Personal Finance tips

How to find the next real estate hot spot

The Globe and Mail

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It may be ironic for an author of real estate tips books to advise people not to act on tips, but Don Campbell is adamant that buyers do their groundwork before they invest in the next housing "hot spot."

"I have seen too many people buy a property based on what someone tells them, rather than do their own homework," says Mr. Campbell, president of the Real Estate Investment Network. "This leads to disaster so many times."

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If you've heard that a certain neighbourhood is poised for growth, that's just the first step, he says. Before you invest a dime, you need to verify the information. Read the minutes of council meetings, ask local politicians whether the leadership is focused on bringing new jobs and growth to the area, and check for a written renewal plan at the municipal planning department.

"You can actually see what's coming if you get one of those reports on the neighbourhood," Mr. Campbell says. "You just have to have patience, like most investors should."

Before you buy, drive around the neighbourhood, he advises. Look for renewed signs of pride of ownership that weren't there before - a sure sign that renewal is under way.

Other tips for getting the best return for your real estate investment:

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1. Look for transit improvements

If you want to buy in an area that will increase more than average in value, choose a neighbourhood with a major transportation improvement occurring nearby. The demand for such properties is always strong, even when market conditions turn sour. Also, think about who the target buyer will be when you sell the property and whether there are amenities nearby to attract such a buyer.

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2. Check the zoning

Don't buy a property hoping to convert it into something else without finding out how it is zoned. Check with the planning department to find out whether there are any zoning changes pending.

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3. Don't buy too early

Governments announce a lot of things, especially around election time, but not all projects pan out, Mr. Campbell says. "Watch for the tractors and watch for the diggers, and that'll give you a big indication that they're at least committed to getting this project going."

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4. Don't buy too late

Once a neighbourhood's redevelopment is close to being finished, that's a sign it has become a more mature area and will only increase at an average rate. It's important to "get in front of the tractors," Mr. Campbell says.

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5. Buy used

Many renewal projects involve knocking down old buildings and putting up condo towers and trendy shops. Rather than buying into the new condo building, buy an older home in the surrounding neighbourhood, Mr. Campbell says. You'll see a bigger bump in the value of your property than with a new condo that everyone is lining up to buy.

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6. Consider renting

Sometimes when you're buying a house to live in it's not the ultimate investment spot, but you may need to live there because of its proximity to your work. In such a case, consider renting your accommodations. If you can afford it, buy another property with more growth potential as an investment.

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7. Consider the demographics

Is the area's average income increasing faster than the provincial average? What about population and job growth? If these figures are above average, chances are good that property values will see higher-than-average growth. You can research a region's demographics by looking at studies done by Statistics Canada, provincial government economic departments and local economic research firms.



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8. Don't get carried away

You want a fair price. If you get emotionally attached to a house, you might talk yourself into overpaying for the property, Mr. Campbell says. Similarly, if you get caught up in a bidding war, it's easy to get swept up in what he calls the "I'm going to win this" mentality and spend more than you should.