HOW TO PICK THE RIGHT NEIGHBORHOODS TO INVEST IN

There Are Plenty of Bad Neighborhoods in Good Cities

Best Neighborhoods in a City: 2 Ways to Find Them

BOTH METHODS ARE COMPLIMENTARY TO EACH OTHER. YOU WILL NOTICE THAT I USE THEM BOTH

#1 The Raw Metrics Method

#2 The NeighborhoodScout.com Method (SF/Small MF) PAID

METHOD 1: THE RAW METRICS METHOD

Pull Publicly Available Statistics and Compare Cities to Each Other

Resource #1: City-Data.com

• The most powerful FREE real

estate website available to

investors.

• It has a tremendous amount

of metrics information that

can be very useful.

Resource #1: City-Data.com

Before we dive into the details, here are 3 general tips:

• Improving areas have a very strong tendency to keep improving

• Areas that are going backwards rarely tend to recover. Most civic turnaround efforts fail.

• Play the odds. Resist the temptation to buy in a rough area simply because you think it cash flows better (tip: It doesn’t. Paper numbers are not real).

Resource #1: City-Data.com

CHARTING METHOD

1. Start with the Gradation chart on the City-Data.com website, for the city being analyzed. Make sure that MEDIAN HOUSEHOLD INCOME is selected, and the MOST RECENT VALUE button is selected.

2. Use your computer or tablet’s screen shot feature and make a screen shot of the view.

3. Now click the % Change since 2000 button. Take another screenshot.

4. In the dropdown, select MEDIAN HOUSE OR CONDO VALUE, and make sure that the $ CHANGE SINCE 2000 button is selected.

5. Make a third screenshot.

6. These 3 screenshots should together tell you which parts of the city are good for investment.

7. Keep in mind that you should ignore the darkest areas (prices are too high, so those areas tend not to cash flow as well, in most cities).

Resource #1: City-Data.com

Resource #1: City-Data.com

CLICK AND TRY METHOD

1. Start with the Gradation chart on the city-data.com website, for the city being analyzed. Make sure that MEDIAN HOUSEHOLD INCOME is selected, and the MOST RECENT VALUE button is selected.

2. Start clicking the portions of the city that have darker (but not very dark) coloring.

3. In the popup window that comes up to the right, try to find areas that have:

a) median household income between $40K and $70K (in certain cities $80K also works)

b) an unemployment rate that is lower than other areas around it (less than 10% is a good starting number)

c) a good ethnicity mix.

d) residents below poverty level should be 10% or less.

e) median rents should be $650 or above. $700 and above are preferred.

Resource #1: City-Data.com

Note that the numbers provided previously for median household income and median rents should be bumped up for more expensive states such as California and New York.

Also note that there is an options button on the top right. Click it and reduce OPACITY to 10%, and you will be able to see the names of the streets and freeways more clearly.

Resource #1: City-Data.com

IT DOES NOT ALWAYS WORK

Many cities in the U.S. do not report public data that the City-data website needs to create the neighborhood map. Examples are:

• Kansas City, MO• Salt Lake City, UT• Indianapolis, IN• Boise, ID• Nashville, TN

Resource #1: City-Data.com

Note that the city-level data is still available for all of these cities, its just neighborhood data that is missing.

This method is also slightly less useful for very small cities like Provo, UT, or Vallejo, CA. While the visual data is there, the city is broken into smaller number of chunks, making it harder to figure out path-of-progress corridors.

METHOD 2: THE NEIGHBORHOODSCOUT METHOD

Try Powerful and Well-Organized Stats Used by Many Professional Organizations

Go to neighborhoodscout.com

• Very well designed service that gives you the ability to plug in an address and learn more about the neighborhood than you ever dreamed possible

• NeighborhoodScout does not work at a city/state level. For those, you are better off with LocalMarketMonitor or HousingAlerts

• You can get 10 reports a month for $49. A very inexpensive service, that produces reports that are terrific for an investor presentation

• Sample report at: www.neighborhoodscout.com/search/location/sample

Questions: On This Module?