Whether you are a first time homebuyer or this is your 5th home purchase, using publically-available data can help you make a smart decision that can reap years of benefits – as well as be pretty dang profitable.
In this article, I’ll show you how to use school rankings, as well as demographic and psychographic data, to help you find your tribe, boost your career, get your kid a great education, and make some money when you sell.
STEP 1 : ARE YOU LIVING IN IT OR FLIPPING IT?
Know your motive. Know your budget.
You may increase your social clout and networking through your home purchase, which assists you in reaching your career goals.
You may just want a fixer-upper that you can flip to MORE THAN DOUBLE YOUR INVESTMENT.
Is this a flip-and-sale house or a live-in-and-sell house (aka owner-occupied house)?
While the research performed may be a bit similar for each motive, there will be a few deviations.
In searching for a lifestyle home, expect to pay more for an established neighborhood and great schools.
Sample Flip-And-Sale (or rental property)
This home is a foreclosure selling for 27% under estimated Zillow value. It needs interior work – perfect for a handyman or lean construction team. You can find other deals of homes with even greater room for profit. Some homes located in trending areas (with updates and a remodel) double their purchase price. Example: Pay $62K for a fixer upper in a trendy area. Spend $10K-20K on updates Sell it for 124K.
In searching for an investment property, expect to pay less, but consider the crime rate and other socio-economic differences carefully.
Occasionally, you can find a gem – a low-cost property on the cusp of a burgeoning, growing, trending area (we’ll look at population trends later).
In this article, we’ll look at the live-in approach. The goal is to find a home that we can love on for 2 years or more, and then sell it for profit.
Lifestyle Home Sample
- I can tell you that if you live in the home for a minimum of two years, you don’t have to pay the hefty capital gains tax when you sell. So, there’s that benefit.But if you’re looking for speed, a flip-and-sell approach would be a better fit.
- Your realtor should be able to provide you with demographic population trends data in an easy-to-understand data. If you have a great realtor, this can be the quickest way to success. I’m going to use a mix of professionally-pulled data, as well as data that you can easily find online.Some demographic data sources may be available to you as well, using basic sources like AmericanFactFinder.census.gov, a part of the US Census.gov website, City-Data.com, or DataUSA.io.
STEP 2 : WHO ARE YOU?
Identify a few key factors in the life goals and give that your realtor. Your realtor should be able to help you find properties that fit your criteria.
SAMPLE LIFE GOALS FOR LIFESTYLE BOOSTS
Increase professional network
Live near other young families so the kids can have birthday parties, etc.
Perhaps live in an area around people with similar interests
Live in a low-crime area
Live in an area with good schools
Sample budget and other details:
To spend no more than 500k
Within a 1 hour drive to a major city
SAMPLE PROPERTY INVESTMENT GOALS
Purchase a low price point home in a relatively safe neighborhood with decent schools and live in it for two years
Invest in sweat equity to fix it up
Create a solid investment rental property (passive income) and/or
Sell after two years for profit
Sample budget and other details:
Spend no more than 225k
Near population trending area
For this example, I’m going to look at Option #2: Sample Property Investment.
STEP 3 : WHERE DO YOU WANT TO PURCHASE?
If you’ll be living in the property you’ll need something that meets your need.
Do you need to be near your work (unless you don’t mind extending your commute short-term for the long-term payout)?
Near schools (or within the same district if you don’t want your kids to change schools)?
Near a health food store?
Open land for your dog to run?
PRO-TIP: The more flexible you can be – the more opportunity you will have.
For our sample city, I chose an area near Modesto, CA. From this quick slideshow article from U.S. News, Modesto, CA ranks 15 out of 22 for best climate in the U.S.
STEP 4 : SCHOOL RANKINGS
If you want to narrow your search fairly quickly to start, look at school rankings. Why?
According to an article in NYTimes.com, authors Quoctrung Bui and Conor Dougherty state,
“There are many factors in a home price, of course, but economists have estimated that within suburban neighborhoods, a 5 percent improvement in test scores can raise prices by 2.5 percent.” Source
For a home valued at $225,000, a five-percent improvement in test scores could result in your home increasing in value over $5,000.
