8 ways to invest in the right neighbourhood

Toronto’s once-seedy neighbourhoods are gentrifying faster than you can say “Anthropologie,” so if you’re going to stay ahead of the curve, you need more than an understanding of interest rates and the general economy — with pricing in established neighbourhoods already out of reach for many, you need to predict with reasonable accuracy which neighbourhoods are going to be next.

Liberty Village was little more than an industrial park with one good pool hall just a decade or so ago. You could still get a house in Leslieville for under $200K only a dozen years ago. If you’d known then what we know now, imagine the money you’d have made. So how do you know your desired neighbourhood is upwardly mobile?

Shop till you drop: What sorts of retailers are moving in? I used to joke that there wasn’t a neighbourhood in the city that had both a Starbucks and a Money Mart, but a couple of suburban locations have recently proven me wrong. I still stand by the general gist, though. Retailers of $6 lattes don’t open up in neighbourhoods on the downswing. Artisan bakeries, craft brewers, vegan restaurants and art galleries are all good signs. A Whole Foods is practically a guarantee.

Condos: When the condo developers move in, you’re on the right track. To stay ahead of them, don’t wait until they break ground. Watch this site (and, ok, if you must, also perhaps read the papers) for deals that are still a year or two away, and get in ahead of them. Things don’t always work out as planned, but whether or not a deal gets done, if a successful developer is taking a close look at an underutilized or vacant spot, there’s money coming.

What’s in a name: “The Distillery District” didn’t mean anything to anyone not that long ago. If you find that pennants have gone up on the lampposts heralding a new, trendy nickname for an area, pay attention.

Playtime: Watch for new cultural events and festivals. Many upstarts can’t afford the finest venues for their events and go looking for alternatives. Music festivals and craft fairs that seem to appear out of nowhere in nothing-much neighbourhoods can be harbingers of artsy types to come. And artsy types, in addition to hip beards, generally bring specialized coffee shops and oxygen bars with them.

Community spirit: When you start to see neighbourhood watch organizations become more active, it means higher income buyers are likely moving in.

West Queen West in Toronto

The flip side is knowing when you’ve missed the boat and picked a neighbourhood that isn’t going to get a Lululemon any time soon. The good news is that in today’s sellers’ market, you will get decent value for a home just about anywhere in Toronto, but if, after reading the above, you’re not convinced you picked the right spot, here are some signs that your neighbourhood may have missed the boat.

Retail concerns: If there’s a chain store in the neighbourhood that’s going out of business, be wary, especially if it’s a supermarket. While the general state of the economy has a good deal to do with where successful chains open, there’s also a local factor at work. They use a sales per square foot matrix to decide where to open stores, and if they’re closing one, they’re finding the neighbourhood doesn’t meet corporate profit standards. They have a lot more resources at their disposal than a local Mom & Pop, and closing one is no trivial matter. If the anchor store at the local mall is closing, that’s generally not a great omen either.

Tax hikes: If your property taxes are going up, it can mean local businesses are moving out, and the municipality has to recoup funds from somewhere.

Night watch: Have a walk at night, and see who else is out. If you don’t see elderly folk, women and children, it could be because there is an increasingly unsafe air about the place.

Keep an eye on the details, and your next property purchase could be a goldmine down the road.