If you're looking to make an investment that pays off big time, buying in a neighborhood that's heating up is one way to get more than your money’s worth.
In an up-and-coming neighborhood, property values can skyrocket in a relatively short period of time, leaving you to enjoy the added equity. That said, though, there's an art to identifying these neighborhoods before they become the next hotspot and you're caught having to pay a premium.
If you looking to get in on the action, we've outlined a list of a few key factors to help you know when a neighborhood is on its way to becoming a hot area.
Keep your eyes peeled for these signs, and you can feel secure that you're making a sound investment:
1. Rising rents
As a buyer, one of the easiest ways to spot a neighborhood on its way up is to keep an eye on rent prices.
Usually, these neighborhoods start out on the fringe of an already popular area and are seen as some of the few places left that are affordable. But, over time, that becomes less and less of the case.
Keep in mind, however, that inflation happens everywhere. It's not uncommon to see rent prices increase a little bit each year.
What we're talking about here is something more substantial -- you'll want to look out for a neighborhood that undergoes a sizable, otherwise unexplained jump in price.
2. Major construction
Even if you're a homeowner and you haven't looked at rent prices in a few years, there are still plenty of ways to tell if your neighborhood is up-and-coming. You want to keep an eye out for major construction happening in your area.
If it seems like every other day something new is popping up around the corner, that may be a sign you're in for change.
In particular, you want to keep an eye out for flips -- existing buildings that are bought cheaply and then renovated to be sold at a premium, an increase in fixer upper homes for sale, as well as new structures, especially apartment buildings and condo complexes. In addition, new commercial developments or local government investments in green spaces such as parks or public facilities can also signal that your neighborhood is on the rise.
3. New hot spots
While the appearance of more housing options is a sign of gentrification, it's far from the only one. If your neighborhood is set to become the next “place to be”, you'll likely start to see more communal amenities start to crop up that come with some serious buzz.
Typically, these will include places like restaurants, bars, and nightlife. However, the focus here is really anything that gets people out and about. It could be new gyms, farmers markets, and coffee shops. Pay special attention to any new additions that get hailed as “trendy” by the press.
Additionally, though it may not be the sleekest item on the list, new transportation options are also a sign that an area set to boom. In this case, it's all about making an easy for people to use those amenities by increasing walkability.
4. A younger, hipper crowd
The last factor to look at in determining whether a neighborhood is changing or not is the residents themselves.
This one is a little bit subjective, but typically the most up-and-coming neighborhoods draw a younger, artistically-inclined crowd looking for the right balance of affordable rent and proximity to hot spots. Traditionally, this demographic drives demand for more local amenities -- and will go enjoy them.
Do your research
Remember: up-and-coming neighborhoods are called that because they're still in transition. If you buy a "steal" today, it may take a while before your investment truly pays off. In the meantime, you may be living somewhere with less amenities, higher crime rates, and other safety concerns.
Do your due diligence: check crime rates in the area you're looking to buy. Make sure you can honestly picture yourself living there, during the day and at night. Because, in the end, no investment is risking your peace of mind.