Advice on Evaluating Neighborhoods to Invest
Before buying a home to invest in, it pays to do some research on the neighborhood you want to invest in. Narrowing down certain areas you feel are prime for profits to be made will allow you to target your marketing and test your strategies in order to validate your assumptions. The neighborhoods that you decide to invest in could have a big impact on your investing success. You want to ensure that this area is a place where people want to live, schools are good for their children and there is a low crime rate. If people don’t want to live in the place you are investing in, you will have a much harder time selling and will find yourself holding properties longer than you want too. So how do we get a good feel of a specific market before we decide to invest our money?
1) Local Market Research - You can either get information from your real estate agent or research the area yourself. You want to make sure you are investing in an area that meets your goals. Whether you are looking for a very safe neighborhood with a low crime rate, a neighborhood that seems to appreciate well, a neighborhood that is close to your personal residence or work. Just make sure you narrow down your target area to a few zip codes or specific sub divisions that you feel offer an opportunity for you to profit. Do your homework and if you need help ask a professional. Make sure you choose a location where houses are selling and people are interested in living.
2) Crime Rate - The crime rate in a specific area is very important for most people looking for a new home. They want to be ensured that their families are going to be in a safe place. Living in a high crime area can certainly affect the value of a home and will also limit the buyers. Depending on your goals and what investment vehicle you choose, you may decide that you want to invest in rentals in C or D level areas to increase your cash flow. Just make sure you do your research on this type of investing and realize what you may be getting yourself into.
3) Areas Supply of Houses- Here we want to figure out how long it is going to take to sell all of the houses that are listed for sale in our target area. This will give us some better input on the rate at which houses are selling in the neighborhoods we are targeting. We want to determine the number of homes that are listed in our area (zip code). Determine how many houses were sold in the last 30 days. Divide the number of actively listed homes by the number of homes that are sold. This number will give the amount of time it will take for all listed properties to sell.
4) Amenities - Take a look at what is around your target neighborhoods. Are there grocery stores that are close, restaurants, highways, is it in a convenient location. People want to be able access valuable areas in a couple minutes. If you find a neighborhood that is close to valuable amenities it will be a bonus for an easy sale.
5) Schools - Take a look at the school system in your specific area. Are the schools rated highly? Do they offer the education you want for your children? The school system in these neighborhoods will be very important to the future buyers of your investment property.
6) Google Trends - Google Trends can provide a lot of insight into what’s popular locally. Are people searching for homes? How affordable are rents? Are people constantly looking at foreclosure issues? What topics and keywords are trending, and which are declining?
7) Market Direction - Take a look at where your specific market is headed. Are people currently buying a lot of properties (sellers’ market) or are sellers have a hard time selling and a lot of homes are sitting on the market (buyers’ market). This goes back to being in a neighborhood that people want to live and people will buy into.