How to find a neighborhood to invest

Question

When trying to find a city/town to invest it what should you be trying to find?
days on market? upcoming? location to main town?

Any other suggestions would be great

Thanks!

Rick H. · Answer

Kind of a loose question, don't you think?  What's your idea of investing?  SFR's as rentals?  Buy-Sell?  Land development?

If you want to start with rentals, as many on this forum have, consider your own backyard a great starting place.  Unless you live in an area too affluent for novice investors to easily acquire a starter property (in my area, that would be Beverly Hills, Newport Beach, etc.) find neighborhoods with easy driving distance of your home, maybe 20-30 minutes max.

Look for neighborhoods that your target tenant would want to live in: 3 bedroom, 2 bath for instance. Your target tenant will probably have kids, lots of stuff to store in the garage and such, too.

Personally, I like neighborhoods that skew with older demographics; people I can buy from with paper or from their children or even their heirs.

So, it's really more about who you want to rent to, what you want to rent to them, and who and from where you want to buy to serve your tenants who will be paying your mortgage off and putting money in your pocket.  Hey, that's just like a customer!

Kevin Dickson · Answer

My strategy is find a cheap neighborhood with "potential".

It must be adjacent to other neighborhoods that are obviously gentrifying.  You'll find that rents are about the same, but purchase prices could be 20%-60% cheaper.

Price pressure eventually spreads to the cheaper neighborhood, and the price gap closes to 0%-20%.

I've seen this general scenario play out many times over the last 30 years in Denver.

Once you own several homes in the cheap neighborhood, you can even try to help "tip" the neighborhood toward gentrification by improving or redeveloping your properties.

New light rail lines tend to help  a neighborhood's values.

Vincent D. · Answer

lol ron.  No dodging bullets in this area.  Like I said, Indy is unique in its opportunities - in some ways, a well-kept secret.  more for me!

Ron Robin · Answer

WOW I wish I could find deals like that.  To get something like that I would have to be dodging bullets during repairs.

Ron Robin · Answer

Being is south Louisiana the Fema flood map is my first step.  I always look in a "X" flood zone.  I buy and hold so, I look in areas that are known for rentals and have very little or no gang activity.  I like REOs in mid-lower income areas where houses sell between 100k-130k in good shape and 30-50k run down. Something that will take 20k to get [I]"right"[/i].  No more than 20 minutes from my house. 
 Can't count how many times I get a call because someone wants to see the house and they not show up!!!!  
Here you have to be real careful because poorly constructed home tend to start sinking.

The main thing is know the area.

Vincent D. · Answer

Indianapolis is very even keel.  There are no all-out war zones.  My focus area isn't north-side suburbia, nor is it the inner city dregs.  It's a great middle ground.  My average all-in purchase/repair cost is less than $30K for an average rent more than $700/mo gross.  Very solid.  Generally, I'd say about 75% of these tenants last at least a year as paying residents.  I found the perfect niche and the perfect system for running the show.  just saying... :)

Robert Pangborn · Answer

As a new Investor myself, I ask myself that same question everyday.  I am not willing to invest in the State I live in so I am combing the Internet looking for a new state/city to relocate to.  My goal is to find a neighborhood that is not a combat zone, Houses are affordable, employment is steady or growing.  That is what I am searching for at this time.

Vincent D. · Answer

It has to be an area that you could easily drive to every day (if you had to, though you NEVER should).  Half an hour from home is my personal rule.  My 30 rentals are all within a 4 square mile area less than 30 minutes from my homestead.  Of course, that's just the beginning.

It's all about the ROI, so far as I'm concerned. Assuming you're talking about rental properties, if the numbers don't make sense, nothing else does.  return on investment (net) is what you should be queuing on.

This is just the cornerstone - obviously, we can't equip you to run out and make a deal tomorrow with a few short paragraphs.  IMHO, you should look into some type of systematic roadmap that you can follow in steps to complete your first deal or so until you get the hang of it.  Worked wonders for me, and well worth the investment (many, many times over).

In any case, I wish you the best!

Ann Contorno · Answer

Depends on what you are going to do with it.  If you are looking to wholesale properties your best bet is to pull a list of cash buyers for the last 90 days and see what zip codes they are buying in.  This will tell you whats hot as the cash buyers are usually investors/rehabbers.
If you are picking up rental property for you to buy and hold, nothing high end and have a good public transportation line running through it. Often times renters struggle with having their own transporation so need to utilize public transit. 
If you are buying to rehab and resell to owner occupants, look at your school districts as the biggest buying pool has kids.  Look at your neighborhood demographics and stay away from a place that has the lions share of occupants as renters and not home owners.  Heavy renter population does not appeal to homeowners.

In general areas with the lowest days on market are the best always.  You always have to be planning your escape! :)

Kevin Dickson · Answer

Here's a thread I found that discusses the neighborhood gentrification strategy:
https://www.biggerpockets.com/forums/311/topics/70927

How to find a neighborhood to invest

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