Distance coupled with accuracy of the location. Depending on what you're "Finding" the device might be using GPS or wifi to locate itself, or (in the case of e.g. AirTags) it might be relying on GPS or wifi location of the device reporting the presence of what you're looking for.
GPS is VERY accurate, but only when outdoors. When indoors the GPS signal is mostly just through windows so limited direction; limited number of satellites so accuracy would be within some range (potentially hundreds of meters). wifi accuracy is typically in the 10-20 meter range.
One thing that MIGHT influence what you're seeing with your neighbor's address, is the location of your wifi and your neighbor's wifi base stations. If the device you're tracking (let's say, an iPhone) sees your home wifi and your neighbor's wifi - but for whatever reason the signal from the neighbor's is stronger - that would influence it.
