How to tell if an inner Boston city neighborhood is upcoming.
Let’s face it: When we ask for advice on a new idea, we are often looking for someone with experience to validate our ideas. That can be especially true when it comes to the Boston real estate market.
As a starter in the Boston real estate market looking to purchase residential properties, you will more than likely come to a point where you start seeing Boston condos or single-family houses in a very low price range in some inner city neighborhood’s throughout Massachusetts, and find yourself tempted—or maybe even a little concerned.
Though people might warn against certain neighborhoods, you should be skeptical about these assumptions without ever visiting a property or checking out the neighborhood characteristics. Sometimes, a neighborhood deemed, falsely, “bad” might actually be a great fit for you as a starter Boston real estate investor.
Before diving into Boston real estate investing, make sure you understand how to compare markets and properties. Hopefully, this guide will walk you through all the numbers you need to know. From calculating cash-on-cash return to running a comparative market analysis, this Boston real estate blog post will outline the steps you need to follow and the statistics you must know with The Beginner’s Guide to Real Estate Market Analysis.
Every investor is different and so is every market. Some investors have access to a lot of credit, some investors don’t. Some cities have a plethora of foreclosures, and some areas just have older homes. As a new investor, it’s going to be up to you to find those sweet, sweet deals for your flip or buy strategy.
In business and in real estate investing, those who stay “safe” don’t always get the best returns. Doing what everyone else does won’t necessarily lead you to financial success, and commonly accepted wisdom on money is often misguided.
There is no such thing as a “good” or “bad” neighborhood. There is only “good” or “bad” for your specific portfolio. What degree of development of a neighborhood feels right to you? Are you looking to be the first investor in a future hot spot, or to find a location where the trend of property values is increasing?
Do your research, talk to people, and get a feel for the neighborhood characteristics with some firsthand experience. You can also do some research about the demographics and crime statistics. The results of a neighborhood analysis will tell you definitively if this location is a yes or a no. Here are some factors and sources to consider.
There are a number of Boston real estate websites with virtually all kinds of information for cities, ZIP codes, and even subdivision statistics. The best of these sites—at least the best free one—is City-Data. Remember, you want to look at the data as a film and not a snapshot.
Of course, there are paid sites that can provide even better research. Many brokerages and local real estate associations release helpful reports for cities as well.
There are other factors to investigate, too. While good schools might seem like a solid indicator of a location and the trends of the area, public education should not be a driving factor when purchasing real estate—especially if you’re looking to invest in up-and-coming areas.
Consider using the “leveraged analysis technique,” which leverages available resources so you can find working-class neighborhoods for investment and cut search time in half so you are not wading through dud properties.
If you see a lot of homes being remodeled or repaired, that is a very good sign. The same goes for construction, although be forewarned. there is certainly such a thing as over-building.
On the other hand, lots of vacant, boarded-up, or burnt-out buildings are a sign that the neighborhood is either declining or has already declined.
There’s nothing like a major business development to turn an area around. Indeed, this is one of the most important things to look for (as are, in the other way, large businesses closing down). These new developments not only bring in a lot of jobs, but they bring in something like two to three support jobs (such as cashiers for retail stores that open nearby) for every high-paying job. And all of these people need somewhere to live.
It’s important to get out ahead of these developments as quickly as possible, so pay attention to the local business news. And if your city has an economic development plan, that would be wise to read up on.
There’s no better way to get a feel for a neighborhood than to talk to the people who have lived there a long time. Has it improved or gotten worse? Are people generally moving in or out? What is it with the kids these days?
Of course, don’t just rely on one or two people’s opinions. Some opinions have been jaundiced for whatever reason and are at odds with reality. But the law of large numbers suggests that if you talk to enough people, you’ll get a good idea of where the neighborhood is heading.
And if you run into a bunch of people who just recently moved there, that might tell you something about the growth of that area as well.
Leveraged analysis is powerful because it uses the right metrics for analyzing Boston properties. When looking at the supply of houses or condominiums in working-class neighborhoods, three crucial metrics are primary indicators of market condition: crime, photo counts, and rents. Just remember “CPR.”
If someone who is new at Boston real estate market views a condo where the property prices are very low, the first response should be, “What do the crime rates, photos, and average rents of that neighborhood say about the subject property?”
Knowing these nuances can help make your neighborhood analysis more applicable and accurate. You can leverage the resources available to you and make sound decisions that take a number of factors into consideration, in addition to running a comparative market analysis. Expanding your scope to other neighborhoods and areas has the potential to increase a property’s value and secure the highest return for you.
You have a wealth of resources at your fingertips. Look at crime reports online and call the local police department. These resources can help you determine if a low-priced property is in a high-crime area, which can affect value moving forward.
This data helps you filter through locations and properties so that you can make an informed decision based on what type of crime happens in that location. Is the crime typically misdemeanors, or is there a rash of more violent crime?
The more real estate pictures, the better! You can use this websites for this type of work. If the MLS sales data doesn’t have a large photo count, this might signal that the property is a dud. Plus, if there are only one or two photos, you are not getting a good idea of the property’s amenities, square footage, architectural style, or environmental factors.
If the listing shows a low price range but has limited photos it probably means that the property is burnt up or terribly destroyed.
Now, if there are a number of photos to browse through, it is a good indication that the property is in decent condition, but perhaps located in a distressed area. If you’re not looking for a major fix-and-flip project, focusing on properties with a variety of photos is a big time saver.
Calculate the cash flow of each property before buying to make sure it makes sense. But remember: Cash flow isn’t the end-all, be-all of buy-and-hold investing. Up-and-coming neighborhoods can create incredible equity. While it’s important to be cash flow positive, a good eye for potential may lead to enormous gains.
The multiple listing service (MLS) is the best source for the hard data. Once you know what numbers suit your investment strategy, you can fine-tune your search to make sure you’re buying the right properties for the neighborhood. (You can access MLS on this site)
Look at comparable sales to make sure you’re not under- or overpaying. Comps provide another benefit, too. Paying attention to recent sales for several months will give you a deep understanding of the local market. You’ll understand market forces implicitly, know the expected supply of properties, and easily identify competitive properties when you’re ready to invest.
Get in the car, do a little driving, and talk to some neighbors yourself. You will get the picture of the real estate market for any Boston neighborhood immediately.
Please feel free to contact Ford Realty and we will assist you in your Boston real estate search. We can be reached via email firstname.lastname@example.org or cell/text 617-595-3712.