Have you caught yourself thinking more deeply about the advantages and disadvantages of investing money in a cul de sac investment property?
Table of Contents
- What Is a Cul De Sac?
- Why Invest in Cul De Sac Rentals?
- What Are the Drawbacks of Cul De Sac Properties?
- Are Cul De Sac Properties More Expensive?
- What to Look for in a Rental Property
- Summing Up
You can’t just allocate funds towards a certain investment property; it’s never that simple. As an investor, you must be knowledgeable and familiar with everything related to the area in question.
It also includes conducting deeper research into the real estate market in question, the profitability of that particular investment property, and a thorough analysis of the neighborhood.
And speaking of the neighborhood, is it worth investing in a property on a cul de sac?
It’s safe to say that opinions differ. Some are all for it; others hate the mere thought of it. Surprisingly, it can often lead to some hesitations among beginner investors.
So, to learn a bit more about investing in properties on a cul de sac, the difference between a cul de sac and a dead-end street, and some key pros and cons of this type of investment, please continue reading.
What Is a Cul De Sac?
To make the rest of this article as clear as possible for you, we should first turn our attention to the cul de sac meaning for those who are encountering the term for the first time or might not be completely sure what it means.
Here’s a brief explanation that’ll hopefully clear things up.
The term “cul de sac” comes from the French language—and the literal translation would be the “bottom of the bag.” How is that connected to real estate? Well, a “cul de sac” essentially represents the end of the street, where there is no more traffic.
Although it may sound negative at first, it’s just a term used for a type of dead-end street, typically one with a rounded end. While we’re at it, we should point out that such type of street layout actually allows more space in the driveway.
So, don’t let the French translation confuse you; there is nothing bottom-of-the-bag about a cul de sac street.
Now, there’s also something known as a dead end street, which is another common term in street terminology.
Why are we mentioning it? Here’s the thing:
Many people actually confuse the previously mentioned “cul de sac” with a dead-end street and continue to use them interchangeably in everyday conversations. However, there’s a difference between the two.
A dead-end type of street actually refers to a one-way street; that’s traffic lesson 101. In real estate terms, similarly, it comprises one route that serves both as an outlet and an inlet to a property or a line of properties.
There is no rounded end at the end of the street here, though—at least, it’s not implied in the meaning. And unlike in a cul de sac area, at the beginning of the street, you’ll mostly see a dead end road sign, which serves as a warning that you’re heading into a one-way street.
With cul de sacs, you won’t see such a sign. Why? Because once you get to the end, you’ll still have enough space to turn your car around and go back.
Next, there’s the whole cul de sac vs court matter.
What’s the difference between the two?
As we’ve explained already, with a cul de sac, there’s a rounded end, but a court will end up in a loop—or a circle, for that matter. With a court, there’s no through traffic.
In more familiar terms, it’s similar to a square or plaza. With a court, there are eight or fewer lots that are not interrupted by a through road.
Similar to the ones we’ve mentioned so far, there’s a chance that you will come across paper road streets in your real estate journey.
Paper roads are streets that are legally recognized as roads and will appear on your Google Maps but have not been built yet. In fact, they are very common—perhaps due to a delay in construction or simply because the construction of that street never happened.
For example, the landowner of the parcel might’ve wanted to subdivide the property that they own and sell it to someone else and hired an architect to make plans accordingly. But things changed—and the process stopped.
And so, the paper road remains on the map—but the process we used in the example above was never realized.
Related: Google Vacation Rentals: The Real Estate Investor’s Guide
Why Invest in Cul De Sac Rentals?
When it comes to a cul de sac neighborhood, we should point out some rather compelling reasons to consider it a worthwhile investment. Here are a few that might make you want to consider this type of investment:
Peace and Quiet
The first benefit that comes to mind when investing in cul de sac homes is the isolation from the rest of the world. Okay, maybe not the rest of the world—but certainly most of the neighborhood you’re a part of here.
Some people consider the serenity a huge advantage—and they would very much like to move to an area like that. For investors, that’s a more than prospective opportunity, especially if they already have a potential tenant in mind.
Spending time on a cul de sac property means peace and quiet for your tenants and separation from the rest of the neighborhood, and most importantly, the noise associated with city centers. It would be the complete opposite of what they were used to on their old, busy street.
If you advertise your property accordingly, you’ll see a lot of interest from families with young kids and residents from urban areas looking for a vacation in a quieter community.
We’ll even argue that it can be a suitable investment for retirees.
For both investors and those who will spend their time here, it’s very important to be familiar with the meaning of a through street in relation to cul de sac and traffic rules that are at play here.
With a cul de sac, traffic is not an issue. It means that, here, you won’t need to wait long to park your car or enter your own driveway.
On a related note, you can be confident in the safety of your vehicle and know that the risk of potential theft or damage is minimal.
Safe for Children
Next on our list of positive aspects of investing in a cul de sac house is that it is the perfect environment for growing families with kids—and family vacations in general.
Again, the most significant advantage is that you are pretty much separated from the rest of the neighborhood, and there’s not much going on in general.
For families with small kids, that is an ideal opportunity to combine “useful” with “fun.” They have the freedom to enjoy their time on the property and let the children out to play without worrying that something dangerous might happen.
