First Person: Spotting an Up-and-Coming Neighborhood

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I have only purchased two real estate properties in my lifetime, but both were in up-and-coming neighborhoods that rewarded people like me who purchased a home in the beginning. As a resident of Florida, I am surrounded by numerous subdivisions and master-planned communities, but not all prove to be good locations for real estate investments. In fact, some people find out they have purchased a home on or near former landfills while other people deal with flooding or sinkholes.

According to a recent article by Business Insider, people know they are making a smart real estate investment if they see signs such as big chains such as Whole Foods or Starbucks opening a store.

Finding neighborhoods in transition

According to experts, fringe or transitional neighborhoods that are close to cities but that used to be neglected provide the best bargains. In my case, I purchased a townhome in an area that used to be cow fields. Because hundreds of acres of lands had been purchased by developers, I knew the area would grow. After I moved in, a school was built nearby as well as new grocery stores, restaurants and fast-food restaurants. I purchased my current home in a rural area as well. Now developers are building an upscale mall within walking distance to my home.

Relying on their market research

The theory is that instead of having to do my own research as a home buyer, I can just rely on the fact that major chains such as Starbucks do their own thorough market research before opening a retail outlet. However, I found it's easier to get a deal a few years before Starbucks appears. So, perhaps it's better to find out where chains plan to build in the future rather than waiting to buy a home after the chains have already opened.

Being patient as the economy recovers

Another thing I did was realize that few neighborhoods are immune to overall housing trends. After purchasing my townhome, I watched as the value went down slightly for the first year and a half. I waited to sell when it was a seller's market. I was able to use the $20,000 profit toward my down payment for my single family home in a completely different neighborhood. Our home, which we bought for about $180,000 tumbled in value even though it's a good neighborhood. Now, the housing values are recovering. I fully expect the value to reach about $250,000 in another 8 years due to the increasing values in the area.

Although not everyone comes out ahead in the real estate game, I think the best reason for being a homeowner is having a safe and comfortable place to raise a family. I'm not as worried about what my home is worth as much as I'm happy to have chosen a good neighborhood. Even if we could sell our home at a profit in the future, we may just decide to stay put or retire in place.

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