a.k.a.: What your real estate agent won’t (or can’t) tell you

In a previous post, I observed an interesting business practice: a liquor store open at 7:15 am.
After meditating on this madness, as well as other observations, I figured I would codify them for your here. The following are my observations about real estate. I am not a licensed broker or agent. I am not even “good” at it; I have owned two properties (not at the same time) and lived in one my whole life. Take it for what it is worth: the musings of a fool. These are mostly indicators of a not-so-good neighborhood, and therefore a not-so-good property valuation; I won’t be discussing quality of school systems or neighborhood watch programs: these are obvious and what you will learn from your agent.

Here how this works: take the value of the property in question the perform the following calculations (it is kinda like a game, you know):

Foolarch’s Law of Real Estate [de]Valuation: Home values decrease as marginal businesses increase .

Now by “marginal” I mean:

“close to the lower limit of qualification, acceptability, or function : barely exceeding the minimum requirements <a semiliterate person of marginal ability> ” — Merriam-Webster, definition 4a

The Law breaks down like this (really, this should be obvious):

  1. Note the proximity to and the density of cash advance / payday loan joints.
    • 2% devaluation for each joint within 1 square mile.
    • 1% additional devaluation for each joint within one block of each other.
  2. Note the proximity to and the density of corner liquor stores.
    • 1% devaluation for each store within 1 square mile (liquor sales within grocery stores do not count).
    • Have you ever noticed that corner liquor stores advertise as “discount” liquor stores? It must because they “feel the pain” of the poor; really, who wants to pay retail for al-ke-hol? It is nice, though, that many of these fine establishments offer to process your income tax return…and hey, BTW, why don’t you by some al-ke-hol while you have some cash?
  3. Note the proximity to and the density of pawn shops.
    • 3% devaluation for each pawn shop within 1 square mile (these nemeses allow people to peddle their wares for some cash-money in order to spend it at other establishments listed herein).
  4. Note the proximity to and the density of tattoo / body piercing parlors.
    • 1% devaluation for each storefront; 2% devaluation for a combo tattoo & body piercing parlor within 1 square mile.
    • If this is the local art scene, look elsewhere.
  5. Note the proximity to and the density of adult bookstores, “gentlemen’s” clubs or adult gift shops.
    • 5% devaluation for each “attraction” within 1 square mile.
  6. Note the proximity to and the density of auto audio establishments.
    • 3% devaluation for any (once there is one, does it matter how many?)
    • Bass that rattles you bones is one thing, but these establishments provide a service to young punks with kool kars and are a black hole of real estate valuation.
  7. Note the proximity to and the density of ethnic grocery stores (not ethnic restaurants).
    • 1% devaluation for each within 1 square mile.
    • If you can’t pronounce it and you don’t eat it, then you don’t want it!
  8. Note the proximity to and the density of used tire and/or hubcab businesses.
    • 2% devaluation for each within 1 square mile.
    • Really, who needs used tires; someone gave them up already?
  9. Note the quantity of billboards relating to liquor, lottery or legalized gambling.
    • 3% devaluation for any within 1 square mile.

Businesses like these are not stupid, they just prey on the stupid. They have done their market research and have located their place of business strategically; remember the three rules of real estate: location, location, location.

These represent a work in progress, please feel free to add corollaries as you have observed.

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