If you’ve been looking for a new home and found that many were out of your price range, you may have to broaden your search. You might be able to find a property at a bargain price in an up-and-coming neighborhood. Those areas aren’t always easy to spot, but there are some clues that may be able to help you identify them.
Look for Artists and Young People
Artists and musicians often move into a struggling neighborhood because of the cheap rents and then revitalize it through their creativity. They open galleries and put on performances that draw other people to the area, sometimes first as customers and later as residents or business owners. If you hear about a new art gallery or a restaurant or coffee shop frequented by local artists and musicians, those could indicate that the neighborhood has started on the path to revitalization.
Young people are another demographic who tend to breathe new life into troubled neighborhoods. They often move into those areas for the same reasons that artists do–because of low rents–and lead their neighborhoods down the road to a renaissance. Businesses open to cater to young crowds, and the entire area benefits.
Find Areas Where Money Is Being Invested
City governments that spend large sums of money to construct a tall building or park or to fund a cleanup project do so because they’re committed to revitalizing rundown neighborhoods. Homeowners’ property values will likely rise as a result. Buying a house in that area early in its resurgence could be a good long-term investment.
Look at Trends
If a neighborhood on an upswing is bordered by one that has been neglected, the rundown neighborhood may be next in line for a revitalization. As home values rise in the thriving neighborhood, people will look for homes with lower rents and the resurgence will spread outward.
The improving reputation of a neighborhood will be reflected in prices at local businesses. When you visit an area, ask merchants and restaurant workers if prices have been going up. If they have, that points to a neighborhood that’s changing for the better.
Think About the Pros and Cons
Buying a home in an up-and-coming neighborhood can be a good investment, but be prepared to wait years, or even more than a decade, for your investment to pay off. It can take a long time for a neighborhood’s character and reputation to change significantly, and there are no guarantees. Changes in laws, demographics or economic conditions could prevent a neighborhood that seems promising now from realizing its full potential.
Even if the neighborhood does improve, you could have to deal with crime, rundown buildings, litter and other problems for years. Think carefully about the risks, especially if you have or plan to have children. Discuss with your real estate agent the current conditions in a neighborhood and how things have changed and might change in the future so you can make an informed decision.