The Importance of Research When Considering an Area’s Potential
You’ve just pumped $350,000 into buying and renovating a home in a sleepy, yet relatively affluent suburb. But when you put the house on the market for $450,000, there’s little to no interest from buyers. The reason? One of the region’s largest companies is about to relocate its nearby offices and production plant—taking workers, jobs, business, and money with it. As a result, people are leaving the area… and they’re not interested in buying homes, no matter how much work you put into them.
If this sounds like a nightmare scenario, then it’s good to know you can relegate it to the realm of bad dreams by properly researching a neighborhood before investing in it. Here’s how:
1. Create a customer profile
A wealthy family looking to buy a home in a suburban area has different expectations and needs compared to a working-class couple who want to rent an affordable, safe property close to shopping, recreational facilities, and main access roads. Make sure you always understand the needs of your target market before deciding where to invest.
2. Get neighborhood data
You can use tools like Trulia’s Maps to find information about demographics, schools, crime, commutes, amenities, and hazards. Click on each individual tab to see overlays on the map of the area you’re researching. Compare this data to the needs of your target market to see if it’s a match.
3. Research local real estate data
While some of the larger real estate websites offer data about local real estate markets and trends, it’s often better to ask the local county assessor’s office and the local chapter of the National Association of Realtors® for detailed information. Note, however, that property values may be outdated, depending on the date of the most recent valuations, neighborhood sales, etc.
4. Collect information about regional developments.
New commercial and residential construction, revitalization initiatives, business developments, transportation routes, etc. can all make neighborhood more attractive to buyers and renters. Conversely, property demolition, urban blight, and the closure of companies, schools, healthcare facilities, and major transportation routes can render neighborhoods unattractive and cause property values to plummet. And of course, there are also instances where the closure of certain companies (for example, a factory or waste plant) renders a neighborhood more attractive while at the same time, new construction can also compromise the value of an area. For example, if a highway is being built through a wealthy rural area. To accurately estimate a projected value for a property, it’s clearly vital to have dependable insights into the long-term developments planned for the neighborhood. You can find information about developments by checking with the municipal building and planning office, where you should also inquire whether local zoning laws are likely to be changed any time over the next five to 10 years. Additionally, contact the local Chamber of Commerce and/or regional economic council for information about business developments in the area, and research regional economic news for the past 12 to 18 months.
The success of your real estate investments is not something you should leave up to chance. Gather as much relevant data as possible about a neighborhood before deciding to invest in it, and you can maximize your chances of getting the ROI your hard work merits.
Find the Right Financing
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