One of my field team members called me the other day. He had been out scouting for potential properties and thought he struck upon a fantastic prospect. “There is just one problem,” he said, “This neighborhood is so loud.” He wondered if the noise would affect our ability to sell it even if we did quality renovations. As an experienced investor, I know the importance of evaluating each property purchase carefully. But there’s some degree of intuition that’s required as well. In this instance, the research also backs up my gut sense: Noise can be a determining factor for home buyers and subsequently affect property values.
Effects of Noise Pollution on Property Valuations
More than just a nuisance, most people are aware that noise pollution can have significant health effects. Some of the effects include higher stress and stress-related illnesses such as increased blood pressure. Noise can also cause anxiety, sleep disruption, and lost productivity. Even more dramatic, however, is the fact that noise is the most common cause of hearing loss among young and middle-aged adults.
But the negative effects of noise pollution don’t end there; research shows that it can also dampen property values. Most studies have focused on the effects of airport noise on property values, concluding that it does indeed have a significant negative impact with valuation drops of between 0.4% and 1.1%. Other studies have shown an 8-10% drop in value for properties that are situated near highways. These numbers reflect how noise pollution can skew buyers’ perspectives of a property, making it hard to sell without dropping the price.
New York’s Noisiest Neighborhoods
Despite the 2007 update to New York’s noise codes, which took advantage of advances in acoustic technologies and set standards for noise levels, complaints by city residents suggest that it remains a significant problem. In just a little over a year’s time, between 2013 and 2014, our city’s 311 service logged more than 140,000 noise complaints. That amounts to roughly one noise complaint every four minutes!
Based on data from these 311 calls, the top ten noisiest neighborhoods in New York are:
- Midtown/Midtown South
- North Side/South Side
- Soho/Tribeca/Civic Center/Little Italy
- Battery Park City/Lower Manhattan
- West Village
- East Village
- Washington Heights North
- East Williamsburg
- Hudson Yards/Chelsea/Flatiron/Union Square
As you can tell, generally speaking, noise complaints are lower further away from Manhattan. But, even in the quieter neighborhoods, particular houses might have a noise problem that you need to identify before investing in a property that will be difficult to achieve the highest potential returns from.
How to Approach a Noisy Property
Obviously, a noisy property is worth less to home buyers. You may need to offer the seller less money than you would pay for comparable properties. Then, you will need to try to mitigate the nuisance during the rehab process and market it strategically when it’s time to sell. Here are some ideas about how to go about this:
- Install new windows. Some types of windows, like triple-glaze, can have noise-abatement effects. Of course, you will want to advertise them as a feature when it’s time to go to market.
- Set up a fountain. If the property has yard space, a fountain makes a nice decorative touch and can draw attention away from the surrounding racket.
- Target your buyer. Buyers all have different lifestyles and needs. Perhaps a two-income family with no kids will not be home during the noisiest hours, and so it will be less of a concern.
- Price the property right. Your investment property will not sell until all the truly comparable properties in the area, including those on the noisy same street, have sold.
- Home staging. Home staging can increase a property’s appeal to buyers and positively impact the sale price in the end.
As a real estate investor, your goal is to buy low and sell high. If you approach a noisy property strategically, the nuisance won’t necessarily have to impact your bottom-line returns very much.
Evaluating Externalities Like Noise on an Investment Prospect
While growing my real estate investment business in New York, I have found the best tools for analyzing investment prospects. The proprietary HomeVestors software tool, Valuechek™, enables me to confidently make an offer on a house while taking into consideration the effects of noise on the final market value after renovating it. When my field scout found that beautiful investment prospect in a noisy neighborhood, he was able to access ValueChek™ right from his mobile phone, crunch the numbers, and then use the app to share the data with me for making a final decision on what to offer the homeowners.
If you are growing a real estate investment business but need the right tools to work more efficiently and achieve better potential returns, I suggest you look into a HomeVestors® franchise too.
Each franchise office is independently owned and operated.
Photo Credit: Flickr user joiseyshowaa.