For the first time in the last 90 years, city centers are growing faster than the suburbs, according to the Census. Urban housing prices are also rising faster than those in suburbia, with real estate website Trulia reporting a gain of 11.3%, and with the 20 cities on the S&P/Case-Shiller index seeing the largest price gains of the last seven years.
Prime areas in many cities are already out of reach for most home buyers. So professionals, students, and artists are following the deals to affordable but formerly under-the-radar neighborhoods. In the process, these hidden gems are being transformed into the next hot real estate spot and early buyers are selling at a profit.
But how do you know when it’s worth it to take a risk, or if a neighborhood will provide a good return on your investment? We asked Jamella Swift, an associate broker at Keller Williams NYC with nearly a decade of New York City real estate experience, for her advice on buying and selling in up-and-coming neighborhoods.
How can buyers identify those neighborhoods that have growth potential?
I always advise my customers to do three things:
- Study what has developed in the surrounding areas because there is always a domino effect.
- Read about economic development in the overlooked communities.
- Follow the artist community. Artists are known for beautifying a neighborhood, opening cafés, and local businesses.
What are the downsides of buying in up-and-coming neighborhoods?
The amenities may be lacking in that immediate neighborhood. It may take some time for the cafés, restaurants, and green grocers to arrive, however, don’t let that deter you from investing in those neighborhoods! There are a lot of buyers that miss out on opportunities because they lack the vision.
What should buyers look for in a property they plan to sell in five years or less?
Look for the economic projections for that neighborhood. Buyers not only buy a property, they buy the neighborhood as well. Research whether the property is near a school that is getting citywide recognition. All it takes is one article and the interest in that neighborhood surges.
How can buyers maintain or enhance resale value once they purchase?
Keep the property updated, modern, but not too personalized. Pay close attention to the kitchen, baths, and the conditions of the floors. I also encourage sellers to check out comparable properties to make sure they are offering a competitive product.
How do those owners then evaluate when is the right time to sell?
Pay close attention to interest rates; the rates are still very good, so buyers are encouraged to invest in real estate. Research the amount of inventory on the market in your neighborhood. If the inventory is limited, there will be more of a demand and the result will be a strong interest in your home.
*Check out this video on NYC rents