“In a real estate man’s eye, the most expensive part of the city is where he has a house to sell.”

Will Roger

Can you imagine purchasing a property with a scenic view only to discover that a few months later, that landscape is replaced by a new highway onramp?

Did you notice how much available street parking there was on your block? Renters will notice, especially roommates with multiple cars per household.

You’ve learned why it’s so important to build a real estate team before buying a home. A contractor, home inspector, and real estate appraiser can provide valuable opinions about the condition of the home. Now it’s time to learn about the importance of researching an area before buying a property. This includes the city, sub-market, community, neighborhood, and street that you’re about to purchase on.

Here are some tips to help you research the area you are looking in:

  • Visit the property during high traffic times to discover how backed-up the streets in your neighborhood become. Also check out the nearest freeway entrance for the same information. Renters who know the areas will actively avoid parts of town that experience gridlock.
  • Pay attention to the proximity of the property to hospitals, schools, office parks, and other areas of high density employment which can provide a steady supply of potential tenants in the future.
  • Another important thing to consider is the area schools. Buying a home near a school can be a valuable investment. Proximity to schools can add to the rentability and resale value of your home.
  • Are you interested in short term rentals? Research nearby airports and how easy they are to reach. Your investment could potentially double as a short term rental in the future. Be careful here though… While being close to an airport has benefits for travelers, being too close adds lots of noise and air pollution which can be a turn off for long term renters.
  • Research the value of homes nearby homes. Never buy the most expensive home in the neighborhood. The principle of regression dictates that the lower priced homes in the neighborhood will pull down the price of the most expensive home in the neighborhood. The opposite is also true–more expensive homes pull up the prices of less expensive homes. Therefore, it does not make sense to stretch for a nicer home in the same neighborhood, rather stretch for a nicer neighborhood. Educate yourself about the gamut of home values, number of foreclosures, vacant homes, and rentals in the area. A great tool for this is research is Zillow.com
  • Check with the local department of building and planning to see what types of permits have been pulled and issued for new development and construction. This will prevent you from purchasing in an area that is about to be saturated with similar valued rentals, or alternatively could steer you towards a part of town that will be rising in value due to the construction of a new shopping center. Do not assume that your broker will do this for you.
  • Is there a Starbucks or Chick-Fil-A nearby? Major higher end franchises like these spend millions of dollars on market research to determine good places to open their restaurants or stores. This isn’t a guarantee, but chances are, if there are major franchises like these in the area, it is probably a relatively good place to invest.
  • Search the Internet. What’s it like living in the area? There are websites dedicated to reviewing individual neighborhoods within cities, and Internet commenters aren’t shy to tell you how they really feel.
  • Ask people in the community what it’s like living there. Talk to street cops, the FedEx delivery person, Mail Man, and local residents like your future neighbors. Police officers can be desensitized to crime and might instinctively tell you that it’s a decent place to live because they’ve seen worse. A good question to ask a local police officer is, “Would you let your family live here?” Talking with local folks is some of the best research you can do. The majority of these people will be honest with if you tell them you are considering moving to the area and ask for their advice. We never invest in an area without talking to the local police station about their experiences with that particular street or area where our property is.

➡️ Chapter 25: How To Search For An Investment Property