How to evaluate a neighborhood

General Real Estate Investing
1

Hi Gang,

Can anyone recommend how to go about analyzing a neighborhood to see if it is getting better or getting worse?

I know there are several web sites that provide demographics but none really show trends or graphs that I know of.

Thanks

2

The definition of better or worse has to be defined first and Investors should not use their own definition of a neighborhood to determine if the neighborhood is desirable…

I have purchased plenty of houses I would never have lived in which were in a declining economic area…

Always keep in mind people like associating with like type people… So if someone wants to smoke pot freely in the front yard they are going to pick an area where that is welcome. Look at the neighborhoods that have a fair amount of car engines laying on the driveway… its weird but people don’t tend to move far from where they were raised.

I personally would be knocking on some doors in the neighborhoods…

3

I have to agree with Michael. We have a neighborhood in Houston that had country club that closed down and they decided to replace it with affordable housing. This is a neighborhood with 4,000 sqft house on the golf course that are now worth maybe half what they were worth 6 months ago. But that neighborhood is no different than any other. If you talked to the people you would find that they were uncomfortable for years about the kind of people that were starting to move in. The dope dealer that wanted to buy a big house picked that neighborhood and it started to wear it down.

In general apartments degrade neighborhoods. If there are apartments build in close proximity to a neighborhood it will start to decline the neighborhood. The closer the faster the decline.

4

Thanks for the replies!
So would it be fair to say that the quality of the deal is more important than the quality of the neighborhood?

Would the same hold true for a buy and hold strategy? I am looking to by 2 families and rent them out for long term investment…

5

I am not a buy and hold Investor… That question would be better served to Mike

6

You want to look and see what industries are in the area for jobs. Is there a big company that employs a lot of people? How is that company financially?

Are there plans for development in the area? How will this impact housing? If a big road is going to be built, this could create jobs and the need for housing - or if the road is going right through the area you want to invest in, that won’t help your property values.

Stable jobs and growth are great areas to invest in. It also depends on what type of property you want. I think in lower income areas, there are likely to be more tenants (with more turnover).