Whether you’re buying a home for yourself or as an investment, it pays to research its surrounding neighborhood. Why? Because the quality of the neighborhood where your home is located will have a huge impact on your home’s appreciation as well as a huge impact on your sense of safety and your ability to enjoy the home. It’s a principle found in everything from stock investing (a stock’s sector affects its performance) to marriage (you marry a family, not just a person). You become like those you hang around and we want a home that “hangs around” in a great neighborhood!
“When you buy a home, you’re also buying the neighborhood it’s in.” – anonymous Realtor
Before you start hunting for an individual home in your personal quest for the American Dream, hunt for a neighborhood that meets your personal tastes and needs.
Characteristics of a Great Neighborhood
In part, the traits that make a neighborhood good or bad depend on your personal tastes and needs. You can evaluate different neighborhoods based on qualities such as:
- Who lives there? Are the people in this neighborhood similar to you or your projected tenant in terms of age and occupation?
- Commuting distance. Are there offices or other business destinations nearby?
- Mass transit. Is it important for this neighborhood? What mass transit options exist for this neighborhood?
- Are there any young families in the neighborhood? Be on the lookout for children playing freely in the neighborhood. It usually indicates a safe neighborhood.
- Shopping, exercise, and leisure needs. What stores and facilities are nearby?
Other factors are common to all great neighborhoods no matter what your personal preferences:
- Strong, diverse economy. A city or town where most of the available jobs are dependent on a single company, industry, or factory does not have a diverse economy. One downturn in that company or industry can decimate your property values as people sell their homes in droves.
- Strong housing market. Granted, strong housing markets are harder to find these days but a strong housing market should have a vacancy rate below 5% and rental prices close to the cost of owning a comparable home.
- Good school system. School system quality is important even if you never plan to have kids, because a good school system raises home values.
- Low crime rates. Crime should be the exception, not the norm. It will help lower your homeowners insurance rates too.
- Services and amenities. The neighborhood should feature multiple amenities, including parks, parking, restaurants, museums, and supermarkets. It should also have reliable public services, such as garbage pickup, sewage, recycling, and emergency response.
Great neighborhoods can be expensive. If you can’t afford a home in one of the great neighborhoods, keep an eye out for “up-and-coming” neighborhoods that have rising prospects. Up-and-coming neighborhoods typically lie on the outskirts of great neighborhoods that have been established for a number of years and tend to have specific set of statistical traits:
- Increasing population
- Young families
- Multiple offers on homes being sold
- Residents renovating or moving into bigger houses
- A shift from renters toward homeowners
- New businesses opening nearby
How to Research A Neighborhood
Many resources are available to help you evaluate your preferred neighborhood:
- Internet. Websites such as Yahoo! allow you to find and compare crime statistics, school scores, and demographic data for virtually any city, town, or suburb in the United States. Family Watchdog is another site where anyone can map the location of predators in neighborhoods. That’s a good site to bookmark and check every so often.
- Local resources. The local library and chamber of commerce should have a lot of relevant data about the area. Local periodicals will give you a sense of both the news and cultural events in the area and local issues and politics.
- Local professionals. For a few hundred dollars you can hire an appraiser to assess the likelihood of home-value appreciation in a specific home, street, or neighborhood. Also, you can usually get housing statistics on sales prices from local real estate agents.
- Residents. No one knows a place like the people who live there. Talk to the neighbors. Ask about the schools, amenities, local government, crime—everything. Listen to what they say … and what they don’t!
- Visits. If at all possible, visit the prospective neighborhood multiple times, in different weather, at different times of the year, and at different times of day. Drive the commute from the neighborhood to your work. Act as if you live there. Try the place on.
Just like a rising tide lifts all boats, a falling tide lowers them. A neighborhood can have the same effect on a home, so do your research before you fall in love with a particular home.