We hear all the time that buying the cheapest house on the block is a bad idea. "It won't appeal to buyers when you're ready to sell," real estate agents will tell you. But depending on your priorities and financial situation, it can pay to spend less than you can afford.

There are no "secrets" when it comes to home buying. But unless you're super wealthy and have millions in the bank, buying the cheapest house on the best block (in the best neighbourhood) is a smart decision. Most buyers avoid this, but when you think differently from everyone else, you can get significantly higher returns.

I once made the mistake of buying the most expensive house on the block because I thought it'd help me break resale records. But nope — that didn't happen. My property value went down due to the surrounding houses that sold for much cheaper than they should have. And because the pool of buyers looking for the most expensive houses is extremely small, I also had a hard time selling.

So I took a major hit and lost a lot of money. (Granted, I started my career in real estate at a young age, so I had a lot of learning to do. Luckily, my poor decisions taught me so much that I reached millionaire status at 26.)

'Location, location, location' I'm not saying, "Find the cheapest house and buy it now!" You'll only get high returns if you're buying on the best block in the best neighbourhood. Don't waste your time looking at a block full of dilapidated houses in a bad (or even mediocre) neighbourhood.

As a homeowner, you can do whatever you want with your house: Remodel the interiors, change the exterior facade, paint it a different color, update the landscaping and so on. But the one thing you can't do is change the location. Enter the real estate adage: "Location, location, location."

Do your research. Talk to locals if you can. Get in the car and drive around until know the area inside out. Are there good schools? Low crime rates? Lots of shopping and entertainment? Good transportation and walkability? Above-average job growth? Choose a good location and you'll likely get significant increases in property value. Choose a bad location and you're screwed.

In Part 2 of this article, Josh Altman shares his advice on:

- Advantages of buying the cheapest house on the best block - Getting started - How to be a master negotiator in a video!