382: Top 10 Real Estate Investing Markets for 2020

SHOW NOTES FOR EPISODE 382: TOP 10 REAL ESTATE INVESTING MARKETS FOR 2020

Tip for the Week

If you’re an out-of-state investor and you need work done on your property in a hurry, check out these resources.

• TaskRabbit.com
• Handy.com
• HomeAdvisor.com

Introduction

We all know that real estate is about location, location, location. But the important question for real estate investors is really…  which location is best for investing?

We talk a lot about “emerging markets” on the Old Dawg’s REI Network, especially for those of you who are an out-of-state investors.  We are always looking at which markets are the best markets to invest for both the short and long term.  In today’s podcast, Bill shares ten of the top real estate investing markets for 2020 as well as several other good potential markets.

I still believe that that is the best way to buy properties where you have the promise of strong appreciation, rent increase and a great exit strategy — all in the same purchase.

What do you look at to identify an emerging market?  Things like: 1. Job creation, 2. Increase in population and future expected growth, 3. Building proposed (permits pulled), 4. Government planning, 5. Affordability, 6. Absorption rate and vacancy rate. One of the other major factors that I look at, is if there is opportunity to buy value-add properties, meaning buildings are being sold in the asset class and size that I desire and there are building being sold at a discount due to a problem needing to be solved.

You also must consider

• Large businesses locating in the area
• Appealing lifestyle
• Are there state capitals and universities nearby
• Big box retail, shopping hubs
• Location of an airport
• Infrastructure
• Path of progress
• Minimum population size

In today’s podcast, I’ll look at some of the top markets for this year, how to select a market based on investment strategy, and the best cities to invest in real estate as we head into 2020.

Top 10 Markets of 2019

Gary Beasley is the CEO and Co-Founder of Roofstock.  Earlier this summer he wrote an article for Forbes entitled “Secondary Cities Make Up The 10 Trending Single-Family Rental Markets For Investors In 2019.”

Using an analysis of data from the U.S. Census Bureau and Zillow Research, Gary suggested smart investors watch these markets through the second half of 2019:

1. Las Vegas: Record levels of convention business and tourism have helped the population of Vegas grow by 2.5% with rent prices increasing by over 10%.
2. Orlando: Tourism and job market growth in leisure and hospitality are creating a large share of renter households with population growth at 2.4% and household growth at 3.4%.
3. Atlanta: High-tech and financial services employers like Google and BlackRock are expanding thanks to Atlanta’s business-friendly climate, helping single-family homes to appreciate by more than 13% in one year.
4. Charlotte: High quality of life and business-friendly environment are helping the population grow by 1.9% with forecasted household growth of 2.4%.
5. Phoenix: One of the top job markets in the country last year, rent growth in single-family homes is expected to increase by 9% with the population growing by more than 2%.
6. Dallas-Fort Worth: The #1 metro area for job growth last year, with single-family home values appreciating by 10.6% and a population growth of 1.7%.
7. Jacksonville: An international trade seaport and city infrastructure improvements boosted economic growth, with rent rising by 3.7% last year and households expected to grow by 2.1% this year.
8. San Antonio: Strong local economy in the 2nd-largest city in Texas helped to drive rent growth of 4.2% in 2018.
9. Indianapolis: Affordability is attracting millennials from high-priced markets like New York and San Francisco, with single-family home appreciation in Indianapolis growing by 12.8% and rents increasing by 4.1% last year.
10. Fort Lauderdale: Steady population growth and retirees with discretionary income helped real estate investors in this Florida city earn gross rental yields of nearly 10% last year, with households growth expected to reach 2.1% in 2019.

But What Are The Top 10 Real Estate Markets for 2020?

With the beginning of a new decade, smart investors are asking which cities will be best for ,real estate heading into 2020.

Every year the Urban Land Institute and global consulting and tax firm PwC lists the top housing markets for the upcoming year. According to the 107-page report on Emerging Trends in Real Estate 2020 the top 10 markets for real estate in 2020 are as follows:

1. Austin, Texas
2. Raleigh/Durham, North Carolina
3. Nashville, Tennessee
4. Charlotte, North Carolina
5. Boston, Massachusetts
6. Dallas-Fort Worth, Texas
7. Orlando, Florida
8. Atlanta, Georgia
9. Los Angeles, California
10. Seattle, Washington

Now, Realtor Magazine took a deeper look at these emerging real estate trends and created five different categories of hot investment markets for real estate investors to watch in 2020.

