How to know if a neighborhood is worth investing in
You receive a call from a Bird Dog telling you about a potential deal. They describe the property; it sounds good. They describe the opportunity to earn rental income cash flow; it sounds good as well.
But how do you know if it really is a good deal? After all, you're only hearing about the property itself... what if the neighborhood is not a place worth investing in? Even a great property in a bad neighborhood isn't a great investment.
(Note: I'm not saying that you shouldn't invest in neighborhoods that are in a downturn, but I am suggesting that you should check to make sure your ideal renters will be willing to live in the neighborhood).
Here are some ways to figure out if the neighborhood is worth investing in:
Be proactive and train your bird dogs to know what you're looking for. Be specific. Don't just tell them about the types of properties you want, but give them details about the neighborhoods to watch for.
Create a list of neighborhood-related questions to ask the bird dogs when they call. Ask questions like – Describe the neighborhood. How many other For Sale signs did you see? What would attract tenants to live in this neighborhood? What would repel tenants from renting in this neighborhood?
If possible, get in the car and drive to the neighborhood yourself. Obviously, this isn't going to work for everyone (it doesn't work for me – that's why I’m a virtual real estate investor) but if your first couple of deals are near your house, it will be helpful for you to get your own eyeballs into the area, or simply call 3-4 property managers and get their opinion about the area. If you are keeping this for a rental, you wouldn’t be your own property manager so ask the person who’s going to deal with the property (if you buy it) what they think.
Create a simple chart that includes information like average income and average resident age (or whatever factors are important for you) and have your assist research this information to put together a local profile. (This will help you when you rent or even wholesale your property).
Go onto Google Maps and look at the street map. (See picture below). How close is it to things that potential tenants would be interested in? (For example, if it's a commuter neighborhood, what is the proximity to the main thoroughfares that commuters would use. Or if you are trying to attract young families, make sure there are schools nearby).
Here's an example of a Google Street Map for Kansas City Missouri. Note: The DM doesn't have an investment here. The map is provided as an example only.
While in Google Maps, switch to Street View and view the neighborhood from the perspective of someone driving around. (See picture below). Check to make sure that your property is similar to the other properties. See if everyone takes care of their lawns. See what kinds of cars people drive. Figure out: Do the people who live in this neighborhood fit the profile of the renters you're looking to attract to your property?
Do some online research to see what the city or town is like. Have your assistant dig into municipal websites to find demographic information like average income per household, neighborhood crime statistics, etc.
Have your assistant call a real estate agent to get comparables on the area. (You can do this yourself in the beginning but eventually you'll want to get an assistant to do it).
It might be a great property but if that property is not in the right neighborhood then it is not a great deal.
Some additional tips from a virtual real estate investor
Knowing the neighborhood is important but I'm usually traveling and can't do many of these things myself. I have my assistants do some of them, I have my bird dogs trained to look for specific things, and I have a lot of experience, which helps me as well.
So the good news is: You don't have to be on the ground yourself to learn this stuff.
But you do have to become a Deal Making Machine so go out there and get marketing to get buyers, sellers and keep growing. This is by far the best deal online, and it's the best way to jumpstart your real estate investing business… what's more, it all gets delivered to your door... (How cool is that?)
Your friend and mentor,
Mark Evans DM, DN
PS Make sure to leave a comment here... Always excited to see what you have going on and need help with…