I received a great question from Charles, one of our guild members, a few days ago…and I thought it was the perfect choice for this month’s “Ask the P.I.G.” video. Charles wanted to know what is the best way to find real estate “hot spots”, or the highly desirable neighborhoods in your area where homes sell quickly. That’s a great question, and an important thing for any investor to know, so that they can target their marketing or direct mail campaigns to the areas where they can find homes to flip rapidly.
The first piece of advice I would give you is to ask a local Realtor who is ACTIVE in the business. Don’t ask just any old dope who has never sold a house and is a Realtor in name only. The barrier to entry is extremely low to become a Realtor, so there are a lot of people out there brandishing a license who have no clue what they’re doing. You want to find a high-octane realtor on steroids who’s out there beating the streets each week to make a living. Those Realtors will have their pulse on the market, and will be able to guide you towards the neighborhoods or areas that are particularly desirable in today’s market. They typically have information at their finger tips regarding the popular school districts, proximity to local hospitals and other services, which can be valuable in determining where buyers will want to live.
The second strategy is to ask a Realtor with access to the MLS, even if they’re not a top producer, to pull some hard data for you to confirm what the other agents or local industry experts have told you during your research. We always want to “trust but verify” in business, so it’s important to get some numbers to back up what you’re hearing. The key statistic you want to look at is the “Days on Market” or DOM for a particular neighborhood, which paints a pretty good picture of how desirable an area truly is. If most of the homes sell in 30-60 days (or significantly less than the average DOM in your market), then you know it’s a “hot spot”. However, if it’s taking much longer than that (over 180 days or so), it may be a neighborhood you want to avoid.
***A WORD OF CAUTION*** Make sure you look carefully at the data behind any anomalies, where one house sells significantly faster or slower than other homes in the neighborhood. Check out the video above for more on anomalies, and what to look for to see if they’re a cause for concern or something to be discarded.
This understanding of “hot spots” and knowing what to look for has made myself and many other investors a great deal of money over the years. In fact, there’s a neighborhood in my neck of the woods called Mirabelle that fits the “hot spot” criteria perfectly. It’s not a particularly huge neighborhood (50 homes or so) and it’s not near a bunch of other residential neighborhoods. However, a unique combination of price, quality, location, and neighborhood dynamics have made it extremely popular. Most homes in the neighborhood sell in less than 30 days (even without being renovated) and the majority of the buyers pay CASH because the neighborhood appeals to an older demographic. The last renovation we did in there sold after just ONE DAY on the market, for full price, to a cash buyer…and it wasn’t the least bit of a surprise. Oddly enough, because of our market research before we purchased it, the result was somewhat expected.
What are your thoughts? Do you have anything to add? If so, let us know in the comments section below. And don’t forget to grab your free investing resources, including our audio teaching on how to find motivated sellers with equity, and our free report entitled, “Top 10 Foreclosure Mistakes (and how to avoid them)”. Just click here, fill out the form, and we will rush them to your e-mail box!