Sometimes an investor can purchase a property for a very low price because it’s in a bad location. Then the investor can help improve the neighborhood or somehow change the property’s relation to it, and in this way increase the property’s value. In this situation, it’s important to keep in mind the risk. If the price is low mainly because of a poor location and you can’t effect a change, you might have to accept a low price when you sell.

Thus, when location is an issue, the most important thing is to determine if you as the new owner can do anything to mitigate the problem. For example, say you want to purchase a home as a rental and the price is low, but it’s right behind a shopping mall with its attendant traffic and noise. However, if you buy the property and are able to erect a fence that shields it from the mall, you might be able to reduce significantly the detracting influence and thus be able to sell without being at a disadvantage. Similarly, some investors have been able to effectively change the detracting feature itself. For example, they have bought homes in neighborhoods where the prices were driven down because the neighboring homes were poorly kept up. They then formed a homeowner’s association, which went around and helped clean up the bad properties. Once the neighborhood was ship-shape, they were able to resell for a healthy profit.

It’s important for every investor to determine if there’s a problem with the location of the subject property. If there is, then it’s equally important to determine if anything can be done about that problem and what risks there are of not being able to effect a remedy. Buying low because of location and later being able to sell high because you have in some way remedied the problem can be a profitable approach to dealing in real estate.