For a greater portion of this decade the real estate market experienced unprecedented appreciation considerably due to a “Buy, buy, buy!”mob mentality. If you timed it right, you made out like a “fat cat.” If your timing was off, however… you have likely lost a significant portion of your portfolio, are losing it and/or are carrying “money-pit” properties.
You have likely thought at some point over the last couple years, “If I only knew then what I know now?”
Perhaps you want a Do Over? Good news, you’ve got a chance to get one.
There’s really no such thing as a good or bad real estate market. More accurately the market should be described as either “up” or “down.” Depending on the market conditions there is always a profitable investing strategy to accompany it.
Earlier in the decade investors, novice and seasoned alike, were making a killing flipping properties, often times experiencing 2-4% appreciation while in escrow. Amazing! Those days are gone for a while, likely a very long while. So what strategy to implement now?
Common sense would tell you that “buy n’ hold” would be the strategy of the day given so many people have lost, and are losing, their homes. They still need somewhere to live. They’re going to become renters, right? It would seem so, but it hasn’t necessarily been the case as the common “post-foreclosure/short-sale” move for so many has been to consolidate households; Friends moving in with friends, and family moving in with family.
If you have aggressively played the “buy n’ hold” (rental property) card in this new era, it likely hasn’t yet resulted in the cashflowing strategy you thought it would. But don’t sell those rental properties so fast, there could be some good news just around the corner. It depends, though, where your rental properties are (or are going to be) as it does with any real estate investing strategy. Location, location, location is still king. Given that… economic and social indicators, bolstered by media support, are casting favorable light on four specific U.S. rental markets.
For the most part, you’ll find current low rents in these areas are driving migration and demand, but there are more factors that affect a landlord’s bottom line than just “rent,” such as vacancy rates, sustainability and future growth. Cost of living, access to public transportation, and a thriving downtown scene are all important when people (renters) contemplate a city’s livability. The following cities rank high in all of these categories, and they just might surprise you.
Four Cities (in no particular order) to Consider for Buy n’ Hold
- Austin, Texas
Austin is home to the popular South by Southwest festival and boasts more music venues per capita than any other U.S. city. College cities typically make great investing areas, and Austin is no different. The University of Texas’ young and intelligent students keep downtown vibrant. Large corporations like Dell, Apple Computers, and SUN Microsystems support a strong job market. Rents in Austin are on the rise as more and more Americans catch on to just how cool this city is.
- Wichita, Kansas
Wichita enjoys 250 days of sunshine per year! The city itself is an evolving cultural and entertainment center, offering downtown nightclubs, restaurants, shopping centers, museums, and parks. Much media attention has been casted on Wichita for its great living environment; it ranked ninth on Money magazine’s 2006 list of the 10 best U.S. cities in which to live and first on MSN Real Estate’s 2008 list of most affordable cities. Newsmax magazine also named Wichita the most unique American city.
- Miami, Florida
Miami is a great example of a city where the fall of the housing market has benefited renters, driving migration and demand. Be scrupulous in your Florida investments, but never underestimate a city that has a pulsing night life, beautiful beaches, tropical climate, and a resident university.
- Memphis, Tennessee
Memphis is a diamond in the rough. With only a cursory investigation, any investor will quickly find that rents in Memphis easily exceed the average mortgage payments. Translation: Cashflow! There’s a tremendous upside, as well. The city’s largest employer is FedEx. Transportation is one of the early industries to turn around as the economy recovers begetting significant appreciation potential for the area.
I don’t think I have to disclaim these are not guaranteed forecasts, we know better than that. Nobody has a crystal ball, but we all do our best to predict. That’s what investors do.
Conduct your own due diligence keeping your immediate expectations modest and these four cities may provide the “Do Over” in real estate you’re looking for. Timing is everything and this could be your chance to catch the beginning of the wave as opposed to wallowing in the whitewash.