We’ve discussed it before; why invest in real estate? The truth is, investment diversification is generally a good idea. As demand for housing continues to grow, real estate remains a wise choice when looking for stock market alternatives. As one of the nation’s leading providers of housing market data, we took to our own database to offer reasons why real estate could be a smart move for your next investment.
First, it’s important to note that approximately 15 million households in the U.S. are renters*. That means property investors have someone else paying their mortgage. Also important to note, is that homeownership rates have steadily declined post 2007 recession. Tight credit markets continue to make it difficult to obtain a mortgage, and the affordability index doesn’t match the average person’s income in many areas around the country. There has also been a psychological shift away from the “American Dream” in which many millennials are not as interested in buying a home as past generations and alternately, may view homeownership as a burden, putting down roots they aren’t ready to plant. Young in their careers, millennials see rentership as freedom to move around and spread their wings.
Technology is another key factor propelling the single-family asset class to a top investment choice. Real estate has historically been a business focused on hands-on experience. Investors weren’t comfortable entering markets away from their own homes because they didn’t have widespread access to information and resources. Today, improved access to data, resources and property inventory has made it easier than ever to facilitate a transaction, regardless of location. A property investor in California struggling to find a property that makes sense as an investment due to skyrocketing home prices may now expand their search into better performing markets like Cleveland, Charlotte or Dallas, where returns can be well over 11% and populations continue to grow as the local job markets expand. Not only are investors armed with data to make smarter decisions about which markets to enter, they are also able to connect with high-quality service providers to assist at every step of their transactions. Whether it’s a real estate agent, a loan officer, a general contractor, or a property manager, investors are supported throughout their investment journey regardless of where they live. Never before have investors been able to access many of the resources necessary to facilitate a successful transaction from start to finish without ever leaving their home. Until now.
Another major evolution in real estate investing has to do with the financing options that have become available. Financing has transformed over the last few years to cater to investors looking to build wealth through real estate using a variety of investment strategies. It’s not just buy and hold investors benefitting from the updates in residential property investment lending, fix and flip investors are also in a better position than ever before to obtain legitimate loans with credible, dependable lenders. If you’re a fix and flip investor, tune in to episode 41 of The Real Investor Podcast to hear from one of the leaders in the space discuss financing options fit for flippers. Whatever your strategy, there are flexible, attractive loan options available to help real estate investors meet their investment goals.
Now, let’s cover what many property investors care about most—where are the best returns? According to industry leading data provider RentRange®, it’s the C-grade markets that are seeing higher-than-anticipated returns. Detroit, MI, Cleveland, OH and Milwaukee, WI topped the list of metros with the highest gross yields in Q1 2017, reaching upward of 18%. Other areas in the midwest and south ranked not far behind with Dayton, OH, Columbia, SC, St. Louis, MO, Chicago, IL and Houston, TX also making the list. Unsurprisingly, almost all of these markets have experienced spurts of employment growth pushing nearly 5%.
As we fast approach the halfway point of 2017, our team wants to help you reach your investment goals. If real estate is part of your investment plan this year, we are here as a resource to help propel your success. Whether you need guidance on where to invest, how to crunch the numbers of a prospective deal or a resource base of professionals to facilitate an out-of-state deal, we are there to provide assistance. Leverage us for high-quality data or to source investment property inventory.
*According to RentRange®