When it comes to real estate investing, it’s common to struggle on deciding where to invest – should you invest nearby? In the same state? Or out of state?
These questions can be hard to answer, especially if you don’t have the bandwidth to research your options and make an informed decision. It’s important to dedicate time and resources to figuring out where to invest, since location is crucial in making sure you receive the returns you are trying to achieve.
Many investors make the mistake of only looking for real estate investment properties within their own neighborhood, since it feels the most familiar and is a short-drive away. But, by only looking nearby, investors are limiting their returns and could be missing out on higher yield in other neighborhoods all over the United States.
That’s why we created the Neighborhood Investment Rating (NIR)© to help investors, like yourself, easily assess neighborhoods remotely and without familiarity to the area, so you can decide on which location will best help you achieve your financial goals.
Now, let’s go over different aspects of the NIR, so you can get a clear picture of what it is and how it improves your real estate investing experience.
What is the NIR?
The NIR is a rating of a neighborhood based on a variety of economic, environmental, and demographical characteristics in relation to other neighborhoods locally and nationally. Some of the evaluated factors included in the algorithm are median home prices, distance to various amenities, education level, job market, unemployment rate, and a number of other factors that evaluate risk-and-reward for a specific location.
Another way to look at the NIR is how Nani Narayanan, one of the creators behind the model, describes it as “the NIR stands for two things – quality of the neighborhood and the associated value of the neighborhood combined; simply, quality and value.”
The NIR Scale
- A+ Neighborhoods generally offer the lowest risk exposure, highest appreciations, but with lowest yields. These neighborhoods are usually the highest priced.
- A Neighborhoods generally offer lower risk exposure, higher appreciation, but with lower yields. These neighborhoods are usually higher priced.
- B Neighborhoods offer moderate risk exposure, a balance of yield and appreciation, and typically have mid-priced properties.
- C Neighborhoods have the potential for higher yield, higher risk and lower-priced properties.
- D Neighborhoods come with the greatest risk that we typically do not recommend to our investors.
How to Use the NIR
You can see the NIR in action by logging into or signing into the Investor Portal, where each property on our platform has an NIR grade available. These ratings, from A+ to D, are there to help you decide if an investment property is located in the right neighborhood that matches your financial goals.
You can even search by neighborhood under the “Property Search” tab of the website. This is a helpful filter to use, especially if you must stay within a specific graded neighborhood to reach your goals. For example, those with a shorter time horizon of less than 10 years before retirement should look for properties within A or B neighborhoods to ensure that they are not adding too much risk to their portfolio, right before retirement.
Need assistance in deciding which neighborhoods are right to add to your portfolio? Speak to one of our Solutions Managers by signing up for a consultation or call 888-276-0232. Once we have a thorough understanding of your financial goals, we can build you a custom portfolio of properties within ideal neighborhoods, so you save time and energy.
The Goal of the NIR
At HomeUnion®, it is our mission to provide our investors with the latest advancements and technology to help them invest in real estate as easily as investing in stocks. The NIR is proof to this sentiment, as its goal is to easily assess the quality of the neighborhood, so our investors can quickly identify the ideal neighborhood that coincides with their financial goals and personal investment style without doing any of the heavy lifting.
“The benefits are huge [to the investor], because they can actually understand the quality of their investment easily,” adds Narayanan. “We designed the NIR to be quickly digestible by our investors, and for them to have the opportunity to make decisions about their investments accordingly. For example, an investor who can be less conservative might go with a C neighborhood with more risk, hoping to get a better return, and on the other end of the spectrum, a more conservative investor can now easily identify properties in an A neighborhood that potentially carry less risk.”
And the best part of the NIR? You never have to leave the comforts of your home to research a neighborhood outside where you live ever again.