As you look at potential neighborhoods for your new home, you may come across the term “revitalization.” This usually refers to a neighborhood that was once in decline but is on the upswing again due to buyers renovating homes and increasing the property values. This type of neighborhood offers both risks and benefits to buyers. Take a look at both sides of the story before you decide to buy.
Potential For Profit
Neighborhoods that are undergoing revitalization offer a great deal of potential for a profit. Because home values are generally still low in the area, buyers can get into a home at a good price. As the property values in the area rise, those who bought early in the process will find their home worth a lot more than the purchase price, often within a few years.
The profit can sometimes be a bit slower in coming, however, since it takes time for the reputation of a neighborhood to change, and renovations that increase value take time as well. Still, as long as the upswing continues, these homes can really mean good equity in the future.
Hard Work Is Needed
Many of the homes in these types of areas are in need of some work. That’s why the prices are so low. People who are willing to do the renovations and help to improve the neighborhood as a whole can definitely make a nice profit on the home if they later decide to sell.
Especially in areas where the homes are quite old, this can really mean a lot of work. It may not be the best choice for those who don’t have the time or the inclination to do a lot of renovating.
Not All Revitalizations Stick
It’s important to realize that the attempt to make a neighborhood fresh again doesn’t always work out. An area may appear to be on the upswing, but the economy or other factors can change that. Buying in such an area does come with the risk that the neighborhood might not reach the level residents are hoping for.
You may also find that a lot of the renovations are being done by people looking to “flip” houses. They fix them up and then sell them at a profit. While there’s nothing inherently wrong with that, it means that for a time your neighbors might be investors and not families looking to make a home.
A neighborhood being revitalized can be a great opportunity to get into a home at a low price and see its value rise. Just be sure you are ready for the potential risks when you buy such a home.
Photo Credit: @Barefoot_Traveller via Twenty20