One of the keys to making a sound real estate investment is ensuring that you’re choosing the best neighborhoods to invest in. At Walnut Street Finance, we’re very cognizant of this fact and we thoroughly review our borrowers’ proposals and plans to make sure that the properties they’re interested in are in areas that will yield a high return on the investment and, thus, continue high returns for our investors. We do this by examining a number of factors in the areas in which the proposed properties are located and we make the lending decision based on these findings (as well as a few other factors)...
Below, find out the top three things - in no particular order - we look at when we review a proposed property and determine whether it’s one of the best neighborhoods to invest in.
Schools and Safety
Two of the biggest factors for assessing the value of properties in any town or neighborhood are how good the schools are and how safe the town or city is. When young families are looking to move into a new town they’re often concerned with the quality of the public schools - especially if property values in the area are already a bit on the high side. After all, if they’re going to be paying taxes in the area, they might as well be confident in the fact that the portion of their taxes dedicated to the school system are being put to good use.
Additionally, buyers want to know that their new hometown will be safe. A beautiful home is a beautiful home… but, if it’s in an area with nightly break-ins and car jackings, it’ll sit on the market for eons. These two factors often go hand in hand, and are big considerations when we’re deciding if a borrower has selected a property in one of the best neighborhoods to invest in.
Infrastructure and Commute
For some prospective residents, the commute into a larger metropolitan area and the infrastructure surrounding that commute could be one of the largest factors in deciding whether or not to make the move. For some residents, having an excellent public transit system - including buses and subways - is key, whereas for others having a highway commute that’s quick and won’t land them in hours of traffic each day is the main objective. There’s no right or wrong answer here, necessarily, but when we’re working with a borrower to evaluate a property, and whether it’s located in one of the best neighborhoods to invest in, we make sure that the ability to commute into the closest cities and shopping areas is as pain-free as possible and provides as many options as is reasonable.
Similarly, prospective residents are generally encouraged to drive around their potential new hometown. If they notice that the public spaces and roads - the general infrastructure of the town - aren’t well-kept and up-to-date, it may deter them from making an offer on a home. They may also be curious about things like available utilities in the area, such as fiber optic cable and internet, or regulations for or against solar panels.
Velocity of Trade
One of the absolute biggest factors that we take a look at, however, is general supply and demand in a specific area. If a borrower approaches us with a property in a town that has only had three sales in the past 12 months, then we know that it’s not a hot market. Based on other factors, such as whether or not it’s a high-end, established community, how good the schools are, etc., we may still make the decision to fund the loan. However, if they show us a property in a town that has had 45 transactions in the past three months, then that’s a pretty good indication that we should fund the loan regardless of other factors, since it shows that buyers are eager to get into the neighborhood and is probably a good indicator that it’s going to be a popular, “up and coming” area.