When searching for a new home, buyers often look for houses or land in the best neighborhoods \u2014 or, at least, the best neighborhoods that they can afford. And that\u2019s certainly understandable. However, homeowners may be missing out on several advantages by not considering less prestigious or less desirable neighborhoods.<\/p>\n
Below are six reasons to build or buy in up-and-coming areas.<\/p>\n
#1 : Lower price points<\/strong><\/p>\n It\u2019s natural to want to be in an area in close proximity to popular dining, shopping and entertainment options. Even if you\u2019re buying the home to flip it, you want to own property in a desirable area. \u201cWhen you buy in the best part of town, you are paying top dollar for the property,\u201d according to Oliver Somoza, Partner of Philadelphia-based S7 Real Estate and Turnkey Property Pro. But when you invest in a less popular neighborhood, your buying power can go much farther.<\/p>\n \u201cWhereas $300,000 might get you a studio apartment in the city center, it could buy you not one but two 3-bedroom houses in a growing neighborhood not too much farther away,\u201d he says.<\/p>\n #2 : Personalization<\/strong><\/p>\n When you build or buy a home in an up-and-coming area, you buy at a lower price point. That means you now have the funds to create your ideal place. And that\u2019s especially important if you purchase a fixer-upper that needs major repairs.<\/p>\n \u201cNow you can consider retrofits and renovations that will help you build the home that you want to be in, instead of adjusting your needs based on the space that already exists,\u201d explains Mick Lynch, Senior Vice President of Installations at Power Home Remodeling. So you can install those hardwoods in the kitchen or use those brick walls as a design element. And there\u2019s another bonus to being in an up-and-coming area. \u201cYou tend to have more freedom to make external renovations without worrying about zoning ordinances and other neighborhood restrictions,\u201d he says.<\/p>\n #3 : Increased resale value<\/strong><\/p>\n Since the neighborhood is up-and-coming, you can get in before prices start to skyrocket. And as a result of your renovations, you can significantly increase the home\u2019s resale value. \u201cHowever, just make sure you understand real estate trends in that neighborhood. [Understand] what\u2019s happening in the market and in that specific county,\u201d Lynch advises. He warns against relying solely on word-of-mouth, which can be misleading. \u201cIt\u2019s important to do the research, study the people and companies migrating to those areas and let the information dictate what neighborhood is best for you.\u201d<\/p>\n When a neighborhood starts to transition, Matt van Winkle, Founder and CEO of RE\/MAX Northwest, says it often takes five to 10 years for it to really transform. But he agrees that buyers who get in early can see tremendous gains. \u201cValue add or sweat equity homes in up-and-coming areas provide a lower entry point for buyers and the ability to be part of the transformation if they remodel a home,\u201d he explains. You\u2019re not only benefiting from the return on the remodel. van Winkle says you can also benefit from the appreciation of the neighborhood.<\/p>\n #4 : An existing sense of community<\/strong><\/p>\n Lynch\u2019s advice is actually based on his personal experience. \u201cI recently bought a home in an up-and-coming neighborhood, and it was the best decision I could have made,\u201d he says. As he was searching for the right area, Lynch looked for certain things. He wanted to find a neighborhood with an existing sense of community where he and his family could fit in and thrive. \u201cFor my family, our new neighborhood was such a great fit because we enjoyed the vibe of the neighbors, the potential job opportunities based on the companies moving into that area, and the ability to make the house and community we were moving into truly our home.\u201d<\/p>\n #5 : Appeal to a larger pool of tenants and buyers<\/strong><\/p>\n If you\u2019re purchasing a property to flip and then rent or sell, there are several advantages to choosing one in up-and-coming areas. \u201cFor one, you have lower initial costs, but you also improve your chances of renting to good tenants or making a quick and profitable sale,\u201d Somoza says.<\/p>\n \u201cEveryone is looking to lower their costs of living, and many are being priced out of the popular areas in today\u2019s rental market. So they\u2019re turning to \u2014 you guessed it \u2014 up-and-coming neighborhoods,\u201d he explains And this means that you\u2019re not likely to have any problems keeping your property rented. \u201cYou\u2019ll also be able to increase rent as the neighborhood becomes more desirable. And you could potentially see buyers competing for an already upgraded property if you\u2019re looking to sell,\u201d Somoza says.<\/p>\n #6 : Create higher-quality affordable housing<\/strong><\/p>\n Investing in up-and-coming areas often leads to gentrification, but it doesn\u2019t have to. \u201cActually, real estate investment in these areas can even combat gentrification by creating better affordable housing without displacing people and families,\u201d Somoza explains. \u201cIf a developer purchases an outdated apartment complex with the intention of fixing it up and renting it out, there is an opportunity there to provide clean, updated, affordable housing to the people who already live in the area.\u201d<\/p>\n Finding the right up-and-coming areas<\/strong><\/p>\n There\u2019s no exact science to identifying a neighborhood poised for growth. That said, there are a few things to look for. \u201cIncreasingly, people are rejecting far-flung suburbs and are embracing walkable, urban neighborhoods,\u201d says Gianpaolo Manzolillo, Licensed Real Estate Salesperson at Citi Habitats in Brooklyn.<\/p>\n \u201cLook for areas that offer an easy commute to the downtown business district or that are located along transit lines,\u201d he says. This is based on the theory that no one wants to spend hours sitting in traffic. \u201cDistricts that are adjacent to already-established desirable areas also offer a lot of potential for upside due to the \u2018spill-over\u2019 effect,\u201d Manzolillo adds. When they can\u2019t afford what they consider the prime neighborhood, people look to purchase in surrounding areas.<\/p>\n