Even though the average person moves about 11 times during their lifetime, when it’s time to relocate, it’s easy to get overwhelmed by choice. With all of the options available and all of the details of finding the right neighborhood, finding the right one is stressful. Seeking out new neighborhoods can be a way to save money but could be hard to find if you don’t know what to look for.
Here are four things to look for when you venture into a new neighborhood
Figure Out Your Budget
The first thing that you need to figure out when looking for a new neighborhood is what your budget is. While it seems obvious and you may have already considered how much you need to spend to get what you want, there are details beyond the sticker price.
Working with a broker can help you too do a deep analysis of your income and ensure you know the difference between your liquid assets and debt-to-income. Your debt-to-income ratio will help to determine how much of a loan you can take on without severe discomfort. Once you have a grip on your financial details, your broker can aid you in figuring out what the most realistic down payment to make is and how much you can afford.
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You also need to do right by your budget when it comes to your investment. If you leave $1,000 in a box, in a few years it will have the purchasing power of just over $900. If you put all of your money in the bank or in an investment, you could make 3% to 5% every year.
You need your property investment to grow at least as fast if not faster than inflation. If you plan on spending the next 30 years in that neighborhood, you need to think about how your quality of life will change over that period. If you’re buying only to flip it in a few years, then you want to ensure that you can buy low and sell high by making a smart investment.
Watch Local Trends
In order to get a feel for what kind of pricing to expect in apartments and homes in the neighborhood, do some sleuthing online. While most brokerage sites will show you inflated prices, they will give you a rough idea of what to expect.
On several brokerage aggregation sites like Streeteasy, you can see what the history of a property has been. Watching the trends as they go up or down can help you make a smart purchase. As most real estate tends to trend upward, there are places where things are headed on a downward trend.
If you find that you can capture a piece of property on its way down, you could end up getting a fantastic deal on something great.
While looking at decades-long trends can be informative, they won’t tell you as much as the most recent few years can.
If you’re moving to a city, there are likely several brokers who specialize in finding emerging neighborhoods or ones with great deals. If you work with them, together you’ll have your ear to the ground on great deals on exciting neighborhoods you might not have considered just a year before.
There are a wide variety of growth traits that can relate to every different buyer. Some will be looking for an increase in rentals if they’re buying a property that they plan on renting out in part or in full. Others will want to see that there are more schools or transportation hubs opening up.
Rising home prices can show you growth from only one perspective. They’ll show you that people and businesses might end up being priced out of one neighborhood and pushed into a new one.
While the common logic might be to see that the next neighborhood is the one to invest in, the one people are leaving might have a quick drop-off. That will leave lots of vacant apartments and storefronts that might not get taken up as fast as speculators planned. As the emerging neighborhood grows, the old neighborhood might drop slightly, making it perfect for investment, right before things balance out.
Learn about gentrification in any neighborhood you invest in. While some real estate investors look forward to it, if you’ve invested in a building that’s in the path of a coming train line, you could end up in trouble. Your home could be bought via eminent domain or you could end up living in or renting an undesirable space where the floor rumbles every seven minutes.
Read more here if you want to learn how to look for the important growth details that matter.
Statistics Aren’t Everything
While you might think that looking at crime and economic statistics can tell you a full story, they will be misleading. If there are 100,000 people in the area you’re moving into and you hear that there were 100 instances of crime, that could be shocking. However, when you put it into perspective, a 1 in 1000 chance of having your bike stolen in a city is a pretty low figure.
If crime statistics go down in a neighborhood, you need to also look at the broader political picture.
In cities like New York, quality of life crimes have been downgraded from a misdemeanor to a simple citation or ticket. That means public intoxication or vandalism might not show up on a statistics sheet the way that they showed up in previous years.
This gives a clearer picture of what a neighborhood truly is, but if you’re a garden lover tired of cleaning graffiti or picking up cigarette butts, you could be surprised.
Seeking New Neighborhoods is an Adventure
When you’re looking into new neighborhoods, the most important thing to remember is that there are people who were there before you. Even though you might be the first person to reinvest in the neighborhood in a generation, you should still be a part of your community. Every aspect of living in a new area is made easier when you have a good relationship with your neighbors.
If you find yourself doing repairs, check out our guide to choosing the perfect roof color for your home.