Buying a home in the United States where the buyer is buying the most expensive house on the block is not wise from an investment standpoint.

For the average homebuyer, buying the most expensive house on the block just to show off their status in life is very unprofitable.

If a buyer buys the most expensive house on the block, then when the property is resold, he or she is penalized by the principle of regression - the house has to sell for less because of the low prices around it.

Second, from an investment perspective, the most expensive house on the block is often the property with the lowest return on investment.

Suppose a buyer buys a $250,000 house in a neighborhood where the average home price is $150,000.

From an appraiser's perspective, this house is already overpriced. Since neighborhood home prices are generally lower than this home, your home has more limited room to increase in price at a time when home prices are increasing throughout the neighborhood.

In addition, if a buyer spends another $50,000 on further alterations to the house, such as renovating the new kitchen, it only adds to the severity of the problem - the amount invested in the house is so large that it will be difficult to recoup the cost at resale and be forced to lose money. Because it is basically certain that a new kitchen will not increase the value of a house by $300,000.

Knowing these two points, we can know that a wiser investment should be to choose a better neighborhood for the same price and buy a house in a new neighborhood that is less expensive than its neighbors.

Avoid cheap homes with irreparable defects

In a desirable neighborhood, there is a cheap house and the price is low because of some small defects that can be repaired, then the house here is worth buying for the buyer.

For example, renovations, bathroom remodeling, a kitchen that needs a new stove and cabinets, upgrades to the house's electrical system, etc. All of these issues can be remedied without costing the buyer too much.

The house is not renovated and needs to be painted, landscaped and simply decorated by the buyer to meet the condition of other houses in the neighborhood, then buying this house will be a very good decision.

However, some houses may have some non-adjustable flaws and should not be bought even if the price is cheap.

For example, the house has a unique style and it will be very difficult to sell. Or the house is in a poor location, located at an intersection with a lot of cars, and it will be difficult for the buyer to change this situation by spending money.

Or, to fix a leak in the house, the buyer has to replace the roof of the house, which costs at least $125,000, or maybe the buyer needs to fix a new foundation, new plumbing, etc. All of these require huge amounts of money to be paid, so the total cost is not cost effective for the buyer.

Beware of over-rebuilding a house

A house is like a glass that overflows when it is filled with water. Similarly, when a buyer over-remodels a home, the home itself becomes less profitable to the owner through resale.

Excess in this case is measured by the cost of remodeling the house and whether it has substantially exceeded the selling price of similar houses in the neighborhood.

In this case, even if the buyer initially buys the cheapest house in the neighborhood, but the buyer spends so much money rebuilding the house that the cost of the house far exceeds the average price of the surrounding houses, the buyer still ends up spending the highest price on the house in the neighborhood, thus significantly reducing the benefit he can obtain.