Are Gateway Cities a Good Real Estate Investment? – HomeUnion

Are Gateway Cities a Good Real Estate Investment?

Being a successful real estate investor requires being able to identify a deal before anyone else. That way, you can employ investment strategies such as:

Sometimes, though, you don’t have to look for a deal because you’ve discovered an area that’s already been designated as a good investment opportunity. 

What is a gateway city?

Gateway cities get their name because they used to be the “gateways to the American Dream.” They were right outside large metropolitan areas and housed the transportation, manufacturing, and industrial infrastructure for the region. But as manufacturing jobs disappeared over the past several decades, many gateway cities have found themselves unable to attract new economic investment. As a result, they’ve failed to evolve and revitalize.

What’s the difference between a gateway city and a gateway market?

A gateway market isn’t the same as a gateway city, although sometimes the terms are used interchangeably even though, in many ways, they are each other’s opposites. The alternative usage of the term refers to international cities that are also entry points into the country or region. So, that means having a major airport, seaport, or train station. Some other qualities include:

  • Being among the largest cities in the country and sometimes also being the capital. 
  • Having a real estate market with high liquidity because there’s such great demand for real estate.
  • Being an economic or cultural center within the country or region. 
  • Having diversified economies with many niches. 
  • Having a brand that’s known worldwide. Such as:
    • New York
    • London
    • Tokyo

Are gateway cities good investments?

The significant difference between a gateway city and a gateway market is that a gateway city no longer thrives as much as it once did. This is what makes them ideal investments. Gateway cities have great potential. They also have:

  • Infrastructure.
  • Are often connected to major institutions like:
    • Transportation networks
    • Museums
    • Hospitals
    • Universities
  • The population skews toward younger, underutilized workers, which means there’s a large labor force ready to support entrepreneurial endeavors. 
  • Gateway cities authentically urban, a feature that you can’t put a price tag on because it can’t be recreated.
  • Have walkable neighborhoods
  • Are desirable for entrepreneurial businesses because they have the vitality and creativity 

that comes from urban markets. 

With the investment, allowable gateway cities can thrive once again. 

What are some pros and cons of gateway cities?

While there are many positives about gateway cities, there are also some negatives.

Pros of gateway cities

  • They’re in or close to in-demand metro markets.
  • Real estate is at lower prices.
  • Improving or renovating real estate has the effect of revitalizing the area. That because it:
    • Creates new jobs
    • Creates new housing
    • Injects money into the local economy
  • There may be tax incentives to build in gateways cities hungry for redevelopment. 
  • Some gateway cities are opportunity zones, which are low income or rural areas deserving of tax incentives by the Tax Cut and Jobs Act. 
  • Some gateway cities have councils that champion the best interests of residents while working directly with developers. Their job is to guarantee that any new development or redevelopment is for the benefit of existing residents and the area. They can make things easier for everyone involved.
  • Development projects can offset the risks of investing in a gateway city by providing:
    • Housing
    • Jobs
    • Transportation
    • Accessible and affordable food

Cons of gateway cities

Gateway cities have some unique challenges: 

  • Low income
  • Now enough affordable housing
  • Insufficient access to transportation
  • Now enough jobs
  • Distressed real estate prices
  • Sometimes gateway councils mean having to jump through additional hoops and dealing with more bureaucracy.
  • Some gateway cities have lower-income communities, which may mean
    • Higher vacancy rates
    • Increased tenant turnover
    • Needing to perform repairs and maintenance more often
    • Lower rental rates relative to other investments. 

What are some gateway cities?

Many gateway cities are places that you may recognize by name. And you may be surprised that some states can have multiple gateway cities. Here are some examples. 

  • Holyoke, Massachusetts
  • Haverhill, Massachusetts
  • Worcester, Massachusetts
  • New Bedford, Massachusetts
  • Springfield, Massachusetts
  • Fitchburg, Massachusetts 
  • Haverhill, Massachusetts 
  • Lawrence, Massachusetts 
  • Lowell, Massachusetts 
  • Pittsfield, Massachusetts 
  • Fall River, Rhode Island

How do I know if I should invest in gateway cities?

Gateway cities are better suited for experienced investors who have a keen sense of:

  • What markets to invest in.
  • What projects to invest in.
  • How to serve the market with successful and meaningful development. 

If you think you’re up for the task of investing in a gateway city, you can start by talking to local real estate agents or speaking to the gateway city council if there is one. They’ll let you know:

  • What the real estate is worth
  • What the neighborhood needs
  • What are some opportunities 

Additionally, if you pair up with an opportunity zone fund that’s already involved in revitalization, then you may have an easier path to investing. 

Bottom Line

Having once been booming, gateway cities have a drive to them that other cities lack because they not only want to reclaim their place on the mantle, but they also want to do so on their terms. As a result, each gateway city has its unique particulars, so you can find one that not only meets your criteria as an investment but also compliments you more personally. 

An investment in a gateway city isn’t only in real estate but in an idea; and what you give isn’t just your money, but also your own desire to help transform something for the better. 

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