The real estate market showed unprecedented growth due to the surge of homebuyers in the market taking advantage of record-low mortgage rates. But the more pressing question on your mind would probably be where to buy property in a booming housing market?
We put together this information to guide you in creating a strategic plan for expanding your real estate portfolio in places that show solid potential for growth and profit. We’ve covered the bases by giving you the reasons that trigger the housing demand, factors to consider when deciding where to buy rental properties, and places where investment properties are hot right now.
Leverage the Demand-driven Market
As we see signs of economic recovery, the housing demand is expected to grow in the years to come. One reason is that 25-30% of the U.S. workforce will continue to do remote work. This gives workers the option to migrate from big cities to the suburbs where housing and cost of living are lower, driving demand for real estate.
The low mortgage rate of below 5% is another reason why first-time homebuyers are flocking the market to try their luck in buying a home. This momentum remains at a steady pace as mortgage rates will continue to stay comparably low toward 2022. This opens up a good opportunity for you to buy multiple homes at this time as the low mortgage rate makes the cost of buying them inexpensively in the long run.
Expand Your Rental Portfolio
Despite the demand, not every intentional homebuyer will make it to owning a home. The median home sale price of $269,093 as of January 2021 is a price most Americans still find too steep. With the end of unemployment benefits from the government and job insecurity, many are also not willing to put down their life savings as a down payment. Your financial capacity as an investor could easily outbid individual homebuyers by a mile, giving you a chance to quickly grow your rental portfolio.
With missed opportunities to own a home, big city dwellers looking for a low-cost place in the suburbs will trigger demand for rental homes. The third quarter 2020 market index report by National Homes Rental Council showed a 97% occupancy rate for single-family homes in the suburbs. It assures that the rental business will also continue to grow in the coming years.
Take Note of Growth Indicators
Before you even consider following the tracks to where movers are heading, you need to consider a few crucial factors to make sure you gain a long-term appreciation of your investments.
The influx of migrants will naturally increase the population in the area. Commercial, housing, and infrastructure developments are also indicators that the locality is well-populated. This means you have better chances of renting much faster and at better prices.
Employment and Wage Growth
Job growth and wage hike are closely tied to the locality’s increased population as the latter drives up demand for products and services. It will lead to an uptick in hiring for businesses that open up or expand. More locals with a job mean having more disposable income and higher spending capacity for consumer goods and housing needs.
Cost of Living
People relocating to a certain place usually consider its cost of living. Living in a less expensive location can allow them to save more from everyday expenses. This can translate to more money toward spending for a better quality of life, specifically in housing, healthcare, education, and others.
Rising Home Values and Rental Investments
The desire of people to live in an area is a good indicator of the potential for growth of rental income and home values. You can evaluate this desirability by knowing the vacancy rate or making rent comparisons of similar properties in the area. For a more accurate estimation use Zillow Research Data on vacancy and occupancy rates as your guide.
Go Where Opportunities Await You
Many reports on the top places to invest in real estate show varying lists depending on the qualifiers they set. To save you time and effort from having to scour through multiple reports, we narrowed them down for you. Here’s a shortlist of the five best cities to grow your rental portfolio and their positive attributes.
Las Vegas, Nevada
Las Vegas is dense enough to earn the 25th spot as one of the most populated cities in the United States in 2021. Its current population of 667, 501 is a 14.19% increase from its recorded 2010 data, indicative of a diverse economy driven by health, technology, and commercial interests. The city also serves as the center of Nevada for its commerce, culture, and finance. Gaming, amusement, and tourism are the primary drivers of the city’s economy, boosting the retail and food businesses. The state of Nevada does not levy individuals and corporations with taxes; instead, its sources of income come from sales taxes from all types of goods, sin taxes from alcohol and gambling, and taxes from hotels and casinos.
Washington is home to 100 of the biggest companies in the nation, 37 of which are located in Seattle. Second, to Silicon Valley, the city is also home to tech giants and startups that attract migrants from all over for various job opportunities. The city’s unemployment rate of 5% in August 2021 is comparably low compared to the national average of 5.2% in the same month.
Seattle earned the recognition as the 10th in the country for Emerging Trends in Real Estate for 2020 by the Urban Land Institute. The city’s population of 776,555 boosts the locality’s real estate, with the rental market showing 54% of households in August 2021 as renter-occupied based on RentCafe.
What attracts people to move to Denver is the consistent job growth. As a beta world city, it has exciting and bustling economic resources that link to the world economy. This has influenced the city’s unemployment rate which is consistently below the national average in recent years. With its full economic recovery in full swing, Denver is now regaining at least 80% of jobs lost at the height of the pandemic, bringing its unemployment rate down to 5.6% in September 2021.
Denver earned the 19th spot as one of the largest cities in the U.S. by population. As a result, housing demand increased and home values appreciated by 153.94% in the past 10 years (2000 Q1 – 2021 Q2). As of writing, the median home value is $490,736.
People moving from the big cities are flocking to Tampa for its affordable housing and cost of living. According to Payscale, the cost of living and housing expenses are lower than the national average — 5% and 23%, respectively. No wonder it is consistently mentioned by numerous reports as one of the best cities to invest in real estate.
Tampa is also home to at least 20 large companies that employ thousands of workers, five of which are in the Fortune 500 Companies for 2020. They largely contribute to the city’s growing economy as well as job opportunities for locals and migrants.
Remote work has triggered the migration of residents of expensive bay area cities to California’s inland areas like Sacramento. This reason accounts for 70% of moves seen in 2020, according to a real estate company and investment firm CBRE. Redfin also reports that more than 50% of new home searches are from outside the area. The median home price of $468,036 in September 2021 (Zillow) is widely considered affordable compared to bay area homes valued at $1,522,827 in the same month.
The resiliency of the real estate industry during one of the most challenging periods in history is unprecedented. Its momentary drops quickly recovered with a phenomenal rebound that we now see. This market strength ensures that growing your investment properties at this time and keeping them for the long haul will pay off handsomely. But like any other investment, you need to practice due diligence. Look for information that supports your goal and also consult with investment planners before deciding where to invest.
Finally, to maximize the performance of your rental property investments, consider working with a proptech company, such as Poplar, that has full-stack technology capable of delivering high-value service for you and your renters. In addition to helping you buy the right properties for your investment goals, they have systems that streamline the whole renting process. Automated leasing, virtual tours, online lease signing, rent payments, and maintenance requests, and 24/7 maintenance support provide a convenient renting experience for you and your renters.
Taking your rental homes to the next level of service attracts more high-quality renters, giving you more freedom and a stable stream of rental income.