What to look for in an up and coming neighbourhood

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Established neighbourhoods in any city offer reliability, stability, and a number of amenities. If you purchase a house in an already popular neighbourhood, you know you will most likely be able to sell it at a higher price in the future. If you’re on the hunt for a bargain with real potential for profit, on the other hand, it’s worth looking at up and coming neighbourhoods. These may be areas that are in the process of gentrification and are a bit rough around the edges. Property prices will be lower to start with, but if the neighbourhood continues to grow in demand, you’ll benefit from a higher resale value in the future. One of the first steps to identifying a good investment in a gentrifying area is to identify what constitutes “up and coming.”

Prevalence of Artists and Young People

One of the traditional ways to identify an up and coming neighbourhood is by its population. Artists and musicians tend to move to down and out areas first, drawn to the low prices of rent and studio space. Students and young professionals then follow this first wave of artists, drawn to their creative energy and the changing atmosphere of the neighbourhood.

Current Renovations

Another sign of a neighbourhood in transition is the prevalence of renovations. If the city has decided to clean up a park, warehouse district, or waterfront, it’s a sign that they are making way for new residents and a cleaner lifestyle. If the city invests money into a particular area, businesses and homebuyers will follow. Similarly, look for an area where a number of homeowners are renovating their properties. It shows that they take pride in their community, and that property values will increase in the future.

Recent Increase in Shop Prices

As you take a look at homes for sale in an area, you probably compare current house prices to recent sales from the past few years. This gives you an indication of whether property values are on the rise. However, it’s also a good idea to look at how the prices of basic items have changed. Take a walk around the neighbourhood and ask employees in shops and restaurants if prices have increased recently. A change in the average price of a cup of coffee can indicate a shift in demographic.

A Mix of Old and New Businesses

A neighbourhood’s traditional businesses are part of what lend it its charm in many cases. However, if you’re looking for an up and coming neighbourhood, you’ll want to see these older businesses intermixed with new galleries, bistros, and coffee shops.

Liveability

In addition to looking at these positive signs of change, you’ll also want to assess the neighbourhood to determine if you really want to live there. If you can buy property before the neighbourhood changes, you can benefit from the rise in property prices. However, you still want to choose an area that you’ll feel comfortable in. The areas with the best potential will have low foreclosure and crime rates, high walk scores, and established public transportation links into the rest of the city.

Buying into an area on the cusp of change can not only provide the opportunity to make a profitable real estate investment. It’s also a way to have a hand in the regeneration of a neighbourhood, and help form its new identity.

photo credit: josemanuelerre via photopin cc

8 thoughts on “What to look for in an up and coming neighbourhood”

    1. @Stu: Yep; smart thing to do and a good sign to look for. In fact, when you walk (or run) around a neighbourhood and you see only retired people you should run away as fast as you can – going down certainly.

    1. @Pauline: This is a good one and probably should have been included. Even if there is no convenient transport when you look, ask around whether there are plans to construct. We, for instance, were lucky in Manchester and Sofia – metro was built near our properties which puched the pricies up.

    1. @Krant: Interesting! Well, less speculative, I suppose…It also depends on your personal situation; when we were buying a house, for instance, we looked at the aminities and schools (young children, we had).

    1. @Mary – (sorry I meant to write earlier!).

      Whitefield is in North Manchester – strictly in Bury – so hasn’t had the boom that Manchester proper, particularly South Manchester, has had last year. It is quite a poor area but is higher up, an important thing these rainy days! Checking both prices and rental values on Zoopla, you may expect a ROI of about 6% which is not particularly good – we get this in HouseCrowd without all the overheads and worry.

      Make sure you buy near a Metrolink station – there are 3 in or around Whitefield. That way you may get a tenant who works in the City and the tram is a much nicer commute than the bus and better in the city centre than the train to Victoria while rents are more reasonable than in the city or south manchester.

      There are some nice more modern properties – two-bed flats and smaller houses – for less than 100k so it is worth looking at. I found a 2 bed 1st floor flat for £92,500 and a similar one for rent at £450 pcm. You may be able to negotiate the price down to £85k and the rent up to £500 pcm which would push the ROI up to 7%.

      If values do increase so will rents unless there is a (politically inspired) push to build more starter homes!

      It all depends on your timescales. Good luck anyway!

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