Personal Finance

How To Tell If A Neighborhood Is Safe

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 4 minute read

Let’s say you’ve looked into many different downtown neighborhoods but realized that they’re all well outside of your price range. What if you could predict which neighborhoods will become popular before they were trendy? You may purchase a fantastic home in a prime location for a reasonable price.

What you describe occurred in New York City’s SoHo neighborhood. In the 1970s, SoHo was primarily an industrial area. Eventually, creative types began settling there due to the low rent and consequently low pricing. Now? It’s a hip part of town, and one of the best in New York.

If they buy in a promising area, they stand to gain significantly in the long run. These communities typically have high rates of crime and neglect. Examples include Atlanta’s Cabbagetown and Phoenix’s Roosevelt Row. 

Historically, both of these areas were plagued by drug abuse and abandoned homes. A rejuvenation, however, has made all the difference in how they appear and feel now.

However, it is not always easy to anticipate which areas would become trendy. What if you put your money into a rundown neighborhood expecting it to be revived, but it never improves? When house hunting, keep an eye out for these seven indicators that a formerly poor area may soon be a good place to invest.

Characteristics of a Growing Neighborhood

1. Musicians and Artists

As a result of their desire to live in low-cost areas, artists and musicians often spearhead a neighborhood’s revival. They set up residence and employment in a new neighborhood. When one person does anything, then more will do it too. 

Why? Simply put, people gravitate toward areas with established artists and musicians because they themselves exude an air of coolness and attract others who share their appreciation for the arts. 

As more people move there, the population increases and the region becomes more crowded. As a result, housing prices rise dramatically as the trendiness of the area increases.

2. Profound Renovation

Most large cities have abandoned warehouses and parks. If the city decides to clean up a shoreline, major park, or warehouse, that could be a good sign that the neighborhood is improving. If the city is ready to put money somewhere, then others will be as well. 

Attend community gatherings to learn more about upcoming major construction. Try to find residences that are currently undergoing renovations. Property values will rise as a result of the improvements made by the homeowners, who are showing their interest in and pride in their neighborhood.

3. Proximity to other trendy neighborhoods

A neglected area next to a cool one has a good possibility of becoming hip and happening in the future. For one, when the cost of living in the neighborhood’s epicenter rises, development naturally spreads outside. 

The rising cost of living in urban centers forces creative types to seek more affordable housing in the suburbs. And the process of revitalization never ends.

4. Local Costs

Take a tour of the town and inquire with shopkeepers and waitstaff about pricing increases over the past few years. If prices have steadily grown, especially on products like coffee, you can assume the reputation of the neighborhood is rising up as well.

5. Teenage people

If you want to know where young people are relocating, ask a real estate agent or the city planners, who will be aware of where the artists and musicians are settling down. 

Young people are often the ones who pioneer the revitalization of an abandoned area, as they are priced out of more upscale districts. A cluster of eateries and watering holes generally follows a new resident.

6. Realtors

Real estate agents typically have insider knowledge about the next “it” neighborhood and are willing to share it. The most important thing is to find a Realtor who you have a genuine connection with and who isn’t just out to make a quick buck.

 If your realtor also happens to be a homeowner in the area, that’s an even stronger endorsement. Someone with such market expertise will naturally want to make money off of it, and you should join them. Here’s additional advice on how to choose a reliable real estate agent.

7. Contemporary dining establishment or gallery

Reviews of local establishments including cafes, museums, and restaurants are worth keeping an eye on. When one of these appears in a previously poor location, it’s an indication that things are starting to improve there. If it proves successful, it could spur the opening of further businesses and the purchase of adjacent properties.

Bottom Line

Investing in a revitalizing area requires foresight and patience. Alterations in cost and popularity may take ten years or more to take effect.

They might not even do it. Large-scale development can be slowed significantly by a change in zoning rules or by people moving elsewhere. Crime rates tend to be higher in areas that have been ignored.

Know that there are potential dangers to you and your family if you decide to purchase a house in this area. It’s possible that you’ll have to spend a few formative years in a dangerous region before you can afford to move to the city’s most upscale neighborhood. 

Before making a final choice, consider all of the available information and indicators.

Have you had the good fortune to plant your roots in a locale that has recently experienced a surge in popularity? Where else besides economic growth might you look for signs of a neighborhood’s potential?

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