If you want to be a property investor but have a smaller budget, you really should consider buying run-down properties in poorer areas which have the potential to gentrify into up-and-coming areas.
All four of my properties were bought in poorer towns just before gentrification happened. My first Sydney apartment and my London home doubled in value after four years. Whilst the value of my two other London and Sydney apartments increased by £100K and $200K, respectively, after two years.
However, many new buyers often search for properties in nice towns with nice high streets, and nice schools, near nice train stations, and so forth. If you are purchasing a family home, these ‘nice’ factors are more important because your home is not just for you, it’s also for your family.
But if you want an investment, then look out of your comfort zone to find more value, like I have done.
Where are the poorer but up-and-coming areas?
Poorer but up-and-coming areas are within a one or two hour drive from the city centre. They look ‘dirty’, ‘unloved’ and ‘unsafe’ on first impressions due to the lack of infrastructure investments, and there are limited or no transportation connections.
These areas tend to be predominately lower class and can often, but not always, have higher crime rates. In fact, sometimes it’s intimidating to walk through the back streets of these towns.
But on a positive note, there are discussions for millions of dollars to be invested into regenerating these towns and renovating or building a new train or tram station.
Equally important is that these towns have a strong sense of community and the residents want change. Without community support, change cannot happen.
Thus, in response, the local councillors are delivering community engagement programs to: help tackle anti-social behaviour and littering; improve educational and employment opportunities for all residents; and encourage new businesses to open, such as cafes and restaurants which promote healthier eating.
Tips for finding profitable properties in poorer but up-and-coming areas
- The property should be located within a 10 minute walk from the train or tram station. Tenants, particularly those working in the city, will often pay more rent to live near the station.
- Properties on a wide tree-lined street with houses on both sides are always more attractive to buyers. Houses on these streets tend to be more expensive but should be easier to sell in the future.
- Look out for green spaces like parks and playgrounds – the closer they are to your property, the more renters and buyers you’ll attract. In populated areas, green spaces are scarce, and are valued by tenants who don’t have a backyard as well as families with children or pets.
- Closely examine the layout of the high street. Despite the current selection of poor quality shops, does the high street have a community feel? Can you imagine trendy restaurants and cafes located here in the mid-future? Are new types of businesses applying for shop licences and will these type of new businesses attract more foot traffic? From my experiences, organic and healthy eating cafes and restaurants as well as independent and ‘yummy mummy’ cafes are early indicators of gentrification.
- Learn more about the crime rate. What initiatives are in place to reduce crime? Crime often decreases with gentrification so don’t let this put you off buying properties in unsafe areas.
- Get to know the local councillors because once you befriend them, they are more likely to address your agenda(s). Alternatively, you can also follow the councillors on social media. Some councillors also write in-depth blog posts on local regeneration plans, so check out their personal blog.
- Speak with people who grew up in a gentrified town; they are often better able to identify and ‘feel’ gentrification before it happens. I grew up in a poor town which is now middle class. Witnessing the changes in my younger years has given me a ‘sixth sense’ on how to find property hotspots in poorer areas before most people.
If I were very rich when I was younger then I might have bought properties in nicer areas like most people. But the reality is I want more value for my money. Always.
Risk is involved when buying properties in less developed areas so you need to make sure you always do your research. Reading the tips from my blog is a start. Additionally, you need patience.
Buying properties in these areas should be a long-term investment. Community and government support is needed for gentrification to begin.
If you want to make quick cash or you’re looking for a family home, then this investment strategy might not be right for you. But if you’re patient, you could earn large financial gains and a better retirement.
Please note, though I own a few properties, I am not a legal, financial or professional property expert. I’ve written this post to share my personal experiences and would love to hear your opinions and views.
So, have you considered buying property in a poorer area?
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