Buying a home in the right neighborhood is crucial to profiting from your investment. The key is to get in early before it becomes the next big thing. There is always a risk, but if you do your research and make informed decisions, you might benefit greatly from future returns on your investment. So, how do you know if a neighborhood is up and coming?
Here are 10 ways to help you spot a potentially up-and-coming area with hot investment potential:
1) Look for future transit plans and the area's accessibility. Does the city have plans to build any new transit lines? If so, take a look at those areas first. Is the neighborhood easily accessible from major highways and/or existing public transit? Is it an Uber/Lyft convenient area, a quick commute to the major urban hubs?
2) Follow the creatives. The artists, musicians, artisan chefs...they make the neighborhood hip within their budget which attracts growth. Look for the art scene, culinary experiences, farmers' markets, music venues, art galleries and the nightlife.
3) First-wave corporate businesses are moving in. Starbucks, Whole Foods, New Seasons, to name a few…they spend a lot of time and money researching an area for viability before setting up a new location. If you are in the outskirts of a city or in a more suburban area, look for the new Home Depots, Costcos, Targets, etc. because they are expecting growth in that area. Piggyback on corporate research. It takes about a year for them to open…follow the permitting.
4) Homes are selling quickly. DOM (days on market) is low or declining somewhat rapidly.
5) Architectural themes with a following. Tudor, Victorian, Mid-Century, Craftman, to name a few. Look for historical architecture in residential neighborhoods.
6) City/town is investing in major renovations. Check with the city and find out if there are any urban renewal plans in place or coming up in the near future. Is the city or town planning on building new public structures such as community centers or stadiums? Are the roads being improved? If the city or town is investing in growth, this is an excellent sign that you are on the right track.
7) Find the spillover areas just outside of booming neighborhoods. Check out the neighborhoods one or two transit stops away from the hot spots.
8) There are signs of a lot of home renovations. Are there large construction dumpsters in the front of many of the homes in the area? Look for the construction site porta-potties.
9) Walkability. Walk around the neighborhoods of interest before you invest. Spend some time there…view it at different times of the day and night. What are the walkability scores for the area?
10) Rents keep going up in the area. This is another good indication that the neighborhood is up-and-coming. You should also look at historical data for the area to compare the current price to rent ratio to the historical price to rent ratio.