Whether you’re an investor looking to flip a property or a buyer looking for your dream home on a budget, you have probably considered looking into up-and-coming areas outside of the more popular neighbourhoods.
These areas are definitely attractive, with more affordable housing options, however there are both pros and cons when it comes to buying here. We spoke to our Realtors about the advantages and disadvantages of buying in an up-and-coming area.
Pro: Lower Prices
Popular neighbourhoods are always going to be more expensive because you’re not just paying for the building, but the access to the amenities and reputation of the area. While a new area may not have many shops or fancy restaurants, they have better value for money.
A one bedroom apartment in an established area may cost more than a three bedroom in an up-and-coming area so your budget will go much further.
Con: Riskier Purchase
While the price point may be more attractive, spotting an up-and-coming neighbourhood is not an exact science and unless you’re a seasoned real estate investor you should consult an expert when considering a purchase.
There are also potential hidden costs as some properties in these areas can be run down or in need of dire repairs. What may seem like a bargain could actually end up costing way more in renovations and repairs.
Pro: Property and Resale Value Will Increase Over Time
As the area develops the property will increase in value in the next five to ten years, meaning that those who were in early will be able to reap the rewards. If you bought a house rather than building, renovations will also have added to its value in the long run.
Con: It Might Not Pay Off
Some areas may take a long time to transform into a sought after neighbourhood, and in many cases they may never deliver on the promised growth. In these scenarios you can find yourself stuck with an investment on which you can’t make the return you were hoping for.
Pro: More Options for Buyers or Tenants
As the area begins to get more popular more people will be drawn towards it. This is great news if you are looking for a quick flip, but also if you want to rent out your property. As the value of the area rises you will be able to increase the price of your home and even the rent accordingly.
Con: Lack of Infrastructure or Amenities
Because the area is relatively new there will often be very little when in comes to infrastructure or amenities such as shops, grocery stores, bars and restaurants. This can often put off potential buyers and renters, but also means that you may see an increase in non-housing costs as you need to leave the area to shop, or commute to work.
As with any purchase it’s important to do your due diligence before buying. It’s clear to see that there are many advantages when it comes to buying in an up-and-coming area, however, there are a number of disadvantages to take into consideration.
Speak to a local Realtor and work out if the pros out weigh the risk in your specific situation.