If you want to be a property investor but have a smaller budget, consider buying run-down properties in poorer areas. Not only will you find more value, poorer areas with frequent transportation links often gentrify into property hotspots.
This is how I grew my property portfolio. I bought all of my properties in areas that were, at the time of purchase, entering early stages of gentrification.
After two years, two of my properties increased by £100K and $200K, respectively.
After four years, my third apartment and my London home doubled in value.
Where to find up-and-coming property hotspots in poorer areas?
Poorer areas with the best investment potential are those located within a one or two hour drive from the city centre. These areas are predominantly working class and may have higher crime rates.
On first impressions, non-residents judge these poorer towns to be ‘unloved’ and ‘unsafe’. This is often due to the lack of infrastructure development and council funding.
Yet, at the same time, there are discussions for the government to invest millions of dollars into regenerating the area and the transportation links.
These areas also have a strong sense of community, and the residents want change. Without community support, change cannot happen.
In response, local councillors in such areas are actively delivering community engagement programs to help tackle anti-social behaviour, and improve educational, employment and new business opportunities.
Tips for finding the next property hotspot
- The property should be located within a 10 minute walk from the train or tram station. Tenants pay more rent to live near the station.
- Properties on a wide tree-lined street are always more attractive to buyers. Houses on these streets are more expensive to buy and easier to sell.
- Search for green spaces, such as parks and playgrounds. In populated areas, green spaces are scarce, and valued by buyers and renters who do not have a backyard, or families with children or pets.
- Examine the layout of the high street. Does the high street have a community feel? Can you imagine trendy restaurants and cafes opening in future? Are new types of businesses applying for shop licences, and will these new businesses attract more foot traffic? From my observations, organic and healthy eateries, as well as independent 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 currently unsafe areas.
- Get to know the local councillors because once you befriend them, they are more likely to address your problems. Alternatively, follow the councillors on social media. Some councillors write in-depth updates on local regeneration plans, so check out their blogs.
- Speak with people who grew up in a gentrified town. These people can often ‘feel’ the gentrification before it begins. I grew up in a poor town that is now middle class. Living through gentrification in my younger years has given me a ‘sixth sense’ on how to find potential property hotspots in poorer areas.
Had I been wealthier in my younger years, I might have bought properties in more desirable areas, like most people. But the reality is I want more value for my money. Always.
Buying properties in poorer areas is not only cheaper, but, once the town gentrifies, your profit margin will be higher.
So, have you considered buying property in a poorer area?
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