There are a lot of great ways to evaluate the quality of a neighborhood, many of which I discuss in this article here. There are some good, free websites and services available, such as as city-data.com and clrsearch.com. These websites provide information on crime, housing prices, vacancy rates, income, and more for any given city or zip code.
But to truly understand a neighborhood, you have to analyze it at a much closer level than zip codes. For example, in Kansas City, where I live, Troost Avenue acts as a sort of dividing line, particularly around The Plaza, Hyde Park, and the downtown areas. The areas to the west of Troost are very expensive, whereas the areas to the east of Troost are generally more rundown and less expensive. Yet Troost runs right down the middle of several zip codes in this area. Thus, any analysis by zip code is more or less useless because you’re effectively analyzing two very different areas as one.
Regardless of techonlogy, I still recommend driving an area and asking around to get to know it. But this is the modern age, and using technology to buttress your understanding is all but mandatory. In that spirit, there are also some great software programs that can help you evaluate just about any area. Unfortunately, these services cost money. But the capacity of some of these programs can make that expense worth it, especially if you are looking for some powerful tools to help you with demographic analysis.
Mapping Technology & GIS
One of the best tools on the market is Esri’s mapping technology and Geographic Information System (GIS) which provide demographic, traffic, crime, and lifestyle data all the way down to the block group. You can even create maps based on elevation or other topographical features if you so choose.
So let’s say you want to evaluate areas by how much crime there is. You can pick a block group and it will color it in based on the amount of crime in that area (or type of crime if you so choose). This will allow you to evaluate how dangerous any given area is. Like so:
This is much more helpful than simply looking at the zip code. You can also do a similar analysis for traffic flows. Knowing the total traffic count is important when evaluating any retail or apartment building. But the direction of that traffic can also be important.
Say you are in commercial real estate and you want to buy or develop a coffee shop. You want that coffee shop to be on the side of the street that has a lot of traffic in the morning (i.e. going to work) when people are normally buying coffee. People are less likely to pull across the other lane to get to a coffee shop, especially if it’s during rush hour. “Location, location, location” even applies to which side of the street you’re on when it comes to real estate.
Another very helpful feature is that it allows you to evaluate areas by drive time or walk time. First and foremost, this is helpful for us because we only do off-site management. When evaluating which properties to buy, part of the equation is how far they are from our office.
But it’s not distance, it’s drive time that concerns us. A property could be 10 miles away and take longer to get to than a property that is 15 miles away if there are no good highways along the way there. So you can create a map of drive times from one particular location like this:
As you can see, distances in “drive time” are not the neat little circles you get with actual distances. Properties that are closer in drive time are slightly more valuable to us than ones that are further away, as they are easier to manage.
Esri’s technology can then go even further than just analyzing block groups by actually giving you demographic information about the different rings of drive time (in the above image, five minutes, 10 minutes, and 15 minutes).
You can pick from thousands of variables to analyze. And you can also create handy little infographics which are great for compiling information to review. They can also be incorporated into your presentations when you’re pitching lenders or partners on a particular investment. For example, an infographic for the five-minute drive time ring above is as follows:
And again, all of the data included in that infographic is customizable.
You can also run standard reports on Census data, housing data, age, per capita income, education level, or just about anything else you can think of. Here is an example of the Census profile for the five-minute ring listed above:
Of course, you can still be a good investor without Esri’s or similar programs. But real estate investing has been a sort of fly-by-your-pants industry for a long time. In some ways, it’s a bit of a dinosaur when it comes to technology.
By fully utilizing modern technology, you can gain an advantage over other investors who just go by their feel. Yes, you need to develop such a “feel.” But with such feels, I highly recommend you trust but verify with actual data.
Have you used mapping technology to research potential investments?
Share your experiences in the comments below!