I have learned over the years to buy homes in better neighborhoods, or adjacent to them, because usually the schools and services (police, fire, libraries, etc) are better. Crime rates are lower. So people want to live there, and appreciation is stronger. And, look not just at a granular level within a metro area, but also at a state and/or regional level.
I have found that not only are homes in nicer neighborhoods more enjoyable to live in for many reasons, but they tend to make nice investments- better quality of tenant, solid appreciation, good code enforcement to prevent surprises that can affect home value, etc. The small or older home in a great area is an excellent suggestion.