The stress that urban places cause would no longer be an issue. Of course, it isn’t a sign that children should go without any supervision—just that it’s safer for them to play on a cul de sac than in the city center, where there’s fuss and buzz 24/7.
If you present this unique argument to potential tenants, we are confident that many parents among them will agree with your viewpoint.
Related: Safety Clause in Real Estate: What Is It?
What Are the Drawbacks of Cul De Sac Properties?
Of course, investing in cul de sac properties is not all “sunshine and rainbows.” As with most other investments, there are some drawbacks here.
Let’s go through the most commonly mentioned ones together.
Less Parking Space
Just as there will be less traffic, there may be less parking space. Of course, it is the case with areas where most tenants own one (or more) vehicles.
So, it may happen that your neighbor, in the absence of space, parks their car in front of your driveway—which would automatically block your exit. Rarely enough, but it still happens.
It can be helpful to take the time to invest in a built-in garage as an additional space where tenants can park their vehicles without interfering with their neighbors.
Unfortunately, although we’d like to, we cannot choose our neighbors, and we must come to terms with that—and learn to deal with the people living next door.
In cul de sacs, it can perhaps be a slightly more tense situation, as you’re closer to your neighbors. Ideally, it should build a stronger sense of community among the owners of the cul de sac houses.
However, in reality, it’s far from ideal. It’s possible that there will be some sort of misunderstanding with your neighbors and that you won’t see eye-to-eye in some situations.
It can cause tension—and, in some scenarios, if the situation escalates, it may even lead to legal issues. Needless to say, you don’t want to end up in a situation like that.
As our final point, we’d like to mention something crucial to include in your train of thought when deciding on investing in this type of neighborhood.
We’re referring to accessibility in terms of emergencies, especially with people suffering from severe illnesses and those likely to require frequent hospital visits.
Since a cul de sac area is tucked away from other houses in the neighborhood—and one of the obstacles here is the dead end road—it may be extremely difficult for emergency services (ambulance, firefighters, or police) to get to the property in time.
So, before you decide to invest in such a type of property—or even if you are already an owner and with tenants ready to move in—it’s recommended to raise awareness of such issues.
It is, by no means, desirable to end up in a situation where emergency services do not arrive on time. It’s especially true for retirees, as we’ve mentioned that cul de sac properties are very desirable in terms of them enjoying their peace and quiet.
Are Cul de Sac Properties More Expensive?
A home on a cul de sac doesn’t need to be more expensive. However, it is often the case that, in some real estate markets, buyers are known to stand in line to invest in this type of property. In fact, they’ll have to pay up to 20% more than for an ordinary house down the road.
Why is that?
The jump in price and desirability towards cul de sac properties is also related to the size of the property that the homeowner gets and the overall safety, as we’ve already mentioned. Sellers value safety and privacy, so don’t be surprised if the house price is higher than what you’re used to on an average basis.
What real estate data will you need for analyzing investment properties? Get the answers here.
What to Look for in a Rental Property
Whether we’re talking about investing in rental properties in cul de sacs or somewhere else, investors should consider some guidelines indicating whether it will be a successful or unsuccessful investment.
Here’s what you should look at before investing in a cul de sac house:
Difference in Down Payment
Since we’ve mentioned that cul de sac homes are highly-priced, it is imperative that you take note of the differences in down payment. The differences can end up being huge, especially when it comes to buying an investment property or single-family home.
For single-family homes, it can be anywhere from 1%s-10%, while for an investment property, down payments can reach up to 15%-20%.
Why? The requirements for approval with investment properties are generally much harder to meet—especially when securing financing.
Related: Earnest Money vs Down Payment: What You Need to Know
Fixes and Variable Expenses
The next thing to pay attention to would be the fixes and variable expenses related to your desired investment property. Investing is not a one-time purchase—it’s a continuous effort.
You need to inquire about other factors, as well:
- HOA fees
- Property management expenses
- Property taxes
Remember that they are just some of the points to look out for here. Moreover, the variable expenses will differ from property to property. So, you should set a budget that will be able to cover them.
Even if cul de sacs are talked about as a location on their own, it is important to draw the attention of investors to the rest of the neighborhood.
Location is perhaps the strongest indicator of whether or not you will decide to allocate your funds here. It affects other factors, such as the predominance of people living in the area, climate, convenience for families, etc.
To make your search for profitable properties easier, you can turn to Mashvisor’s Property Finder for assistance.
So far, we’ve successfully covered the topic of cul de sac properties, differences among the court, paper roads, and dead end streets—and the primary pros and cons of investing in such a type of neighborhood.
Let’s just go through the most critical points once again.
The most important thing, of course, is that the investor is aware of what a cul de sac is. In the simplest terms, it’s the rounded end of the street, where there’s no more traffic.
As for the advantages (and disadvantages) of investing in cul de sacs, one of the main benefits is that it is suitable for growing families with kids—and it automatically means fewer traffic jams.
On the other hand, cul de sacs also imply fewer parking spaces. Plus, you can be stuck with not-so-friendly neighbors or not see eye-to-eye with them regarding some issues.
It’s also crucial to mention that the prices of such properties are generally higher than usual.
Lastly, before investing, you should take into consideration the differences in down payment for the properties, the fixed and variable expenses at hand, and, of course—the rest of the neighborhood.
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