When most buy homes they are looking for the best of everything. Best home on the block in the best neighborhood near the best trails in the best school district. No one is ever thinking. “oh look at that nice home snuggled between those vacant and practically torn down properties. Very niiiice! Lets buy it!”
Living in a city that is currently booming in revitalization, it is not unlikely to see this though. It makes one wonder, who is going to be the “crazy” person to buy a home on this sketchy block in this dilapidated neighborhood. Yet, it happens. Someone comes along and purchases it and they aren’t “crazy”. Want to know why? The numbers. There is a time and reason to buy that one nice home and for the person who pays attention to the market, and does their research, the numbers are more than enough reason to do so.
Last week I viewed and showcased on instagram a home in the neighborhood of Park Heights in Baltimore city. This neighborhood in recent decades became a west side drug infested and crime ridden area who’s warning signs rang with its name all across the city. But that was not always its reputation. A half-century ago, Park Heights was a bustling “streetcar suburb” with middle class residents, thriving shops, restaurants, movie theaters and a branch library. Theres no wonder why it was thriving. Even to this day it houses the home of the Preakness, is steps away from the Maryland Zoo located inside of Druid Hill Park, is local to downtown Baltimore and is within walking distance of a Mall that provides well for its community members. The homes in this neighborhood have always been nice sizes for families and were created with beautiful character of quality materials.
Today this neighborhood has drawn attention of need from the city and thereby investors. The city has committed $100M to the blighted area. Investors are already buying the homes for low prices, fixing them up and selling them for prices this neighborhood hasn’t seen in awhile. We saw this happen in other sections of the city such as Remington. An area that went neglected for sometime until investors realized the beauty in its location coupled with its low priced homes and decided to revive it. Homes were going for 70k – 120k then, Now, with renovations, those same homes are sold for the 2-300Ks.
With all of that said, the FIRST renovated home on the block, between the run down homes – what makes one buy and move into THAT one. Lets walk through the mindset of that person.
This person has decided they are looking for the best return on their investment. They have watched the trends of the area and can identify the next up and coming neighborhood. Pairing the two together they are aware that buying low and selling high is the best way to achieve their goal of getting that great return.
EXAMPLE IN NUMBERS:
Disclaimer: Now look….This is a very rough estimate of numbers for the sake of this example. There are variables that go into buying and selling Real Estate that distinguish the amount of monies needed and to be paid. Don’t you go out there saying “ERIKA SAID on her blog that I am supposed to get XY and Z”…. based on this EXAMPLE. IT IS A ROUGH ESTIMATE EXAMPLE to show my point. (love you hear! lol)
You buy the first pretty home on the block with the supporting factors that the neighborhood is undergoing revitalization. You purchase for 170K. Five years later the neighborhood has been established and homes with your similar floorpan are now selling for 300K. your home is well maintained and its comparable to those 300k homes. You decide to sell at that price point while the area is at its high. You walk away from this sale with 163K
Now, shat does this sale look like for the person who moves in once the neighborhood is entrenched. The cafes and joggers are already there and the neighborhoods’ decrepit past is just that…the past. All of the same apply however you purchase the home for 295K. In 5 years the market says you can sell for 300k. You sell. You then get to walk away 86K.
So you see the difference. Real Estate is an investment and when purchased smartly at the right time the investment will pay you well. At this time, I do not work with investors as much as I do families looking for their family homes. However, I always encourage my clients, no matter where or when they buy to still look at their purchase as the financial asset it is even if its for the family for years to come. You never know how the market may change and how much CHANGE it could be in your pocket at any point.
Is buying in the economically challenged neighborhood for you prior to it being on its upside? Maybe not, and I am not trying to change your mind about that, but at least now you know the logic behind why it is for some. Real estate is a home and a dream for some, a numbers game for many others, but its n investment for everyone so never forget to treat it as such.