When it comes to finding a lucrative real estate market, it’s no longer a tale of two coasts.
More often these days, investors are looking further afield, meeting their financial goals—and great expectations—with an array of promising locations in the Sunbelt. These locations offer low entry prices for single-family rentals and attractive returns that are more affordable than the coastal markets of New York City and the Bay Area. While there’s little doubt that these cities are fun, culturally appealing and alluring to millennials — that fun comes at a steep cost of living.
The Sunbelt is synonymous with sunny skies, mild winters and growing economic opportunities.
Spanning the southern United States from California to Florida, the Sunbelt is the fastest growing region in the county, and a top destination for job-seekers and retirees alike.
For real estate investors, here are a few spots to consider with strong rental market fundamentals:
In the current investment cycle, Atlanta is an excellent choice for investors. According to Ingo Winzer, a contributor to Forbes.com, “Fortunately, the low level of construction in recent years will give landlords the upper hand for a while. And the jobs being created, most importantly in business services, healthcare, hotels and retail, are the kinds of jobs that encourage renting.”
Atlanta’s median home price is approximately $131,000, well below the median average investment price of $180,000. Furthermore, rents are $1,243 per month, making the rent-to-price ratio significantly more attractive than the national average.
Austin, “The Live Music Capital of the World,” has a population of approximately 1.9 million and a historically high job growth rate over the past five years. Winzer also describes the Austin real estate climate: “The state government in Austin, including the staff of the state university, provides a large population of potential renters with moderate income, especially as home prices increased 30 percent over the last three years.” Over the past five years, Austin has seen the fastest population growth of the big Texas markets. Therefore, the demand for homes outweighs the pace of home building. For the next few years, this means that home prices will keep rising.
“The tech sector also continues to flourish in Austin, which has been attracting talent away from the high-priced metro areas of San Francisco, Seattle and New York City. Apple, Google and other Silicon-Valley based companies have major campuses in Austin, further spurring rental demand in the Lone Star State’s capital city,” explains Steve Hovland, director of research for HomeUnion®.
A pricier market than others in the Sunbelt, Austin’s second-quarter median investment home price was $270,500, and rents were $1,880 monthly, making the metro a better option for investors seeking a balance of appreciation and yield, according to Hovland.
Charlotte is an in–demand market for investors looking to acquire single-family properties. Diana Olick, a real estate correspondent for CNBC says, “There may be fewer listings on the Charlotte, N.C. housing market today than there were a year ago, but what is for sale is selling faster.” Charlotte is also one of the largest banking centers in the United States, and features a 4.0 percent unemployment rate, which is below the national average.
The median investment home price of $150,000 in Charlotte also falls $30,000 below the national average, making it an excellent alternative to higher prices prevalent on either coast. Meanwhile, monthly rents in the region are approximately $1,240, nearly $250 lower than the national average SFR rent.
Dallas/Fort Worth is the fourth-largest metro area in the United States. The entire state of Texas is known for its business-friendly environment, and D/FW contributes . The sprawling metropolis currently houses the headquarters of nearly two dozen Fortune 500 companies. The population of 7.1 million residents makes the Metroplex the fourth largest in the nation and among the fastest growing large metros.
Not only is Orlando home to Walt Disney World & Universal Studios, a plethora of nearby beautiful beaches and sunny days, there are also 3.3 million residents. This number is expected to increase by 1.5% in 2018, which makes its 3.9% job growth rate attractive to investors over the short and medium term.
“Rental demand for Orlando properties has also been strong over the past two to three years,” explains Hovland, due to the number of residents employed in the hospitality and tourism sectors of the economy. As the region’s theme parks and entertainment venues continue to grow, we expect rental demand to remain strong over the next decade.”
The technology and college hub of Raleigh-Durham is perhaps one of real estate investors’ best-kept secrets. According to Triangle Business Journal, “Raleigh is currently the best market for rental real estate investment in the Southeastern U.S.”
San Antonio is the third-largest community in Texas, and features a growing, diverse population. This gives landlords high-caliber tenants to choose from. In addition, strong employment numbers that show a continued upward trend make San Antonio an attractive choice for real estate investors.
Home to the “Research Triangle,” the Raleigh-Durham area of North Carolina is known for its high-tech research companies and universities. This region hosts North Carolina University, Duke University, and the University of North Carolina at Chapel Hill. Additionally, major tech employers such as DuPont, GlaxoSmithKline, General Electric, LabCorp, Lenovo, IBM, and many others provide a high demand for a skilled workforce in the area.
“We expect rental demand to remain strong over the mid- to long-term in this region due to the region’s ability to attract workers to its tech industry,” notes Hovland. A southeastern tech hub, IBM, Cisco, and Red Hat serve as employers in the region.
High affordability, a strong job market, and healthy population growth combine to make Tampa a great place to invest considering the region’s solid economic incentives and rental market fundamentals. According to Wallet Hub, “Tampa is the third-best city in the United States to find a job.” In fact, many large companies such as Home Shopping Network, Amazon, and Microsoft have large offices in the Tampa area. Furthermore, the Tampa building department issued $2.4 billion worth of building permits last year. This bodes well for construction job growth in the short term, and industry job growth in the long term. Add to that no state income tax, and the result is residents with more disposable income, which translates into greater rents.
Ready to leave the coast behind and set a course for new markets? Consider investing in the Sunbelt, where rental demand is strong and returns are almost always higher.
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