Read This to Find the Next Up-and-Coming Real Estate Market

September 23, 2022

Did you know that properties near transit may be in higher demand? And being near the right kind of grocery store can significantly impact a property’s ROI? There’s money to be made in real estate in areas that haven’t quite made it yet. The trick is knowing how to spot them before they hit the big time.

Every real estate investor wants to know what the next hot neighborhood will be. After all, who doesn’t want to benefit from multiple forms of appreciation as property values rise. And while it may seem like these places pop up out of nowhere, there are recurring patterns. Consider these factors as you try to identify the next breakout areas and plan your real estate investment strategy accordingly.

Employment opportunities

There’s no getting around the fact that people generally move to where the jobs are or as close as they can affordably get to job centers. COVID-19 has allowed more people to work more from home. Even so, access to job centers remains important in any real estate purchase.

When investing, pay attention to gateway city metro areas or hubs that could play a significant role in economic activity for a given region. Try to identify places where the local economies can support (or scale to support) remote or hybrid workers. That means jobs at shops, construction companies, hospitals, and other places where in-person employment continues to be paramount. Even those entering retirement want to move to cities with a healthy economy.

Access to public transportation

Look for areas with housing near major public transit options, such as trains, to spot an up-and-coming area. According to the American Public Transportation Association, public transportation improves real estate value. The APTA found that home values were up to 24 percent higher near public transportation than in other areas. Note that a nearby bus route might not increase property value. Instead, look for permanent, high capacity transit like metro rail or light rail, according to the National Association of Realtors.

Areas with access to this type of public transportation are often considered walkable — another sign of an up-and-coming neighborhood. In 2017, the National Association of Realtors found that 53 percent of Americans would prefer to live in places where the houses had small yards but were within close walking distance of the amenities rather than in homes with large yards but only drivable amenities. Try to locate the areas where the basic setup is walkable. Chances are, the hip coffee shops will come over time.

Schools

School districts have a clear impact on property values. You might find a home only a block outside of a high-value school district selling for tens of thousands of dollars less than one inside a well-regarded school district. A study by RedFin found that homes in top-notch school districts can garner up for $50 more per square foot than in average school districts.

Buyers with children may be calculating that sending kids to a local public school will save them big money in the long run as the average cost of U.S. private school education is $12,350 and can go up substantially for high school or in already expensive areas. Investing in property in the better-rated school district could yield better property value in the long-term. You might have to pay more for this privilege, though.

That said, younger demographics may be less concerned about the school district until they have children. Eventually though, these groups will begin to seek strong school districts.

Developments in the area

Large, new developments like apartment complexes may actually help revitalize an area and push existing property values up. That’s the conclusion of a Salt Lake City study, which found that single-family homes within half a mile of new apartment buildings appreciated slightly faster than single-family homes more than half a mile away (10 percent vs. 8.5 percent).

New development in an area generally points out that other investors see potential value in the neighborhood and are acting accordingly. Whether it’s a brand-new apartment building going up, or a new restaurant or home goods shop opening soon, a new business or new construction project usually signals that a neighborhood is on the up-and-up.

Grocery stores

Not many people want to drive 20 minutes to get to the grocery store when they realize they’ve run out of milk or accidentally left an important item off their grocery shopping list. Having a grocery store close to a home can increase its value and point to a neighborhood with opportunities to grow, although it may depend on the type of grocery store.

For instance, a study by ATTOM found that the average home seller ROI for homes located near a Trader Joe’s store was a whopping 51 percent, compared to 41 percent for Whole Foods, and only 35 percent for the average home seller in the U.S. in 2020. The numbers differed a bit in flips. The same study found that properties near ALDI grocery stores have an average gross flipping ROI of 58 percent and an average home value of $250,850.

Properties near grocery stores, especially sought-after ones like Trader Joe’s may be poised to take off sooner rather than later. While areas without such services may be waiting for local infrastructure, such as grocery stores and coffee shops, to boost its appeal.

Crime rate

Up-and-coming neighborhoods often have higher crime rates than expensive, established areas, so you’ll likely not be able to eliminate higher crime areas from your interest list if you want to get in before a neighborhood heats up. It’s important, then, to drill down into the type of crime.

Studies on crime’s impact on housing price vary in their conclusions, with some finding that visible crimes tend to affect property value more and others pointing to burglary as a primary depressor of property values. A 2010 study found that only crimes that affect physical safety, such as robbery and aggravated assault crimes, exert a meaningful influence upon neighborhood housing values. Regardless, you’d likely want to see most crimes trending downward rather than upward as a sign of an area’s up-and-coming status.

You might also consider if the property you’re interested in can address crime concerns. For instance, a property with a garage or driveway might give a better ROI in an area with high incidents of car break-ins. Whether you’re buying a property as a rental or a fix and flip, you’ll want to improve the home enough to attract quality tenants or buyers but not so much that it’s wildly out of character for the neighborhood.

Local legislation

Before you buy, you’ll want to familiarize yourself with local zoning rules. Relatively new ones may create investment opportunities in up-and-coming areas. For instance in California, the recent passage of SB9 makes it easier to build multifamily dwellings in areas previously zoned as single-family only. And many municipalities across the country are allowing for ADUs.

In the other direction, are movements to limit the supply of new housing , such as in the metro Boulder, Colorado, area. This effectively increases the demand and price of existing units.

Stay up to date on real estate news and local zoning legislation in the areas where you’re looking to invest. That way, you can identify a new opportunity before other investors.

Invest in real estate where the opportunities for growth can be found

Knowing where your next real estate investment opportunity is gives you an edge. It also pays to have access to real estate investment deals that few others do. That’s where Sundae’s Marketplace comes in.

You’ll find a large inventory of off-market properties that can’t be found anywhere else. Take advantage of our supporting data and deep dive into the particulars, such as floor plans, and home inspection reports. Filter by your target market and property details to quickly pinpoint the opportunities that are right for you.

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Erin B

Erin Behan is a writer and editor covering real estate investor strategy for Sundae. She's lived in L.A., New York, and Atlanta and currently resides in Portland, Oregon, where she writes and edits for a number of outlets, including WebMD, Farmers Insurance, and Vox Creative. She spends her free time hiking with her two boys, snuggling with her cat, and enjoying the best of the Pacific Northwest.