How to determine what class neighborhood?

Question

Hey,

How can I determine what kind of neighborhood I’m investing in? Is there a software that people are using to determine if something is an A class neighborhood or D class neighborhood?

What are some tactics you guys are using to know if this is an A,B,C,D area?

Sam Yin · Answer

@Jonathan Rivera

Take a flight, spend a few days there. At least see the property first hand before you buy.

These are just free advice from those that experienced, or know someone close with experience that would dictate this. Investing is a risk, why add more risk when you can avoid it at the front end?

Nicholas L. · Answer

@Jonathan Rivera

that's fine... i just think if you're going to be investing in a purchase as significant as an investment property, it could be worth it to make a trip or two.

Nicholas L. · Answer

@Jonathan Rivera

go to it and walk around

Brandon Goldsmith · Answer

C and B areas are typically where a lot of investors target, but everyone has different goals. As others said, its best to drive some neighborhoods of the market you are looking into. @Jonathan Rivera

Sam Yin · Answer

@Jaron Walling

Agreed.

Jaron Walling · Answer

If you want to invest OOS someone is driving, bicycling, or walking around and viewing properties. Google street view isn't always up to date. Subtle clues and things to avoid can be missed. Neighborhoods change. It's on you to decide who that is.

Jaron Walling · Answer

@Jonathan Rivera  My approach to choosing neighborhood class may be different than yours. It's opinion based and requires market research, but in general you need to compare prices vs. market rent, size, condition, and homeownership vs. number of rentals. You'll find HIGHER returns in LOWER priced areas. Generally speaking these are C-/D class neighborhoods. You'll see more rentals than homeowners, cars parked in the yard, and less amenities. Medium to higher prices that cash-flow or break even (at current rates) are probably C/B- class. Anything that's high priced luxury huge lot sizes, amazing landscaping, bigger garages, and HOA fees is probably A class.

As an investor you need to find the fringe neighborhoods; the C class < moving towards a B < moving towards A and then buy opportunities. Every class has opportunities at different prices. If you're new to REI avoid D class properties. The high return is rarely worth the risk. In some markets maps have been created for class types but be cautious if it's out dated. Nothing beats boots on the ground and personal experience. Cheers.

Sam Yin · Answer

@Nicholas L.

DITTO!!

If neighborhood class is important and you are planning on investing any significant amount of money, then its worth having boots on the ground to see, smell, and feel the area. Google searches will not do it justice. There are a few exceptions, like those well known/accepted areas like Beverly Hills or Palos Verdes Estates or those areas where every house within a 2 mile radius sells for over $5M. Outside of that, you can easily be duped by Google or local property managers. Because at the end of the day, YOU give it the grade, not others because it is a bit subjective.

Example, Hollywood, CA: there are A communities and D communities very close to each other. Bozeman, MT, there are A communities and D communities. Miami, FL, there are A communities and D communities. You get the jist...

How to determine what class neighborhood?

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