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Exodus From the Suburbs

Is it true that there's a big exodus going on from the cities to the suburbs? Are housing projects that are farther out from city now more risky for investors, since those areas are over built and the rise in gas prices has deterred many renters and buyers?

Well, nobody knows if gas prices will stay high or drop, but it's true that more people want to live closer to the city than in the suburbs.

It is certainly true that millennials are leaving the suburbs and want to live in the city. Millennials want to leave in areas where their shops and restaurants are close by and you can ride your bike to work or walk your dog in a park. Plus, millennials don't want to drive an hour to work or sit in traffic. Yes, that's a big reason why there's an exodus going on from the suburbs.

There are advantages for living in the suburbs, you can buy a cheaper residence, and the costs of consumer goods (coffee, dry cleaning, food) are usually much lower than in the city, but increasingly, the privacy and space advantages have lost their appeal if it costs you $5 a gallon to get there and takes you an hour to complete your commute.

Moreover, there’s been lots of talk these days about the end of the suburbs in general. More and more homeowners in the suburbs are moving back into the city due to the high cost of gasoline. And while gas prices due flucuate, the trend is that gas prices will go higher over the long term. But again, people are leaving the suburbs because they don't want to spend so much time in their car in their commute to work, often stuck in traffic.

Right now, in the current real estate market crash, the hardest hit housing markets are those on the very edges of the city, where there is just less infrastructure and as oil prices continues to rise, the desirability of these areas continues to sink.

And it’s not just gas prices, it’s parking as well, which isn’t cheap in many cities. There are people who not only have just moved from the suburbs to the city but left their cars in the country as well, and get around on a bike and use public transportation.

If the edge of the suburbs isn't attractive to renters then the edge of the city will be. So you can expect to generate cash flow from a property that's twenty or thirty minutes outside the city center but has good access to a highway or subway or train. Again though, the city life itself is becoming more fashionable and trendy - although not sure if this trend will continue.

But what is an investor to take away from this? Well those apartments near the city are looking more desirable these days and rents will go up as demand increases.

Overall though, when buying any investment property, it’s good to factor all of this in from the start. Who are the tenants you are seeking? Where will they work? How will they get to work? What schools will there kids go to?

If you're focused on renting your investment property to a younger demographic, then it's crucial to think about the proximity to their job as well as restaurants and parks and bike trails.

Learn more: Smart Growth

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