Comparison of what to look for when investing in suburban real estate



Simply put, the pandemic has ripped the cover off the traditional one. No one expected to have a Thanksgiving dinner with a laptop, or have the children be trained by a teacher they had never met. This was the first (and hopefully ongoing) year for all of us. As life gradually returns to a semi-normal state, it is important to assess which of these changes will forever become part of our work and personal life.

One of the enduring consequences of the pandemic is that people moved out of cities in large numbers looking for more space. This shift away from traditional urban centers has created unique opportunities for individual and multi-family investors, commercial real estate developers and individuals with a shared real estate portfolio. There are early signs that this trend is taking hold and real estate investors should consider when assessing opportunities. By leveraging real estate data, investors can gain invaluable insight into their desired regions, enabling them to stay ahead of the competition amid economic recovery and renewed investment activity.

Moving around the city, not across the country

Unsurprisingly, the need for additional floor space has increased during the pandemic. For many, homes have become the de facto office, classroom, and gym. This, coupled with record low mortgage rates and reduced travel to work (or even live in the same city as an employer), has fueled consumers’ desire to move to more accessible areas. Enter: Suburb.

Real estate investors should take notes on where retailers, restaurants and other businesses are moving in response to the trend of urban-to-suburban migration. In CoreLogic we have used mortgage data for home purchases to understand exactly where people are moving and from where. We found that many people when leaving subways like Los Angeles seem to be moving to nearby, more accessible subways like Riverside. Despite comments about people moving around the country en masse in search of larger, more affordable homes, the data show that most of the time people moved to areas close to where they used to live.

This means that there is probably an opportunity in the suburbs adjacent to the main metro. Not only will these new suburbs require more housing, as our senior head of science and analytics, Andrew Schiller, pointed out in his article. recent Propmodo webinar, they will also need many other types of property. “People moving from urban areas to most suburban areas don’t change who they are,” he said. “They will still need the things they used to love in trendy restaurants, boutiques and Trader Joe’s around the corner.”

Know your hood

By all accounts, there are opportunities in the suburbs. More often than not, for investors looking to seize these opportunities, this means expanding the portfolio into unknown areas. While there are many resources to understand what is happening to property prices in an area, knowing which direction the area is heading is a more complex (and could be argued more important) proposition. First, it is important to understand the demographic characteristics of the area. Census and economic development data can help with this. Then you have to figure out which areas have the most positive dynamics. By segmenting the area by direction of new business, you can see a leading indicator of one of the most important indicators of growth: new household creation. Finally, you need to understand not only what is in the area, but also what it lacks. Is there a shortage of grocery stores, office buildings or cafes?

The answers to these questions will vary from city to city, so it is essential that investors do a thorough analysis of trends and location data when weighing forward-looking real estate decisions. With the right property and location data and tools, investors can more accurately answer questions like the ones above, as well as gain insight into other factors that can play a role in the success of their investments.

Crime doesn’t pay off

Before buying a home or investing in a new property, it’s always important to consider the crime rate data. But crime rate analysis alone may not tell the whole story. It is important to understand any information holistically. In the case of crime data, having context and connections to see how they compare with other factors, such as school district scores or local employment rates, can provide a more complete picture of the “health” of an area.

At a minimum, investors need to know what types of crime are most prevalent in a particular suburban area where they are considering expanding their portfolio. Understanding how crime can affect their ability to keep their employees and customers safe can help plan security and technology in buildings based on specific conditions.

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In addition, the crime rate can affect an investor’s ability to obtain adequate property insurance. Insurers can better set rates if they are aware of the risk of location-related crime, so by matching insurance rates to the relative level of risk in a given area, insurers can improve their underwriting margins while businesses benefit from minimal premiums and sufficient financial support in the event of a loss.

The risk of committing a crime also varies with the type of investment. A real estate that operates a cannabis dispensary can pose a greater risk than, say, a fast food restaurant. While access to crime data is important for seasoned investors, it is only part of a larger puzzle. As migration patterns continue to gravitate towards the suburbs, investors need to have a good understanding of how they analyze crime data to understand what the data means in the broader context.

The pandemic may have been a new situation, but the market trends that have come to the fore are not. While in the late 2010s, there was a centralization of urban centers. due to the growing technology sector, in the first few years of the millennium, people flocked to the suburbs in recording setting numbers… Today we are seeing a return to the trends of the early 2000s.

How long will this trend last? This is harder to predict, but what we know so far is that the pandemic has changed the investment landscape. Urban centers have historically been engines of economic growth, but the desire for more space, as well as the lack of attachment to the workplace, has shifted some of their power to remote areas. Investors of all types are seizing this opportunity in real estate, and those who know they need to use the data to gain a more granular understanding of what people want from their newly acquired suburban homes will benefit.


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