How To Find The Next Hot Neighborhood

Real estate is typically one of the soundest investments anyone can make.
Smart real estate investors follow the golden rule of capitalism: buy low and sell high. Everyone wants to find a bargain – or at a minimum, not overpay for their property.

As neighborhoods become trendy and inventory declines, finding a bargain becomes increasingly hard. Finding a neighborhood at the height of its popularity means paying a premium price and running the risk of lower valuations in the future. On the other hand, taking the risk of investing in a questionable neighborhood that never turns around is equally concerning to homeowners. Yet, these neighborhoods, the ones that haven’t already become trendy, are where you can often find the best investment opportunities. However, investing in this space requires some good old fashion boots-on-the-ground due diligence in order to minimize your risk.

Many articles about spotting the next hot market advise readers to consult metrics like trends in property values or days on the market in order to identify what markets are on the rise. While that information is great in order to understand the historical trends of an area, it will not help you find the next hot areas. If metrics are already showing increased desirability of properties in the area, chances are you’ve missed the boat on snagging a bargain. So how can a smart buyer pinpoint the neighborhoods that will be the next “hotspots” in the future? Here are five essential tips that I believe will help you uncover neighborhoods and signal good investment opportunities.

Public Improvements: In whatever city you are thinking you want to invest, check out the county’s records for current and planned public works projects. Certain projects like road widening and landscape beautification projects indicate areas the city intends to develop due to increased growth and demand. Being ahead of the population growth curve is important when looking for areas with increasing property values.

Rezoning and Building Permit Records: Land use regulations in cities and towns generally govern the type of properties that are allowed in certain areas. When buying an investment property you should look at the applicable zoning laws to understand how potential developments in the future might increase or decrease property values. When a property owner wishes to use land in a way that is not permitted by the zoning of their property, they must request to rezone their property to the appropriate classification. These land rezoning proposals and building permit applications are generally public record, and are great indicators of proposed future development. For example, a review of building permit applications might reveal that a Starbucks is being proposed nearby – and generally a new Starbucks being proposed for an area is a good indicator of an up and coming area.

Infill Development: Most urban communities have a significant amount of vacant land which, for whatever reason, has been passed over in the course of urbanization. Infill development refers to developing vacant or underused parcels of land or redeveloping existing properties within an urban area. When scoping out a neighborhood likely to turn around, you want to see some infill development. There should be a great number of lots or properties that remain undeveloped or underdeveloped, but some infill activity is a strong sign.

New Retail: As mentioned above, retail chains like Starbucks and Trader Joe’s are the well-known, tell-tale signs of gentrification. But people should also be paying attention to where the national big box retailers are going. Look out for the construction of new Costco’s, Target’s, Wal-marts, and Home Depot’s. The arrival of big box retailers often precedes an influx in population.

Word-of-Mouth Insights: Old-fashioned word of mouth is still one of the best ways to go when it comes to gauging the growth of a neighborhood. If you can’t speak directly with locals or shop owners, try browsing crowd-sourced information sharing websites such as our online community, Changeagentproperty.blogspot.com where people who live in the neighborhood offer their insights on how it’s changed, grown and gotten better or worse. You can find insight on new developments, amenities and lifestyle information – all in one place online, saving you time and money.