What do Ellen DeGeneres, Jeff Bezos, and Mark Zuckerberg have in common? Besides scandals, they have all bought the house next door. Why are they doing this, and is this a practice the rest of us might want to consider? Buying the house next door might make sense for wealthy titans, but is doing so a good strategy for the average homeowner or investor?
Why the celebs do it
Take Jeff Bezos
Buying the home next door is part of his MO -- he's known for this. Bezos, the richest person on the planet, bought several properties in the 1990s that surrounded his Seattle estate and, in 2014, bought the home next door to his Beverly Hills home. Most recently, as you might have heard, Bezos shelled out $165 big ones (million) for David Geffen's old estate, 10 acres in Beverly Hills. And even with this purchase, Bezos still had a need to buy the house next door, a quaint two-story traditional, for a mere $10 million.
Why this newest house next door? No one knows for sure.
A home office, perhaps? A guest house? Staff quarters? If you're the richest person in the world, it really doesn't matter the reason. You buy because you can. But for everyday investors, it's usually important to have a plan.
How about Ellen?
Ellen, like any true real estate investor, is in the game partly to make money and partly for the sheer love of real estate. Ask anyone who buys multiple homes, and they'll probably tell you that they are driven to do so. And that drive is one of the reasons DeGeneres buys homes. Once, in 2008, she bought the two homes that were next door to hers.
Why that acquisition? To get married.
DeGeneres has been buying and selling luxury properties in California since 2003. The '08 purchase of a 9,200-square-foot property led to the acquisition of two surrounding homes in order to make a compound of sorts, and this is where DeGeneres was married.
And Mark Zuckerberg?
Zuckerberg often buys homes that surround his. Probably his most famous house-next-door purchase was with his Palo Alto home, where he bought four surrounding properties.
Why buy four homes next door? In true ironic fashion, Zuckerberg, hold onto your seats, buys surrounding properties for… privacy reasons.
In this case, Zuckerberg bought the surrounding homes to prevent a new-build home that would have been tall enough to allow the neighbors a view inside his personal bedroom. Rather than deal with that, Zuckerberg bought all the neighboring homes to prevent taller new builds. (All neighboring homes need to stay lower than his.) It appears that this Facebook (NASDAQ: FB) CEO sure does care about his own privacy.
Strategy for the average investor
If you're pondering whether buying the house next door would be a smart investment, you probably aren't buying for the same reason the celebs do. You're probably interested in making money. And there are two good options for achieving this: Rent the property or flip it.
Just like with any investment, however, you need to determine whether the numbers work and whether there's a market for your potential rental or flip. In other words, it could be the height of convenience to buy the house next door, but unless it makes good financial sense, you might need to pass… unless you're like a celebrity and money is no object.
Living next door to your renter: pros and cons
Buying a house next door that you intend to rent to tenants could work out well for you if you're in a good rental market, but even if you are, you could find yourself in an awkward situation when worlds collide, so to speak.
As long as you and your tenant can maintain a professional business relationship, the management of the property will probably be easier for you when it's right next door. You'll know right away if your tenants move someone new in or try to sneak in a new pet, for example.
Communication can be more relaxed, as you and your tenant can possibly talk to each other, as neighbors do.
Living next door to your tenants could prove to be too close for comfort. If you become friends, it will likely be more difficult to enforce the lease terms, such as fees for late rent.
Your tenant could feel freer to hit you up every time something needs attention, including small things they would probably take care of on their own if they weren't right next door, such as changing the filter on the fridge.