Is the 'worst house on the best street' still good advice?
By Franki Hobson | Published 13 May 2026
Make your bid on a strategy that stacks up beyond the renovation.
It’s one of property’s oldest rules: buy the worst house on the best street, and you’ll come out ahead. The logic is simple: a house can be improved, but a street’s reputation is far harder to change.
But as housing markets, buyer expectations and renovation costs keep shifting, investors are questioning whether the advice still stacks up. According to the Australian Bureau of Statistics, the total value of residential dwellings in Australia exceeded $12 trillion as at the December quarter 2025.
The rule still has merit. Land value has historically outperformed the dwelling, and location remains a major driver of long‑term price growth, especially near schools, jobs and amenities. A well‑located suburb can still deliver upside, even if the house needs work.
However, the reality is more nuanced. Rising prices and tighter borrowing power are pushing first‑home buyers towards lower‑priced properties. That often means taking on homes that need renovation, and that’s where the risks begin to shift.
Residential construction costs have risen materially since 2019, with labour rising amid skills shortages. A renovation that might have cost $50,000 a few years ago can now be closer to $70,000, with compliance, materials and delays adding pressure.
There is also the risk of overcapitalising: spending too much on upgrades in a tightly priced area can limit the ability to recover those costs, particularly if local rents or resale values don’t reflect growth.
It’s not just upfront costs that catch buyers out. Specialist landlord insurer Terri Scheer says many landlords focus on capital growth while underestimating the potential impact of property maintenance, tenant damage and rental gaps.
A more strategic approach
Former The Block contestants and Location, Location, Location hosts Mitch Edwards and Mark McKie have flipped more than 20 properties, focusing less on the cheapest house and more on where value can be added efficiently.
They describe “manufactured growth” as creating value through smart renovation, with Edwards noting that “you make your money when you buy your project, not when you sell”, and stress that the improvements should match what tenants or buyers actually want.
“The ‘worst house on the best street’ can still work, but it’s not simple,” McKie says. “You need to consider the extent of work, what you can afford, the ceiling on prices in the area and your overall goals. If the project takes too much of your money, you can end up in a fire sale where someone else benefits from your strategy.”
Adds Edwards: “One of the biggest mistakes is underestimating the scope of work or overcapitalising. Every area has a ceiling on prices, so expensive finishes don’t always translate into higher returns.”
Less is more: real‑life requirements
Australia has some of the biggest houses in the world, yet the average Australian household is only around 2.5 people. According to the 2025 report Australian Rental Cost Trends by Associate Professor Ben Phillips, principal research fellow at ANU’s National Centre for Social and Economic Modelling, new detached homes have grown from about 160 square metres in the 1980s to more than 230 square metres today: a mismatch between lived reality and what’s being built.
Renter expectations are evolving, too: functionality, energy efficiency and reliability are increasingly valued over high‑end finishes. Poorly maintained properties can struggle to attract tenants or deliver competitive rent, while over‑improving can erode returns.
Holding costs also need to be factored in. Renovations mean time off market, with mortgage repayments, council rates and other expenses continuing. For first‑time investors, that gap between purchase and income can impact cash flow.
When the strategy still works
The “worst house” strategy can still work when improvements are largely cosmetic, renovation costs are clearly understood, and the property can be brought up to market standard without exceeding the local price ceiling. If those conditions are not met, the strategy can turn what looks like a smart entry point into a long‑term financial drag.
For today’s investors, the rule is less about chasing the worst house and more about buying with a clear view of numbers, location and renovation costs. In a market where trillions are tied up in housing, the best decisions come from realistic budgets and expectations.
Terri Scheer is Australia’s leading landlord insurance specialist. For more information, visit www.terrisheer.com.au.