Which Property Market Is Best Suited For Your Investment Strategy?
By Paul Esajian on December 4, 2015
America is full of good, but very diverse property markets. Finding the best market requires more than searching the media for next year’s ‘top 10,’ or checking some boxes that someone else is using. It is about finding the right match for you, your brand, your real estate product, and your strategy. What’s right for someone else, isn’t necessarily best for you and meeting your full potential in the easiest way. For example; you may have a luxury or affordable housing brand, and it might perform very differently in other cities. You may have a green brand, which will thrive in California, but seems eccentric and frivolous elsewhere. They may have far different volume potential.
Understand your brand, and then match it up to the right market. Here are a few different options you may want to take a closer look at:
Top Property Markets for Rental Returns
There are many different factors to consider when choosing where to invest in real estate, or a rental property. One of them is obviously rental returns. Earlier in 2015, RealtyTrac created a heat map of the United States based on annual gross rental yield. The most notably takeaways where sparsity in destinations in the middle of the map, and a main vein running vertically from Michigan through Florida. Of course, both the east and west coast featured many destinations on the list. Among the top destinations for gross rental returns in 2015 were:
- Richmond, VA
- Atlanta, GA
- Baltimore, MD
Best Markets for Renting to Millennials
With Millennials rumored to be such a massive force in the market, it makes sense for those desiring to serve them to keep an eye on where they are. RealtyTrac estimated that some of the top markets for gross rental yield, with high percentages of Millennials would include:
- Richmond City
- Baltimore City
- Philadelphia
- Newport News
- New Orleans
Of course, despite the hype, many investors will find that they are perhaps best suited to helping their peers in Generation X. So where are they?
Best Markets for Renting to Generation X
RealtyTrac’s data suggested these would be among 2015’s top performers:
- Chicago, IL
- Little Rock, AR
- Atlanta, GA
- Miami, FL
- Jacksonville, FL
Best Markets for Renting to Baby Boomers
Based on the same criteria for boomers, top destinations this year were expected to include:
- Fort Myers, FL
- Ocala, FL
- Port St. Lucie, FL
- Charlotte, FL
- Tampa, FL
Best Safe Haven Markets
While the general consensus is that the U.S. real estate market is really just picking up, there are some pessimists and those which prioritize asset protection above hope of yield. This may demand very different markets to be invested in. Some of today’s markets which ‘promise’ the widest rental spreads would probably be the hardest hit in a downturn. Those seeking reliable, long-term safe havens may be more likely to trend towards more affluent, proven markets such as those in NY, CT, CA, and Southwest FL.
Best Markets for Equity Growth
For the bullish, it is a great time to lock into growth markets. Equity growth has been proving robust on select deals, with predictions of 18% plus price growth in 2016, and 40% home value growth over the next 5 years. We see this in New York, Miami, and Naples, FL. There are also markets poised for growth with incredible development potential such as San Diego, California.
Summary
There are a variety of market choices, with different features and demographics in each. There are plenty of choices for different investors, and room for everyone to find their niche in real estate. It is important to look beyond the ‘top 10’ of the day to check the additional boxes that apply to you and your brand. Gross rental yield may mean nothing, if the net isn’t there. Safety, appreciation, and local laws can also make a big difference in results. Don’t forget that the property market and greater economy is constantly changing. What were pegged as great markets a year ago, may be the laggards in 2016, or not. Overall, expect a strong 2016 for rental yields.