It seems like everyone, and their dog thinks that investing in real estate is the way to go if they want to make decent returns, and quite often they are right, but it is by no means a given. In order to be a successful real estate investor, you need to be able to sort the wheat from the chaff and be able to spot the good deals from the bad ones.
Since one of the best ways to make money in real estate is to invest in an Up-and-Coming area before it explodes, having the ability to spot the signs of an up-and-coming-area and whether it is worth investing in at any given moment is a pretty important skill to have.
With that in mind, here are some telltale signs that the area you’re interested in is worth the investment:
Transit Systems are on the Cards
If you’ve found the perfect property on PropertyGuru and you’re confident that it’s an up-and-coming area with great potential, but you aren’t quite ready to take the plunge, look into potential transit systems that are set to be built in the area. It isn’t always the case, but if new modes of transport are being planned for an area, it is a pretty good sign that property values will shoot up, simply because the area will be more accessible, as will the amenities, so if you invest now, you will probably see the benefit later.
Rents are Rising
There are various websites that will show you the current and past rents being charged in a particular area. If an area is truly up-and-coming, then you should be able to look at the stats and see a steady rise in rents. After all, the more desirable a neighborhood becomes, the more landlords are able to charge people for the privilege of being able to live there.
Of course, when you’re doing your research, you need to take into account any possible renovations that might have been conducted on properties in the area because renovations, as well as the area getting better, can be responsible for rent rises, so tread carefully.
The Creatives are There
If you’re a total newbie to property investment and you want to get in on the ground floor, investing in an up-and-coming area before it becomes truly sought after, look at where the artists, musicians, and other creative types are choosing to live. Creative people almost always have the skills and drive to set up businesses and make improvements to the spaces they inhabit, which in no time makes their neighborhoods the ones where people want to live. They might be a little dilapidated at first, but that just means they’re a cheaper investment for you, and trust me, using this strategy will almost always pay off in the long-term.
It’s on Trend
No, we’re not talking about clothing here. If you’re a smart real estate investor, what you will do is identify the demographic that you would ideally like to rent to, whether that be college students, young professionals or families, and then start tracking the trends in how they live, where they live and what kind of work they do. If you do this, you should be able to identify areas in the city/country you plan to invest in, that is likely to attract those kinds of people now and even more so in the future. If you follow trends, then you are ahead of the game, and this will only benefit you when it comes to scoping out up-and-coming areas.
Good Jobs, Good Schools
Another way of ensuring that an area is ripe for investing in is by looking at the availability of good jobs and good schools. Few people are going to move into neighborhoods where there are few opportunities for themselves or their kids to succeed and should you invest there, as well as finding it hard to get tenants, you can expect to only be able to charge low rents and have a lower standard of tenant in your property – none of those things, as I’m sure you’ll agree, are ideal.
Big Retailers are Interested
If big retailers start flocking to a town, it’s a sure sign that the area is well and truly on the map, so whatever you think about them, watch for announcements by companies like Home Depot, Wal-Mart and Costco coming to a location and swoop in while you can still get a property at a good price. I mean, it’s fair to say that these companies don’t come to places where there is little money to be made.
There is Room to Invest Just Outside
If you’ve found an area that is really starting to get hot and that means that property prices are already starting to rule you out of investing there, don’t worry, just look for communities on the fringes of that area. When that place gets too crowded, there will be an inevitable spillover, and you’ll be able to pick up the slack if you have a property literally waiting in the wings.
The Data on Sale Times is Good
A good way to identify whether a market is truly up-and-coming that is perhaps best of all is to look at the data on how long properties in the area have been on the market. If the average property in the area sells in four months or less, it’s a good indicator that people really want to live there and that you could make a decent profit by renting it out.
New Developments are Popping Up
No area is truly up-and-coming if it is stagnating. The places that people are dying to live in are the places where there is lots of investment going on in new infrastructure such as housing and business developments, hospitals, parks, recreational facilities, and yes, chain stores like Starbucks. If you’re seeing these kinds of developments popping up, then don’t hesitate to snap a property or two up.
Are you a property developer? What are your personal tell-tale signs that it’s worth investing in an up-and-coming area?