Finding the Next Big Growth Market for Real Estate Investing

Investors, home flippers, real estate brokers and agents all wish they had the ultimate crystal ball for predicting up-and-coming regions and neighborhoods. Technology can help you hone in on what an area looks like in terms of home pricing, quality of life, and renovation costs. But where do you begin researching the next boom area?

4 Key Areas to Watch

If you're looking to get into the next hot market, there are a few areas to keep your eye on.

Top Market Lists

Studies like this one give you a high-level view of hot markets. But many of these regions (such as Austin and Los Angeles) are already at a mature stage. Finding a great deal can be challenging. This list goes one level deeper, but again once the mass media has started writing about deals and trends, the cat is out of the proverbial bag. Smart investors need to stay one step ahead, looking at factors like the ones below.

The Next Big Tech Hubs

As technology-based businesses thrive, they bring with them jobs and opportunities for housing booms. For example:

• Phoenix is branding itself as a tech-friendly city. Once primarily a retirement and hospitality destination, the city is now the site of many SaaS (software-as-a-service) back-office and sales operations, along with next-generation testing and manufacturing (including autonomous vehicles).
• Indiana startups raised more than $76 million in just one quarter and Indianapolis has been cited by real estate experts as being a great market — especially for multi-unit housing and rentals.
• Amazon's new headquarters in Arlington, Virginia brings with it more than 22,000 jobs. Real estate prices are already climbing.

Advises Arlington-based agent Ryan Taaffe, "Take a data-driven approach, look at job and population growth as well as monthly rent prices. Get a sense of the rate at which prices are increasing and look at the relationship between the median rent and median sales price in the market."

New Transportation Routes

By tracking where new mass transit stops are being constructed, real estate investors can get a jump on the next popular neighborhood. Proximity to a train or bus route correlates with home prices. As more cities add mass transportation or new stops, investors should stay tuned in.

After the Artists Come the Investors

Areas like Hoboken and Jersey City in New Jersey, Lowell in Massachusetts, and Yonkers in New York have all seen historical neighborhoods that were once manufacturing hubs make a transition to artist communities and then, ultimately, to "hidden gems" for pioneering renters and investors who want to get in on the ground floor of real estate opportunities. We've seen a similar trend with vacation homes. For example, as the Hamptons became more expensive, weekenders found bargains in Upstate New York and Massachusetts.

How to Find That Next Great Deal

Those are just a few ways you can stay ahead of your next opportunity. Read business media that talks about major company moves, funding, new commercial construction and other developments that will increase employment in a particular community. Watch what big brands are doing. When a Starbucks, national bank, or big-box retailer moves into an area that is a sure signal of growth.

Look beyond your own backyard. But if you're investing in a multi-unit property or other real estate in a distant area, be sure you've taken into account how you will renovate and manage properties. Do your homework at a highly targeted level, using tools to review comps and neighborhood statistics and trends.

Above all, be willing to take calculated risks. When you invest in an up-and-coming area, you may need to wait a while before your commitment pays off. But those investors and real estate brokers who stay one step ahead of trends will ultimately see the biggest returns.

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