It's one of the oldest tricks in the real estate book. If you're trying to get the most out of the eventual sale of your property, you should try to buy in an up-and-coming area. Ideally, one that people will be going crazy over in a few years. However, then the question becomes how to find the next hot neighborhood before it pops. Luckily, there are a few strategies that you can use to get ahead of the curve. Read on below to learn how to find your next buy.
Start your search close to the current hotspot
As the current hot neighb0rhood gets increasingly popular, real estate values begin to rise. Sooner or later, they stop being reasonable and force those who still want to be close to the action to look elsewhere for affordable housing options. This causes what's known as a "spillover market", where people increasingly expand just a little bit further outside of the trendy area. The more people who inhabit these neighboring communities, the more likely it is that they will become popular unto themselves.
With that in mind, start by looking into these neighboring communities. You can use the rest of the tips to figure out on which one is most likely to become the next up-and-coming area. However, this will give you a framework on which to focus your search.
Scope out rising rents
Again, as an area gets increasingly popular, the cost of housing will rise. You can get in on the ground floor if you notice this increase right when it starts, as opposed to waiting until they get sky high. Keep in mind, however, that we're talking about a substantial increase. Rent is likely to rise a little each year due to inflation. What you're after is an out of the ordinary jump in price.
Keep an eye out for construction and flips
The next step is to keep an eye out for new construction and flips. In an up-and-coming area, it will look like some construction is going on on every corner. You should especially keep an eye out for flips, or homes that are renovated quickly to be sold at a profit, as these are often indicators that other investors also think that the neighborhood is on the rise.
Fortunately, you can do this step just by visiting the neighborhood. Take a drive around and see what you notice. Visit any open houses that you may find. The more turnover you see, the better sign it is that the neighborhood is heating up.
Spot the signs of gentrification
Once people start moving into a new, hot area, the next thing to come along is amenities. Keep an eye out for any news of things like the addition of public transit systems, grocery stores, and fitness centers. This is especially true if the new kids in town are big-name retailers like Whole Foods or Walmart.
The reality is, retail giants do plenty of market research before deciding on a new location. They're not going to spend millions opening a new store unless there is some amount of reassurance that the area they're coming to will pan out. You can use that to your advantage.
