2020 is going to see some unexpected markets attract a lot of investor attention. Yes, this growth will be a continuation of a trend, which is why it’s possible to identify these markets in the first place, but what makes these emerging markets particularly interesting is how much of their success is the result of reinvention and the cities investing in themselves. It goes to show you the power of untapped potential. And if you can identify that potential before others, then you’ll be a savvy and well rewarded investor!
What makes a real estate market good for investors?
There are certain conditions that an area needs to meet in order to entice investors.
Affordability: When the properties in your area are significantly below the national average, investors are going to take notice!
Momentum: If your area had a strong year previously, then the assumption is that that growth will continue into the following year. If the median sale price is greater than the national average than that’s a strong indicator of momentum!
Job Growth: Where there are jobs there’s growth. That’s because accumulated wealth makes it easier to form a family and purchase a property. That translates into increased sales and even increased selling prices if demand begins to exceed supply.
Smaller Markets: The biggest U.S. markets, like San Francisco and New York, have experienced years of price gains and, as a result, may soon be experiencing sluggish, plateauing, or negative growth. Mid-sized markets, meanwhile, have not experienced these trends and, as a result, still have great potential.
1). Las Vegas
Las Vegas continues to experience positive growth. From 2016 to 2018, Vegas saw 1.4% of total US real estate spending conducted within its city limits, which is huge considering its share of the U.S. population. When Price Waterhouse Cooper (PWC) put out their Emerging Trends in Real Estate® for 2020, Vegas was ranked 15th in development and redevelopment opportunity and 19th for homebuilding prospects. A good metric for bolstering these trends is that construction employment is up 14% relative to last year. And since 2010, Vegas’s population has gone up 14.3% thanks to the addition of 180,000 residents. In 2019, apartments saw the greatest growth, but that may change in 2020 because, as PWC speculates, the rise in the population may inspire business and retail properties to expand into suburban markets.
As reported by PWC, despite having .8% of the U.S. population, Orlando attracted roughly 1.3% of the nation’s investment capital for three years, a rate it maintained in early 2019. PWC notes that Orlando’s population is on track to grow by 71,000 in the next five years, which many experts see as a sign that multi-family homes and offices are going to get a lot of action. The addition of a rail line connecting Orlando to Miami is expected to add a significant boost to local business as well.
Atlanta became PWC’s eighth-place pick for overall prospects. Not a surprise considering that for three straight years Atlanta’s share of total U.S. transaction volume was twice of the U.S. population–that’s 3.6% vs 1.8%. New residents are making their way into Atlanta’s urban center, while developers are creating “hipsturbias”, which are foot traffic friendly mixed-use developments.
Charlotte made gains on gains according to PWC. The city has gone to fourth overall from ninth overall, and became second in terms of homebuilding prospects, moving up from fourth. Charlotte has been diversifying its economy by attracting tech and manufacturing businesses. In order to be further accommodating, Charlotte is also expanding its light rail and airport. The downside is that Charlotte’s stormwater systems have not been keeping up with the city’s growth. Charlotte is also beginning to experience higher housing costs, and rental properties are starting to deliver lower yields. Nonetheless, Charlotta continues to attract investors, so don’t count Charlotte out yet!
Phoenix has recovered from the housing crisis but is still under siege by climate change concerns. Those concerns, however, have not been keeping new residents or investors at bay. The city saw the addition of 115,000 residents between 2010 and 2018. Since 2018, more than $10.4 billion of the city’s property transactions have been in the multifamily arena. Growth is happening and more growth is expected!
6). Dallas Fort-Worth
Dallas Fort-Worth is the fourth most populated metropolitan area in the country. The abundance of land in Texas makes it easy to expand a metro area but with that expansion comes a need to reinforce downtowns, which has been challenging for DFW. Nonetheless, the first half of 2019, for example, saw DFW only third to Manhattan and Los Angeles in terms of its share of total US real estate transactions. Recent developments of note including the addition of a new terminal to the DFW airport, a commuter-rail line connecting DFW to Plano due to be completed by 2022, and the construction of a regional Amazon hub.
Jacksonville’s population grew 14.1% since 2010, surpassing 1.5 million. All those people translate into a low of growth! Within a single year, Jacksonville’s ranking as an overall prospect leaped from 48th to 23rd place. Jacksonville has both big city and suburban areas, and investors are looking to expand both the downtown and business districts. For this reason, PWC ranked Jacksonville as #20 in both homebuilding prospects and retail and industrial property markets.
8). San Antonio
San Antonio isn’t just another city in Texas! It’s population grew by 375,000 between 2010 and 2018. That’s 17.5%! And that growth translated into the city capturing $7.4 billion in transactions in 2018 and early 2019. Those are Nashville numbers! San Antonio may also see some growth within the tech space because the campus of the University of Texas located within the city ranks as second in the nation in cybersecurity.
Indianapolis is on track to becoming a real estate market breakout star! A rejuvenated downtown populated by rental apartments and condos? Are tech firms becoming the number one source of employment growth? That means Indy is on track to being an 18-hour city! That’s big news for business and will attract even more residents and investors.
11). Fort Lauderdale
South Florida’s population has grown 11.4% since 2010, adding 630,000 new residents. Fort Lauderdale distinguishes itself from nearby Palm Beach by having crafted a downtown with a skyline that mixes both commercial and multifamily properties. Successes in West Palm Beach and Boca Raton only further benefit Fort Lauderdale! The rising regional real estate market lifts all cities!
What cities are ripe for discovery in 2020?
This list was compiled by Realtor.com based on which markets are expected to see increases in both average selling prices and overall sales volume for the year.
|1||Boise City, ID|
|7||Colorado Springs, CO|
|9||Charleston-North Charleston, SC|
Data source: Realtor.com
How to find cash flow investment properties?
There are two criteria used to identify a cash flow property:
Cash-on-cash return: this is what you get when you divide the annual before-tax income your property makes by the amount of money you’ve invested in your property.
Cap rate: this figure compares your net operating income (NOI), which is all the revenue your property generates minus operating expenses, to the value of the property.
The higher the property scores on both these measures the better an investment that property is. That’s because these two measures indicate that the asset is, over time, generating more money than it cost to buy and maintain. So, scoring high on both these measures makes a property a good investment.
There are many markets in 2020 that will reward knowledgeable investors. So long as you do your due diligence, you can be among them! All while your property appreciates in value! You can refinance to get a loan with better terms. You can even acquire additional assets with lower interest loans if you have enough money to put down a considerable down payment! And all these possibilities begin with a single look, so go take a peek!