Transitional Neighborhoods: Great Deals in a Good Market
June 11, 2012 § Leave a Comment
Transitional neighborhoods are usually described as such because they may have issues with blight, litter and crime. These neighborhoods, however, can be a great investment for savvy buyers who can spot the difference between an actual transitional neighborhood and, well, the ‘hood.
As the housing market begins its slow recovery, it is not uncommon to see substantially lower prices for houses, especially in transitional neighborhoods. Prices low enough to entice renters who realize they could be building equity and have a mortgage that is no more than their current rent—with property tax included. In this market with the higher rents brought on by the foreclosure crisis and higher demand, some new homeowners are finding their mortgage is actually less than their rent.
But how do you find that jewel of a deal? Start with the neighborhood. A good transitional neighborhood will have a few things that will not be found in the ‘hood.
1. Bordering neighborhoods with higher sticker prices. The influence of the neighboring good neighborhood all but ensures your housing prices will eventually rise, as others will help the gentrification process by moving to the outskirts of the good neighborhood that may be out of their price range and/or have very little available housing. If the neighborhood is bordered on 3 sides by good neighborhoods, housing prices will very likely rise in the transitional neighborhood within 10 years. Even two borders can have a dramatic effect on neighboring areas of the transitional neighborhood fairly quickly. If, however, you have only one border on a good neighborhood, the best deals will be closest to that border. As you move further in you may find that crime is more rampant, police less visible and housing prices stagnate.
2. Well-kept houses sprinkled in amongst the downtrodden. This higher standard of personal living can start a trend. It shows that others, whether older families that have been in the neighborhood for generations or new homesteaders, are making an effort to increase curb appeal. Moving in nearby these homes can help start a positive trend. You may even be able to band together with neighbors for some volunteer community landscaping in tree wells, in front of apartment buildings and untended road medians. All this beautification helps with curb appeal which equals higher housing values.
If you are seriously considering buying in a transitional neighborhood, take the time to do your homework.You’ll have a better understanding of what you are inviting into your life on a daily basis, as well as a better sense of whether the home is likely to increase in value or not.
1. Check your local police website for information on crime (and types of crime) in the neighborhood. Look back over two to five years and track whether the number of listed police incidents has increased, decreased or remain steady.
2. Check zillow.com and track housing values in the neighborhood over the last ten years. This will tell you whether housing value in the neighborhood has an upward, stagnant or downward trend in a long term view. As we have seen, housing prices may balloon or deflate in short-term reactions to the economy. A ten-year view will give you a better sense of how the neighborhood is trending for the next ten years.