How do YOU grade/rate a neighborhood?

Rental Property Investor · Discovery Bay, CA · Member since 2017 · 26 posts · 15 votes

One thing I’m struggling with is finding the right neighborhood to invest in. Or when I find a property, confirming if the neighborhood is decent enough.

Any tips?

Thank you!

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JD MartinBusiness Member

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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

If you are going outside of areas that you are not familiar with, then you either have to use statistics or boots on the ground that are familiar with the area. You can use crime, demographics, housing age, proximity to employment/shopping/attractions, etc. If you are familiar with the area, it gets pretty easy as you drive around. Start with the premier neighborhood and see what it looks/feels like. Then compare other neighborhoods to that. Look at rents in the neighborhoods you think are premier vs. others. ETC.

One thing I do when I drive an area (though I know my own area in my sleep): I drive around at 1 or 2 PM on a mid-day weekday, like a Tuesday or Wednesday. If I see a lot of able-bodied people (mostly men) hanging around the houses on porches, corners, etc. at that time, I'm unlikely to consider it much further.

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Josue Vargas
Real Estate Agent · San Antonio, TX · Member since 2017 · 814 posts · 466 votes
6y
@Eric Kulling

Statistics, what a neighborhood compared with the rest. Crime, income/household, properties owned vs renting, unemployment, average property value, average rental cost, schools, etc. There is not a formula (that I know), is more of a personal judgment, but the more familiar you are in an area, the easier it is to identify a Class A vs B vs C vs super rough area.
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Account Closed
Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes
6y
IMO, I'd say it's more important to rate the individual property than it is the neighborhood. The neighborhood factor plays as a feature to the property, not the other way around. You can easily pay too much in a "good" neighborhood or make a profit in a "bad" neighborhood. With that being the case, it sort of blurs the popular/typical/knee jerk ideas of what "good" and "bad" are. Seems to me the only metric that really matters when it comes to "good" or "bad" is a profit or a loss. Turns out that metric has more to do with the investor than anything else. I might say start by assessing what you can afford and then search for deals where you can afford them (I tend to look in areas that are a convenient distance from my place of business as a starting point). Try hard not to pay too much for what the property is and perhaps you'll earn a profit. As a general and vague statement, the only type of neighborhood to truly avoid would be one that is void of housing demand. I hope that was helpful - good luck.
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Matt Maupin
Investor · Denver, CO · Member since 2018 · 18 posts · 24 votes
6y
@Eric Kulling
www.REIndicator.com
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Ryan Mainwaring
Rental Property Investor · Blacklick, OH · Member since 2016 · 286 posts · 253 votes
6y
@Remington Lyman Can you send me your city map? @Marc Rice Can you send me your city map?
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Remington LymanBusiness Member
Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
6y
Originally posted by @Ryan Mainwaring:
@Remington Lyman Can you send me your city map? @Marc Rice Can you send me your city map?

I emailed them to you!
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Eric Kulling
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Rental Property Investor · Discovery Bay, CA · Member since 2017 · 26 posts · 15 votes
5y
Thank you everyone for such valuable input!
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Austin Sine
Real Estate Broker · Kansas City · Member since 2019 · 86 posts · 43 votes
5y
On a pure data level, I use the below guidelines. There's obviously tons of other factors to be aware of but this could help narrow down the search.
1. Household Income
  - Between $36-$70K when reviewing specific neighborhoods
2. Poverty Level
  - Sub 20%. Conservatively sub 15%
3. Unemployment Rate
  - Not 2% greater than the city rate.
4. Diversity
  - No one race is 75% or more of an entire population.
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Kalki S.
Investor · NY · Member since 2020 · 8 posts · 2 votes
5y
@Eric Kulling I have a map that looks at key neighborhood characteristics (income, education, prices, rents, growth, ...) at a ZIP-code and county level. Let me know if you are interested.
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Jessica Mead
Real Estate Agent · Colorado Springs, CO · Member since 2020 · 21 posts · 16 votes
5y
Originally posted by @Brett McManus:
Hi @Eric Kulling, I am relatively new so take the information as you will however, I am working through a similar process and wanted to share my thoughts.
1) The first thing I did was hop on the MLS and start crunching numbers on properties all over the place. After a 100 or so I was able to create themes pretty quickly for the neighborhoods that worked for my numbers based on taxes, rent potential, and ultimately cash flow.
2) I then created a list of neighborhoods, got in my car, and began driving around to see what they actually looked like boots on ground. How nice were cars parked on the streets, are there contractors/workers in the area developing properties, sold signs on houses, etc.Idea being that I want to buy in neighborhoods people are actively moving into, fixing up, and are attractive to potential tenants who like to own/take care of nice things (cars).
Definitely open to the thoughts of others on this strategy.

Hey Brett! This sounds like an excellent strategy. I am still fairly new to market analysis and it seem like this would be a great way to get to know an area. Also a great way to improve your deal analysis skills!
Have you had luck in achieving your goals since you started working this strategy? I would love to connect with you so we can exchange tips and tricks! :)

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Annie Johnson
Realtor · Seward, AK · Member since 2017 · 136 posts · 79 votes
5y
In the past, I have looked at crime activity, school ratings, and asked people who know the area. Hope that helps. The realtor app has a crime filter when looking at the map. Lots of good info posted above!
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