Todd Jones and his wife had bought a townhouse in Wicker Park in Chicago in 2005, before it was a very trendy and expensive place to live. Gentrification had just started there.
“I sold it in three years and was very happy with my return,” says Jones, who now is president of retail mortgages at BBMC Mortgage, a division of Bridgeview Bank Group. He is headquartered in Lombard, Ill.
But buying a condo, house or anything else in an up and coming neighborhood can be tricky and sometimes dangerous. Paying attention to certain factors can help you determine if it’s a good investment or you walk away.
Here are some helpful trends and tips to see if a certain area might be a good place to buy a home even though it’s not the most established place yet.
Who should you talk to about neighborhood potential?
Jones suggests finding a well-performing realtor in that area to talk with.
“Realtors, in general, have the pulse of the environment. That’s how they make their living,” he says.
Realtors know if some place is becoming a hot area or it’s going out. They know if it’s a safe area or not. But Jones says there are plenty of technology and websites out there to validate what you are hearing from people such as crime rates and school ratings.
You can also find out whether the population is decreasing or increasing in the last five years. Realtors can also speak to the economic development side of the area such as how many businesses are coming in.
Plus, finding out the quality of schools can also be make-or-break information because good schools bring in more people and more businesses, he adds.
Where are you at in your life?
If you are a single and children haven’t entered your life yet, you might be more willing to take that risk of buying in an area that isn’t quite developed yet, Jones says.
“If you have kids involved, safety becomes No. 1. You should hit an area a couple of years after seeing the trends are going in the right direction,” he says.
Watch for certain groups of people to move in first
Usually the artists (painters, musicians, and other creative souls) along with recent college graduates move in first to an area because the rent is cheap, Jones adds.
How do you know if it’s safe enough to move in?
Even with all the statistics you can read online about crime rates, you definitely should drive around the area at night, during the weekdays and weekend, he says.
“You need to get the feel for yourself. Always talk to police officers in the area. That’s the sanest thing to do. They don’t want you to move to an area that isn’t safe,” he said.
What corporate businesses should you look for?
Starbucks does a deep analysis of the community and the people that will spend $5 for a cup of coffee, Jones adds. They are an example you will see with gentrification.
“Also Wal-Mart can be a bad word in some areas,” he adds.
But they are building two styles of stores – mega stores and boutique stores with areas with less space. They wouldn’t be building in areas unless they knew it would be profitable.
How do you know what price to pay in these neighborhoods?
“This can be problematic,” Jones says. “You can’t do comparable properties in 1-3 miles and break it down for price for square foot.”
That doesn’t always work. Ask realtors and ask people that have bought there already.
What other things should you look for to perfect places to buy?
When multiple large employers or a professional sports team announces plans for that area, that means they will need significant employee forces. Those employees will need housing. So, buying now when it’s not so expensive is a good timing.
“Businesses drive the development of communities,” Jones says.
For example, when The Thunder came to Oklahoma City, there was no rhyme or reason why a professional basketball team came to that particular city.
“But when the people with big money think this city will expand, you listen,” he says.
You can also look to areas where there is a military base or a big university. Look to feeder populations for fast-growing cities such as Georgetown, Texas. It is east of Austin, which is one of the fastest growing places in the county.
“It’s strategically placed. Austin was only built for 700,000 people. You have to expand out,” he adds.
People want good schools and to still have that certain lifestyle, Georgetown becomes that option. Plus, it’s near one of the largest military bases, Fort Hood, he says.
A few other trends to watch for include transit and transportation being added to neighborhoods; healthcare clinics, boutiques and restaurants popping up; and new schools being planned.
“It takes neighborhoods awhile to turn around,” Jones says. “It’s not a month to month thing. You may see it click in 3-5 years.”