How to ride the next real estate wave -- Page 2
Other factors that can help you assess the growth
potential of a neighborhood include crime statistics and trends;
schools and school scores; public facilities (police, fire, mass
transit); restaurants, shopping and services; and proximity to existing
or planned commercial or industrial development.
Also keep your eye out for what Miller calls markers.
"One time I was driving by and saw a bridge that
was going to be replaced. I wondered, 'Why does this bridge need
replacing?' The answer was that they expected traffic to triple
in the next 10 years. My next question was, 'If this traffic is
going to triple, where are these people going to live?'"
In general, real estate watchers say that these signs
indicate that a community is on the rise:
1. Multiple offers are made on homes for sale.
2. Rental properties are drying up.
3. Homeowners are remodeling, indicating they are investing in
4. Homeowners are trading up to better homes within the neighborhood.
5. Buyers from other communities are increasing.
6. There are more "Sold" and "Sales Pending"
7. Improvements are being made to sidewalks, streets and parks.
Be wary, however, of reading too much into the more
obvious signs of a neighborhood in transition.
A large number of "Sold" or "Sale Pending"
signs might indicate a good opportunity or that you just missed
the wave. On the other hand, lots of "For Sale" signs
could indicate a good investment opportunity or indicate a community
that's on the way down.
"The signs of rising property interest in one
community may not be the same as the signs in another community.
The reason for that is that all real estate is localized,"
says Miller. "People need to really become experts in their
local community. I can easily find you homes that are run down,
but that doesn't mean that they are good purchase candidates. They
might be awful."
Even real estate appreciation figures (available from
your local Board of Realtors) might not tell the whole story.
"When you hear that real estate around the country
has risen by 5 or 7 percent, you have to realize that not all houses
have risen by 5 or 7 percent," says Miller. "As a buyer,
you don't really care about the averages because you're not buying
all homes; you're only buying one. So it becomes very important
to you to really understand the dynamics of your local community."
Grab a block grant
The investment stakes tend to rise in so-called "blighted"
neighborhoods. That's why most communities have access to government
subsidies, which they distribute to qualified buyers in the form
of community development block grants (CDBGs) as an incentive to
improve or replace low- and moderate-income housing.
Your comp plan will usually indicate where local CDBG
money is headed. If it doesn't, contact the person in charge of
your local CDBG program to see where grants are available.
But the inner city is by no means the only place where
government help is available.
"There are grants and subsidy programs for mobile
homes, rural land, homes built for Native Americans, land that has
well water on it. There's even a grant that you can get if you buy
a home with an oil well on it," says Whitney.
The U.S. Department of Housing and Urban Development
Web site is a good place for a grants
overview, but your local grants administrator might have more
specific information about available grants in your area.
Whether you choose to ride the coming wave in new
suburban construction or inner city refurbishing, consider consulting
someone other than a residential real estate agent. After all, their
training is generally limited to home buying and selling.
"Find an experienced commercial broker who deals
only with commercial real estate or an investment broker who deals
only with multiunit residential apartment-type buildings,"
says Whitney. "They're generally going to have the best feel
for the investment climate in your community."
And don't expect a quick "flip."
"If you're buying residential apartment buildings
-- duplex, triplex, single-family homes -- for rental, my suggestion
is don't get into anything unless you're willing to hold it for
at least five years, just in case there's a downturn," says
Whitney. "The only time people get hurt in real estate is when
they sell on the down cycle."
Jay MacDonald is a contributing
editor based in Mississippi.