When paired with demographic and psychographic forecasts revealing population trends for the next five years, school rankings and scores can be a great indicator of increased value to come.
WHERE TO GO:
Using Niche.com, I can enter Modesto, CA and get a quick snapshot of what I’m looking at. With an overall score of B- for public schools and a C- for Crime and Safety, I know that I’m going to have be careful in looking for a safe home for the kiddos while we live on-site and fix this property up to sell.
In fact, I might use Google Maps to zoom out and look at outlying areas to look for safer neighborhoods and better school rankings.
Want more information on school rankings? Check out these sites:
STEP 5: POPULATION TRENDS DATA
When you’re ready to move forward, it’s time to ask your realtor for additional, more in-depth data.
From this pro data-pull of Modesto, CA + 85 miles, I can see the general population numbers for this area in 2017.
I’m going to also look at the same data forecasted for 2022, five years away and try to determine population movement trends.
While the 2022 population density projection, gives me some idea, if I shift the data to separate the geography by zip code, I can see population density trends along major interstates (below).
I’ve drawn a red polygon around those areas for you in the map below. This makes sense as San Francisco, San Jose, and Santa Cruz are all with a 1 – 1 ½ hour drive.
I can also see that the city of Tracy, CA is poised for growth.
Tracy, CA connects the major areas of Pleasanton, CA and Manteca, CA using Interstate 580.
I looked up Pleasanton and Manteca using Niche.com. Pleasanton offers a well-ranked school district (A+) with low crime and affluence, and Manteca, CA, which according to Niche.com, still has a lower (C+) crime rating and a (B) school ranking for public schools.
I project that over the next 5 years or more, the population of Tracy, CA will grow, serving as a socio-economic bridge between the two communities.
From the data in this chart, it looks like the areas of Lyoth, Carbona, Mendenhall Springs, and Mountain House are our target area winners. If I can’t find active listings there, I’ll also check south of Stockton in the French Camp area.
We’ll cross-reference these again with school data to hone in, but, we can now use MLS listings or Zillow.com to start shopping.
STEP 6: SHOPPING
Using Zillow.com, I was able to find a few homes close the budget I had set which looked promising.
Here’s one. This foreclosure is estimated at $230,545.
HUD HOMES FOR SALE
You can also look for HUD homes using HUD.gov.
This listing requires the new owners be owner-occupants. Other homes in this area list for $204,000. This home lists for 185K but is taking offers.
If you want in on the big investing secret, tax sales are where it’s at. It’s a sad truth.
Every year, homes are for sale by the county for back taxes. Look at this list from the San Joaquin Valley area.
Property #14 on this list needed to clear ONLY $7,500 in back taxes.
It sold for $45,000.
The unit was remodeled and re-listed for sale for $116,000.
Less an estimated $20-30k in remodeling, this guy profited around $40k.
He doubled his investment.
Not a bad return.
STEP 7: FINALIZING THE LIST
Make a list of your favorite investment properties.
Check your properties again against other data (school ratings, crime, demographics, etc.)
Compile your list into an simple Google Sheets worksheet or an Excel sheet. Make sure to include times and dates for any ending auction properties.
Talk to your realtor – or, better yet – have him do the work for you!
SOLID REAL ESTATE INVESTING RECAP:
Step 1: Are you living in it or flipping it? Establish what you want. If you want to flip, HUD homes may be out for you.
Step 2: Who are you? Establish your goals. Are you looking for investment, or socio-economic personal growth? We’ll cover socio-economic growth home shopping in another blog.
Step 3: Where do you want to purchase? Are you purchasing close to a new job? Looking for a beach house?
Step 4: School rankings and other data. If you have kids, or are concerned regarding crime rates, remember to check these closely.
Step 5: Go pro: Population trends data. Grab this data from your realtor.
Step 6: Shopping – Time to look online and get in some showings!
Step 7: Finalize your list and make your purchase decision.