Four Characteristics Of An Up-And-Coming Neighborhood (And Why You Should Buy Your Next Home There)
When buying a home, it's a good idea to dive deeper than just "location, location, location." Look for neighborhoods that have signs of big future growth.
When you live in or are looking to move into a neighborhood in a market that has become scorching hot, it's normal to feel defeated looking at real estate prices and feeling priced of anything in the area. Buying property in an up-and-coming neighborhood before the values increase is, in my view, the best possible investment in real estate.
Up-and-coming neighborhoods are those that have not yet reached the transition, so this can often mean living in a location with higher crime rates and lower-rated schools. The lifestyle is not for everyone, but the trade-off can mean a big return on your real estate investment down the line. I would not recommend anyone sacrifice their safety — no investment is worth that high of a risk — so it’s important to do your due diligence by checking crime rates and visiting the location in person both in the daytime and after dark to assess if you can truly see yourself living there.
By buying in an up-and-coming neighborhood that has not yet reached its peak, you set yourself up for rewards later. When neighborhood values increase, your equity will go up just as rapidly. After the neighborhood is already established, home buyers will have to pay a premium to buy property in the area. Wouldn't you love to tell people you lived there “before it was cool”?
Here are some pointers for spotting a soon-to-be hot-spot real estate market worth investing in.
The biggest sign of change is new homes and businesses popping up in the neighborhood. Restaurants, bars, coffee shops, gyms and nightlife announcements in the press help future residents scout the up-and-coming locales. Pay special attention to the locations mentioned in reviews about new or coming-soon hot spots.
Investors remodeling homes are on the pulse of the neighborhood revitalization since they have a trained eye for what results in worthwhile financial gains. Newly flipped homes are a sign that home buyers who don't want to take on repairs or renovations will be drawn to the stylish renovated homes and make a move to the not-yet-trendy neighborhood.
Young People Moving In
Young people are often seen as the creative tastemakers who determine which locations will be trendy. Traditionally, young people will move to neighborhoods where the rent or home prices are affordable and local amenities and trendy hot spots are plentiful. Once enough young people have moved to an area, bars, restaurants, shopping destinations and other businesses will follow.
Close Proximity To A Big City
Development always spreads outward from popular cities. High home prices in city centers often push home buyers and renters out, so it's likely only a matter of time until neighboring areas also become more developed and targeted by amenities providers.
If the neighborhood initiates a cleanup or schedules a new park opening, this is a sign that its trajectory is on the rise. If the municipal government is investing in the area, private developers tend to also see it as a solid investment, and follow suit with building new businesses and homes and revamping the existing structures.
Keep in mind that buying in a less-established area requires long-term vision. It may take many years for the neighborhood to establish a reputation. Waiting for price increases and equity rewards takes patience, but I have always seen it be worth it in the end.