John McIlwain, holder of the J. Ronald Terwilliger Chair for Housing at the Urban Land Institute in Washington, D.C., sees an increase in pioneers moving into marginal neighborhoods and successfully turning them into hot spots. But as demand increases, investors may have to be more discriminating in their choices. He identifies three factors to look for in areas adjacent to an urban enclave: the arts community, the gay community and the presence of young, urban pioneers.

Artist studios and lofts populate the first type of neighborhood, attracting trendsetting young people, as well as edgy galleries and unusual shops. Museums also characterize this type of neighborhood. To the west of Hancock Park, for example, a stretch of Wilshire Boulevard known as Museum Row features some of the city’s most impressive museums, as well as several small but influential art galleries.

"Each house is like a jewel box. They were built with the best materials and designed by the most famous architects of their time."

The gay community, McIlwain says, can serve as a barometer for the market. "If the gay community is moving into that marginal neighborhood, buy," he urges.

The third group of pioneers consists of young professionals, either single or married without children, who are moving into blighted areas and restoring old houses. "If you see one or more of these three groups in the neighborhood around the area you want to buy in, that’s a very good sign," McIlwain says. "It doesn’t mean that the neighborhood will turn right away, but the direction will be strong long-term."

Buyers should also consider trends in both upscale and surrounding neighborhoods over the previous five-year period. "Talk to real estate brokers, read articles in local newspapers, talk to neighbors and store owners," McIlwain advises. "Ask them if the neighborhood is getting better or worse." Buyers should also research the city’s future development plans. "You want to make sure that you have a good mayoral administration, and that the city is working toward improving the basics–transportation, roads and water and sewer services."

Another important indicator of a neighborhood’s direction is its corner properties. "Make sure the properties on the corner of a street are well kept," Re/Max’s Jones says. "Even if they are vacant and can’t be developed, make sure they’re attractive on the outside. Over time, [they will] strategically improve the value of the housing stock in the area." And finally, Jones adds, make certain that the neighborhood has an anchor that will attract buyers and increase property values over time. Buyers in the St. Louis Tower Grove Heights neighborhood are attracted by the variety of international restaurants, as well as Tower Grove Park, a National Historic Park founded by Henry Shaw.

For Gerbaulet-Vanasse, the anchor in South Kenwood was Lake Michigan. "I was always convinced that properties this close to the lake were worth a lot more than they were being sold for," she says. Her instinct about the neighborhood has paid off. She continues to preserve and enjoy her vintage home while remaining active on a committee charged with preventing the loss of single-family zoning in the area. She plans on staying–at least until her children are grown. And if at some point she and her family decide to sell the property, $2 million may very well be a giveaway.

Kassandra Kania is a freelance writer based in Charlotte, N.C.

Illustration by Edwin Fotheringham.

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