Looking for Neighborhood Trends

   

Looking for Neighborhood Trends

When looking for properties that have the best possible long term investment and value potential there are several thing s one can look at to determine if there is demand and increasing value  in a neighborhood or market area.

Observing the Life Cycle of a Neighborhood

Recognition of the stage of a life cycle of neighborhood can help you determine a value trend for your investment property. The four stages of a life cycle of a neighborhood are the growth cycle- the time when there is the fastest growth in desirability and value. The stable period, prices and values remain stable and high in value for the longest period of time.  The neighborhood in decline will show a trend of sales of homes as selling” below market prices”.  The revitalization cycle which may or may not occur in a neighborhood, but if it does, the trend will be an increase in remodeling, rebuilding and higher values.  I know of one area where the neighborhood remained in decline for several years after a major company that employed most of the town moved from the area.  After a time, a developer noticed the area was close to a state park and built some small condos right outside the town that included greenbelt walking trails and promoted the neighborhood as a recreational area.  Other builders followed suit with more condos, tennis courts, pools and small “cabin” style homes.  The area once again enjoys a new cycle of growth an increase in demand and value.  

Observing Social Trends

Community living as a new social trend is on the rise. Community living embraces a shared sense of community, shared responsibility of neighborhood and security.   Many developers are now planning their developments with this concept in mind.  Instead of building on larger single lots that are generally isolated or located farther from neighborhood services, developments are now planned with the community support of local services within walking distance of the units they build.  The lots tend to be smaller which not only keep development cost low but also to increase open and common use areas that are desirable features in community living.  Also the trend for smaller lots is relative to the fact that many homeowners want to spend less time doing yard work!  If you see an increase trend in the sales of community living style properties in an area, this property type may be a good investment choice. These properties include condominiums, cooperatives, retirement villages, gated communities and resort complexes. Look at Trends in Lifestyle 

People  that either work from home or operate a small home business is another lifestyle trend on the rise.  More and more homes will be built with offices in the future and is considered a desirable feature by 58 % of the people recently surveyed by the National Association of Home Builders.  Properties that have this feature will likely be more desirable and in demand than properties that don’t.

Observing Other Trends

Looking at population trends for an area can be helpful when choosing a desirable area for investment.  If there is an increase of people moving into an area there will be more demand for properties and values will increase.

If the population has increased over two or more consecutive years than this area will likely have good potential for investment. Other social trends such as the increase or decrease in average family size can indicate the best size house for investment potential.  Does the area have a college or close to a college town with a lot of single students or residents?  Is the area a place where people are migrating from or to?  This type of information can show you the property size and type that will likely be in the most demand in a market area and increase your best chance of real estate investing success.

When to walk away from a property

You are examining potential properties for investment. You have analyzed all the numbers and determine it would be a good investment on paper. But when you have the inspection done on the property you find everything is not what it appears.
If these repair items come up in the home inspection report be wary-The cost of correcting these conditions may be too costly and turn your financial plan into a black hole.

Termites
The home inspection reports says there is an infestation of termites.
Termites can do a lot of damage that is not always seen. Termite treatments are costly. Even if the seller pays for the treatment, the damage to the structure of property could be permanent.

Water damage from Plumbing or Roofs
Next to termites this is the second most costly damage to correct. Chronic long term damage from leaks causes dry rot in floors wall and ceiling and can even extend to rot in within structure walls. What will this cost and is it allowed for in the budget? Unless you know for sure what the cost of the damage is likely to be, it’s better to walk away it could be more extensive and costly that you can safely estimate.

Structural Defects
If the inspector finds unusually large cracks in the foundation, walls, floors or ceilings, this could be a sign of serious structural defects. The causes could have something to do with the how the home sits on the site and may be affected by grade or topography of the property. Unfavorable site factors may or may not be correctable.

Evidence of other foundation problems like evidence of site flooding which cause foundation blocks to sink into the ground causing them to shift possibly causing permanent settlement issues.

Or, if there has been previous damage due to an earthquake or tornado. This is the most extensive damage and the most costly to fix. In some causes it may not be feasible or worth the investment.

If you think you can determine the cost of repairs and reduce the purchase price to compensate for the repairs, it might be worth it. But if you suspect any hidden damage to the home than walk away from the property and find another one.