Four Trends in Investment Properties
Spotting investment property trends is the key to capitalizing on changing markets and obtaining the best return on your money possible. Over the last few years, a number of developments have represented a sea change in real estate investing in the United States. Below you'll find some tips regarding what trends you should look for when considering your next investment property decision.
A Shift Towards Inland Markets
Although housing prices continue to grow in the country's most expensive cities, such as New York or San Francisco, there has been a notable shift of the middle-class towards affordable housing in areas of the country where it still exists, making “inland” cities the fastest growing in the entire country.
Oklahoma City, now the 8th fastest growing city in the United States, offers just one example of this trend. Young people are moving there, forsaking coastal cities that offer rents that are too high, while facing an inability to obtain mortgages. El Paso and San Antonio, Texas; Little Rock, Arkansas; and Knoxville, Tennessee are all cities that mirror this overall trend.
People are moving to these cities looking for a bargain, as well as the stable employment opportunities these cities provide. Issues such as crime, educational standards and quality of life are all important factors. If you're seeking investment properties, identify areas that are in the process of revitalization in “inland” cities, and you may see better potential returns on your real estate portfolio.
Given the rise in families and people renting single-family homes, renters are more often dealing with smaller rental companies or landlords. Although there was a surge of multi-family home construction during the last housing boom, renters are increasingly turning to single-family rental homes due to the quiet and extra space they bring.
Often these single-family homes are owned by a landlord with only a few investment properties, meaning tenants can expect to deal with their landlord on a one-on-one basis. The growth in single-family renters also coincides with the decrease in home ownership, which has generally been on a downward trend since the 2009 financial crisis made it increasingly difficult for people to buy homes.
Census data has also demonstrated that the suburban market, which features far more single-family homes as a percentage of the market than urban markets, has seen significant growth in 2013. In addition, the National Association of Homebuilders has indicated that 5.8 percent of new single-family houses are being built as rentals compared to only 2 percent in 2006.
The Impact of Financing Rates
Property investors are finding that low financing rates allow them to enter the rental property market and realize strong returns if they invest in the right areas. Interest rates are low and credit is often cheap in many cases. This not only means that investors have access to capital at a low rate, but that the market also remains tight due to investors who already snatched up some of the most distressed housing for investment purposes.
However, this has raised additional concerns that easy money will lead to another property market boom and bust. Despite fears, there are signs that the real estate market is making a slow but steady recovery, with little signs of the mania fueling the property market bubble of the 2000s.
Investing Around Sectors
Property investors are increasingly looking at the employment sectors surrounding a city to determine whether investing there is a safe decision. Healthcare, government, and education are seen as stable choices, while cities that were more reliant on finance and construction are seen as less reliable choices.
This reflects the strong growth of cities like Raleigh-Durham in North Carolina, which has a vibrant education and medical sector, and cities like Alexandria in Virginia that are surrounded by government contractors and employers. These areas are expected to remain strong well into this decade.
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