How We Buy Real Estate In Up & Coming Neighborhoods | Financial Independence With Real Estate

Headline: 11 Tips on Identifying Up-And-Coming Real Estate Markets to Invest In

As you guys likely know, real estate investing has been a major wealth-generating strategy for our family during our decade-long financial independence journey. Over time, we’ve ended up learning a LOT, and I think it’s only fair to spread that knowledge around so that others can benefit!

Today I’m going to let you in on one of our best real estate investing hacks: how to buy property in an up-and-coming neighborhood!

When we started investing in real estate, we were living off of just one income but were still able to put in $20K for a downpayment on a fixer-upper. Eventually, we were able to grow that into 3 different investment properties. When we eventually sold these properties around 5 years later, the profit that we made totaled over $400,000!

We were able to make so much by focusing on investing in real estate markets that we were confident would rise in value. In other words, we made an active decision to ONLY invest in up-and-coming neighborhoods. This decision served us incredibly well as it helped make sure that we never paid for an over-valued property, and that the properties we did buy had a high probability of doing well.

So how did we go about identifying these neighborhoods? Keep reading to find out!

Tip 1: City’s Master Plan

Amon actually used to work as a city planner before we retired, so trust me when I say that using the city’s master plan to determine the best areas to purchase real estate is a MUST if you want to find the best deals! These master plans, which can often be hundreds of pages long, are veritable gold mines of information just sitting there, waiting to be used.

They can provide insight into economic opportunities, land-use policies, visions for growth, housing priorities and policies, future construction and development, vacant and underutilized land, and so much more. Basically, the master plan has all the information that you need to make an informed prediction about the future of any given neighborhood in that city.

And anyone can access these plans if they know where to look. Nowadays, most master plans are found online, and if they’re not, they’ll almost certainly be at the city’s planning department.

Once you’ve accessed a copy of the city’s master plan, you need to review it in detail and niche down to a particular community. Every master plan also has specific plans for each community, making it really easy to determine the future growth and development of areas that you’re hoping to invest in.

For example, if you look at a master plan and you find out that the city is planning on developing a transit line or stadium near a particular area, or if you discover that the city is going to be investing in revitalization efforts of certain downtown areas that are currently not doing so hot, then this immediately gives you ideas for possible investment opportunities.

Tip 2: Crime Rate

No one wants to invest in an area that is known for being a dangerous part of town. The property values just won’t be great because people will be less willing to move there. So obviously doing your research on the crime rate of a particular area is vital when deciding whether or not to invest there.

But the thing is, you need to look beyond the obvious. Look past the current crime rate, and pay attention to the crime rate TRENDS. Look at the past crime rates. If you notice that over time the crime has been dropping and the neighborhood has been getting safer, then this might mean that the neighborhood has recognized that the crime rate was high and has been working to fix this issue, or that there have been other changes over the last few years that have contributed to making the area’s reputation better. Whatever the reason, take the positive trend as a sign that this community is improving and the neighborhood is up-and-coming. And as it improves, so too will the property evaluations.

Tip 3: City Incentives

Is the city incentivizing new construction and renovation? Is it making efforts to promote innovation and bring new businesses in? If so, then that is an excellent sign that the city is looking for economic growth. And economic growth means that the city would be up-and-coming.

Tip 4: Real Estate Listings

If you notice that real estate agents are consistently listing certain areas as up-and-coming, then you might want to look into that. Now, don’t get me wrong- real estate agents aren’t necessarily known for their transparency. After all, their job is to sell! That said, if there is a consistent pattern to which areas are being advertised like this and these trends are backed up by your OTHER RESEARCH, then that might mean that there is something to the description. So look into what areas are becoming increasingly trendy and use this as an opportunity, if it’s not too late, to get into these communities.

Tip 5: Businesses in the Area

Look at what type of business are coming into the city and in which areas, regardless of any city incentives.

If, for example, you notice that a Whole Foods or a Panera Bread is coming into a particular area, or if things like vegan restaurants, trendy coffee joints, or organic grocery shops are starting to become more commonplace in certain neighborhoods, then that is an indicator that the demographics of that area are either changing now or are likely to change soon.

These types of businesses often serve as anchors, allowing other businesses to build off. Similarly, if you notice that businesses are starting to leave the area, then it’s a good bet that the area is in decline.

Tip 6: Housing Vacancy Rates

Vacancy rates refer to how much available housing space there is in a city. If you happen to be in a city that has a higher vacancy rate, then focus on the trends. If the rates are getting lower and lower, then the city might potentially be becoming an up-and-coming city.

Tip 7: Location

Is your city located near another affluent city? Maybe it actually makes more financial sense to invest in an adjacent city, rather than your own. Just make sure that these prospective cities have a good public transport system that connects them with other areas and cities. An affluent suburb with no public transit connections, for example, likely won’t be an up-and-coming because it won’t be as easy for urban expansion and population growth to happen, meaning there are probably better places to invest.

Tip 8: Sports Teams, Airports, Universities

Having a major sports team come to the city, building an airport, or opening up a new university or college campus are all signs that the city is in growth mode. These are organizations that would only be coming to a specific location if they had already determined that there was a big enough population that they’d make money. They’ve basically done the research for you!

Tip 9: Major Employers

When big employers move into a city they bring with them jobs. With more jobs, comes more money, and with more money comes increased housing demand! It’s pretty simple, really- when people are paid more, they are more willing and able to buy homes, which will push your house valuation up!

Tip 10: Number of Days on the Market

Identify trends on how long the average house stays on the market. If the trend shows that houses are staying listed for less and less time, that means that buyers are buying faster and demand for those houses is growing. And that indicates that that neighborhood is up-and-coming. But if houses in that area are already being sold within a matter of days, then you’re too late- that community’s already up-and-come! So look for areas where data shows that this is where the neighborhood will eventually be.

Tip 11: Building and Renovation Permits Issued

This will give you a great indication of the direction of city development. If you start to see an increase of permits (construction, residential, demolition, new additions, etc.) that the city is handing out, that’s a great sign that the city is growing. You can find all of this information online (its public record), and many times you can filter the permit search results by neighborhood or street address, helping you really niche down into the specific neighborhood you want to invest in.

And there you have it folks! 11 tips on investing in up-and-coming neighborhoods! These tips helped Amon and me tremendously on our FIRE journey and I’m confident they’ll help you too!