Learn How To Start Investing In Real Estate
Learn How To Start Investing In Real Estate

Community Redevelopment: Assessing A Market’s Needs And Resources

Written by Paul Esajian

The number one goal of most residential redevelopers is to find as many leads and close as many deals as possible. However, if investors want to gain an edge over their competition by doing their jobs with ethics and integrity, they should shift their focus towards community redevelopment.

Community redevelopment and investing in residential real estate are essentially one in the same. A residential real estate investor will research a market that looks to be profitable, find a property in that area, evaluate that property’s damages to determine a scope of work, rehab the property, and finally, sell the completed home for a profit. A residential (or community) redeveloper will follow the same steps, but also add one more step of their own, which sets them apart from competitors: they assess the community where they are rehabbing properties to determine the community’s strengths and weaknesses. Community redevelopers research a community’s needs and resources so that they can develop a property (or several properties) in a way that will benefit the community as a whole.

What does this mean? Let’s use the following example:

How To Unify Community Redevelopment And Residential Investing

social capital

Investor ‘A’ (let’s call him Charlie) finds a “fixer-upper” property in a great community where he believes he can make a profit. He has done his due diligence and researched the market, and has invested in the area before. He calls himself an expert and his clients would say the same. He runs his residential redevelopment company with a strong moral compass in hand. However, he fails to carry out one crucial step during his investment process: evaluating the needs and resources – or strengths and weaknesses – of the community in which he is investing.

Does neglecting this step make Charlie a bad investor? No. Would including this step make Charlie a better investor and strengthen the community as a whole? Yes.

Investor ‘B’ (let’s call her Molly), on the other hand, decides to include this additional step. She talks to members of community, does some additional research on her own, and discovers that there is large religious population within the community. With this knowledge in the back of her mind, she instead chooses to invest in several properties near a local church. She used the information she received from assessing the needs of the community and realized that renovating homes near the church would provide a benefit to the greatest number of people – including herself. She saw a need in the community and updated homes closer to the local church.

Molly’s investment process compared to Charlie’s worked to help a community prosper. Because Molly was able to identify this community’ weakness, it is likely that her deal will result in a bigger profit because she will have more interested buyers.

Ultimately, a community redeveloper should strive to do five things:

  • Stabilize economic conditions (i.e. improve the community’s standard of living in an attempt to reduce crime rates and increase job opportunity).
  • Increase the quantity – and quality – of housing in order to improve quality of life within the community.
  • Improve commercial/residential functionality (i.e. rehab dilapidated properties and/or commercial buildings).
  • Improve physical aspects and attractiveness of the community as a whole.
  • Provide a variety of public services to support a quality development process.

If an investor aims to accomplish these goals, he or she must make use of social capital.

Using Social Capital To Support Community Redevelopment

residential redeveloper

Before discussing how social capital can be used to fortify a community, it is first important to define social capital. Social capital is, more or less, “the networks of relationships among people who live and work in a particular society, enabling that society to function effectively.” This is essentially a fancy way of saying something we should already know: use the assets of a community and its members to more efficiently get a job done (the job being your investment deal).

So, how can you, as a residential investor, use social capital as the catalyst to facilitate community redevelopment? By helping community members connect with one another in order to produce an outcome where an entire neighborhood will reap the rewards. As a community redeveloper, you are forced to wear many hats. Not only do you play the role of investor and business owner, you also must play the role of middleman and introduce members of the community to other like-minded members of the community in an attempt to create more inclusive social circles.

As an investor, you will work with multiple members of a community throughout the process of a single job. Contractors, construction workers, real estate agents, loan officers, and inspectors are just a handful of individuals you might employ while rehabbing a property. Your goal should not only be to rehab said property successfully and turn a profit, but also to connect the individuals you are working with. Why? Because investors who leave a lasting impact on the community that they redeveloped will have greater success in the long run.

In order to assess a community’s needs and resources, it is necessary to address the following questions:

  • Size of the community
  • Nature of the community (city or suburb)
  • Where the community is located in relation to natural/manmade monuments and other activities
  • Community population
  • Community climate
  • Common occupations within the community
  • Common interests/religious affiliations of the community
  • Backgrounds of community members
  • Physical infrastructure and appearance of the community
  • Financial health of the community
  • Environmental status of the community
  • Community’s political views

Knowing the answers to the above questions will help a community redeveloper know the exact path to take when investing in homes. If a community is located in an area that receives an abundance of sun throughout the year, it might be wise to include solar lighting and other energy efficient products in a rehabbed property. If a large majority of a community’s population uses public transportation to commute to work, it would be beneficial to invest in homes near public transportation depots.

These are merely examples. The point being, the more you know about a community before entering into the redevelopment process, the more you will be able to cater to a community’s needs. Likewise, the more you connect community members with one another in order to create a stronger community bond, the more willing that community will be to accept and appreciate your services in the future.