What I Look For In A Neighborhood When Buying Investment Real Estate

What I Look For In A Neighborhood When Buying Investment Real Estate

What I​ Look for​ In a​ Neighborhood When Buying Investment Real Estate
I often get the​ question, What do I​ look for​ in​ a​ neighborhood?
My answer is​ always the​ same .​
Easy .​
I usually get a​ strange look, but it's true .​
In a​ neighborhood, I​ am looking for​ clues to​ assess the​ value of​ the​ property, plain and​ simple.
Well, maybe not so plain and​ simple, I​ know .​
So let me explain.
Normally, my rehab properties are not in​ the​ expensive areas of​ town .​
It's rare that you'll find a​ rehabber meeting his or​ her investment goals buying in​ the​ expensive parts of​ town .​
There are generally fewer homes needing rehabbing and​ the​ fixer-uppers that are there are going for​ top dollar .​
It's safe to​ say the​ bulk of​ the​ investor activity is​ taking place in​ the​ mid-to-low range of​ home prices.
That's not to​ say I​ wouldn't look in, or​ buy in, the​ swank neighborhoods .​
Occasionally there are bargains to​ be scooped up there, but not with enough regularity to​ focus on.
But, there are some places I​ definitely WON'T invest in .​

I won't TOUCH the​ urban war zone .​
Let me describe what I​ mean .​

You don't go there because it's common knowledge that you shouldn't .​
if​ you happen to​ wander in​ that area, you are given suspicious looks by all the​ folks walking the​ streets and​ sitting outside their houses .​
Your car definitely doesn't belong there! It seems nobody takes any pride in​ their dwelling, and​ trash seems to​ be a​ normal part of​ the​ décor.
Do you know of​ places like that? if​ you are living in​ a​ town of​ any size, you probably know of​ a​ neighborhood that fits the​ above description.
Watch out for​ is​ neighborhoods in​ serious decline .​
if​ the​ area looks like it​ soon WILL BE an​ urban war zone, pass on the​ deal .​
You don't need a​ property that is​ hard to​ rent or​ sell .​
the​ holding cost can take your good investment into the​ red! You can drive through and​ pick up many clues in​ this regard .​
- See if​ there seem to​ be a​ high number of​ for​ sale signs .​
If a​ mass exodus is​ in​ progress, you DON'T want to​ be where everyone is​ trying to​ get out .​

- Check crime statistics with the​ local police
- Check recent real estate sales if​ you can get a​ peek at​ the​ MLS .​
- Ask an​ appraiser about what values have done in​ that area over the​ last couple of​ years .​
Areas in​ decline usually stand out in​ your appraiser's mind, so an​ appraiser can be a​ wealth of​ information.
- Talk to​ other investors and​ wholesalers .​

- Talk to​ your title company contact…they often know trends for​ a​ given area very well!
Another tactic is​ to​ work it​ the​ other way .​
Find out what's hot before you start driving and​ looking!
Talk to​ your investor friends, wholesalers, appraisers, and​ title company contacts about what areas are hot for​ investors these days .​
That way, you start learning positive areas and​ you have the​ benefit of​ someone else having gone before you .​
of​ course, do your own checking but find out where investors are putting their money will give you clues about where you want to​ invest .​

I would recommend against asking family and​ friends not related to​ the​ real estate industry about neighborhoods .​
This is​ often the​ worst assessment of​ value you'll ever find .​
the​ reactions you'll get to​ areas from uninformed family and​ friends will often be negative based on hearsay .​
Get your information from reliable sources and​ ensure it​ is​ based on fact .​

True enough, there are LOTS of​ neighborhoods that are much better than war zones, yet not in​ the​ expensive areas of​ town .​
That's where my best investments live.
So, what do I​ mean by value?
If a​ property is​ in​ an​ area where you WILL invest, it​ comes down to​ the​ deal itself .​
for​ me, the​ better the​ deal, the​ less I​ worry about the​ neighborhood .​
as​ a​ refresher, here are the​ basics of​ property analysis:
- What can I​ buy it​ for?
- What will it​ be worth all fixed up?
- How extensive is​ the​ rehab?
Those are the​ basic questions that must be answered in​ an​ individual property analysis, but that's an​ article…perhaps a​ book…for another day .​

In conclusion, determine whether you will invest in​ a​ neighborhood, then evaluate the​ deal itself .​
You will probably find that there are some neighborhoods where you won't invest unless the​ deal is​ a​ home run .​
By the​ same token, there will likely be areas that you feel confident enough about that you'll take an​ average deal because you like that particular area .​

You are the​ investor, and​ these are the​ kind of​ exciting decisions that investor get to​ make! Isn't that what makes this fun!

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