry were the ones buying with ""no money down"" during the bubble era -- and they nearly killed the neighborhood.)" New Zeeland is quite prone to earthquakes, that is why low buildings are popular.  Also, it is the foreigners that are the problem. They do drive the price up. Especially some 'lucky' house numbers are really wanted by Chinese immigrants.  But there's nothing you can do about it. Instead of foreigners buying houses, it will be companies registered in New Zealand that will buy them. Those measures will only hit middle class immigrants, not richer people who are driving prices up. The few years leading up to the bubble I remember following his articles and he very clearly said to steer clear of buying houses as there was a bubble brewing.  The book does not imply that it's always a good thing to buy a home. It just states that the price doesn't justify the valuation which is not a factual statement. Also this is based on someones opinion of the companies P/E. The P/E was published and public information and idiots on both the buy and sell side jumped in.   The article does not make a factual claim about Fraud (cooking the books), Francine McKenna speculates that management  and auditors cooked the books. A rule of thumb I like to follow when purchasing things from CL listed well below value is this.. Assess the level of affluence of the seller. People living in poor neighborhoods are much more likely to try and hide things that would deter buyers as they are more likely to need the money. I find that when I go to a big house with 4 cars in the driveway the seller is more likely to be honest because she likely doesn't need the money from the sale.  Edit: I seem to have angered the PC police with this answer. This is based on facts and statistics, not my opinion. I have no bias against poor people. "It's just poor writing. Developers like to presell the houses and so on the lots, they advertise the very rough estimate for how much the final house will be selling for. The ""with the completed homes selling for as much as"" 500k means that the developer is selling most of the houses in the 400k range (or they have at least one sale at ~500k)" 15 years ago I bought a beach condo in Miami for $400,000 and two extra parking spaces for $3000 each. Today the condo is worth 600,000 but the rent barely covers mortgage repairs and property taxes. Most of The old people in the building have since died and are now replaced with families with at least two cars and spots are in short supply. I turned down offers of 25,000 for each parking space. I have the spaces rented out for $200 per month no maintenance for an 80% annual return on my purchase price and the value went has gone up over $700%. And no realtors commissions if i decide to sell the spaces. This slave rents from slumlords now.  They suck, but at least I was able to keep my dog.  The 10 years that it will take to rebuild my credit is daunting, but it's not okay to artificially inflate the price of something, only to drop it back down to half of the original price in the span of 2 years.  Nothing happened to that neighborhood.  It was and still is quiet and lovely.  But the schools there were abysmal, and I can't let my very gifted daughter think she's doing well when she's not working for the A that she gets. "Throughout the mid 00's, TV was filled with crappy ""reality"" shows like ""Flip This House"" showing people spending an obscene amount of money on a dilapidated house, then spending an obscene amount of money on it renovating it, and then selling it for an obscene profit a month later.  There were even shows where they would rip out new kitchens, spend $100k on a new one, and make $200,000 on the sale.  The housing market was insane, and was being pushed by realtors, and mortgage companies to trick people into thinking an obscenely priced house was doable on their barely middle class income.  Buyer beware. If prices are going up 20% a year, don't buy into it 4 years into the run and expect it to last forever." "NORMALLY, you don't want to buy in a bad neighborhood. The one exception is ""gentrification,"" that is middle class people are moving in because of a good location (which you seem to have). The other important thing to do is to cover your mortgage. Four ""guys"" at $500 a month will do for an $1800 mortgage. The nice thing is that you are your own tenant for two years and can watch the place. The downside of the neighborhood may be that you can't rent the place to four ""girls"" or two girls and two guys even after you leave; it will always have to be ""guys.""  I'd advise most people to pass. With your financial standing and entrepreneurial background, you might just be able to take this risk, and learn from it for your future dealings if it doesn't pan out. (Donald Trump ""cut his teeth"" on a slum complex in Cincinnati.) Hear what I (and others) have to say, then do what ""feels right,"" based on your best judgment, of which you probably have plenty." Spot on. If Fannie and Freddie were culpable, it was likely because they trusted the ratings houses too much. That's a big mistake, but all too common in every kind of financial risk transaction, as any home buyer who ever hired a home inspector upon a realtor's recommendation knows.