Real estate investors have heard tons of pitches over the years from people looking for buy-in on up-and-coming areas they’re attached to. But how can investors determine for themselves which areas are good investments?
Members from the Forbes Real Estate Council, below, have a range of things they watch for. Some keep an eye on where the artistic or fresh college graduates set up shop, while others track transit system development. These elements — along with other signs, such as job growth or investments by major retailers into the area — point to an area that will soon blossom.
So why do these matter? And what other elements are worth keeping in mind? Here is what members have to say:
1. Look For Transit Systems Being Added
Transit and transportation being added to any area will always benefit property values. If an area that is going through transition has plans to implement a transit system, this is a sure fire sign that values will go up, based on the fact that the area is now more accessible to a larger population base. – Ali Jamal, Stablegold Hospitality
2. Rent Keeps Going Up
From a multi-family investment perspective, the best indicator that an area is up and coming is rents going up. This is usually determined by someone renovating a building they have had for some time and achieving a new rent that turns out to be more than anticipated. This usually indicates that a new tenant is coming to the area, because it is cheaper than an area that has already “arrived.” – Lee Kiser, Kiser Group
3. Follow The Creators And Tastemakers
We have always closely followed the movement of artists, musicians, painters, tastemakers and other creatives, as well as the moves of college graduates. Generally, the younger demographic and creatives use their ability and skillsets to beautify and add character to neighborhoods where they can afford things on their generally shoestring budgets. This brings in the gentrification wave and returns! – Ridaa Murad, BREAKFORM | RE
4. Watch Trends And Demographics
Look for trends and favorable demographics. Empty nesters downsizing, young working professionals wanting to walk to work and live downtown, 80 million echo boomers turning 18 and ready to enter college are examples of demographic trends that have been powerful leading indicators about up-and-coming areas. – Doug Fath, Wealthy Passion / Legacy Capital
5. Jobs And Schools Determine Location Priority
When it comes to determining the best locations for investing, the equation is really quite simple. You must look for job growth and quality schools. Those who move in for jobs pick where they live based off of schools or proximity to the new job center. Good school systems within towns typically have better occupancy rates and higher values. The equation: jobs plus schools equal location. – Tim Herriage, 2020 REI Group
6. Watch For Wal-Mart, Home Depot And Costco
If any of those big three retailers are coming to your town, then you are officially on the map. These companies spend millions of dollars in due-diligence before they open up shop. They look for long-term growth in the economy and won’t open up unless they know the town is there to stay. So leave the guess work to their well-paid advisers and be ready to pounce as soon as the announcement comes. – Chris Ryan, Luxury Lifestyles Group / RE/MAX Crest Realty Westside
7. Invest In The Spillover Areas
We often notice the best investments are in the spill-over markets, which are communities just outside where all the growth is happening in the hot market. As real estate values skyrocket, this instantly starts pricing people out of the hot market and they often look at the spill-over markets that mirror most of the winning characteristics of the hot market. – Sharran Srivatsaa, Teles Properties
8. Examine Time On Market Data
If you are investing with the intent of benefiting from rental gains and asset appreciation, the time on market for home sales in the area should be at 120 days or less. Understand if the area has a high rental demand from tenants. If yes, why so and how long do people rent for. Above all, ensure that purchase price is undervalued, in the sense that you’re buying at 70% of as-is value. – Sohin Shah, InstaLend
9. Seek #Millennialfying Urban Centers
Areas that are up and coming share traits when the urban centers start #Millennialfying. We start to see things like new developments going up, public infrastructure improving and the access to transit-oriented options expanding. Additionally, healthcare, education and walk score friendly neighborhoods are all candidates for up and coming areas as well, especially if jobs are being created. – André Bueno, The BM Group
10. Where’s The Starbucks?
Surefire signs of up-and-coming neighborhoods are 30-foot dumpsters in front of homes that are being scraped and rebuilt or remodeled, and national retailers or chains like Starbucks going up. The data that companies like Starbucks or Chipotle have are far-reaching, which means they know way before the general public does about where people are moving and why. – Joshua Hunt, TRELORA