Major Capital Magnets

Markets accounting for more than 17% of total real estate transactions over the last three years:

• Manhattan
• Chicago
• Inland Empire, California
• Northern New Jersey
• Houston
• Phoenix
• San Diego
• Oakland-East Bay, California
• Miami

Determined Competitors

Housing markets with a consistent record of capital inflows and solid transaction volumes year-over-year:

• Philadelphia
• Long Island, New York
• Fairfield County, Connecticut
• Queens-Bronx-Staten Island, New York
• Minneapolis-St. Paul
• Sacramento
• Kansas City
• Las Vegas
• Baltimore
• Washington, D.C.
• Detroit

Ripe for Discovery

Markets with at least one million people and population growth in the double-digits:

• Jacksonville
• Salt Lake City
• Columbus, Ohio
• Cincinnati
• Louisville
• Pittsburgh
• Greenville, South Carolina
• Oklahoma City
• Cape Coral-Fort Myers-Naples, Florida
• Boise
• Spokane, Washington
• Des Moines
• Tacoma, Washington
• Jersey City, New Jersey

Markets Meeting Expectations

Markets offering the best match between prospects and investment flows:

• Fort Lauderdale-Tallahassee-Daytona Beach-Gainesville
• Richmond, Virginia
• Birmingham
• Honolulu
• Cleveland
• Albuquerque
• Omaha
• Tucson
• San Antonio
• Buffalo

Thrifty Choices

Under-the-radar markets with low rankings and some weaknesses, but with selective opportunities when investing for long-term potential:

• Louis. Missouri
• Memphis
• New Orleans
• Providence, Rhode Island
• Hartford, Connecticut
• Virginia Beach-Norfolk
• Milwaukee-Madison
• Knoxville-Chattanooga, Tennessee
• Portland, Maine

What Makes a Real Estate Market Good For Investors?

In the next part of this article we’ll discuss how to find markets and single-family rental property based on the three main real estate investment strategies:

• Cash flow
• Appreciation
• Balance of cash flow + appreciation

But before we do, let’s talk about what makes a real estate market “good” to begin with.

What does “good” really mean?

You see, the word “good” is a pretty subjective term.

“Good” pizza, “good” beer, “good” movie . . . everybody has their own opinion of what’s good and what’s not. But when you’re investing money in real estate, it’s important to understand exactly what separates good real estate markets from average, not-so-good, and even downright terrible.

How to find a “good” real estate market

Here are seven factors that help make a real estate market good for investors:

1. Job creation above the national average.
2. Current and expected future population growth, also above the national average.
3. Building permits pulled, current construction activity, and forecasted growth in real estate development.
4. Government planning on both the state and local level, and whether or not the municipality you’re considering investing in is pro-growth or is over-burdened with red tape and regulations.
5. Housing affordability by using the price-to-rent ratio to compare median home prices to median rents.
6. Absorption rate, or the time that it takes for new housing that is brought to the market to be purchased or rented.
7. Vacancy rate, comparing the average in your target market to the overall average vacancy rate for the market.

Cash Flow Real Estate Markets

Real estate investors looking for homes that provide a return quickly focus on cash flow markets. Cash flow real estate generates a steady and predictable income stream through the holding period of the investment.

How to find a good cash flow property

There are two financial metrics used to identify property with strong cash flow:

• Cash-on-cash return on a single-family rental house measures the annual before-tax income generated by the property divided by the total cash invested.
• Cap rate compares the NOI (net operating income before mortgage payment) to the price of the house.

The higher the cash return and cap rate, the better the property is for cash flow real estate investors.

In Summary

The lists I’ve provided are more to spur you on to identify your own emerging markets.  You can find a lot of lists with a simple Google search but what you really need to learn is how to find the raw data yourself.

A great reference book is Dave Lindahl’s Emerging Real Estate Markets that I will have a link to in our show notes.  I also will include links to some of our podcasts that further explain how to identify emerging markets as well.

My personal Top Ten favorite emerging markets are

• Raleigh-Durham
• Dallas-Ft Worth
• Orlando
• Atlanta
• Nashville
• Indianapolis
• Charlotte
• Dayton
• Greensboro

Well, that’s it for today…

Old Dawg Emerging Market Podcast and Blog Article Links

DISCLAIMER:  Many of the above strategies take knowledge and have a higher degree of risk.  You need to do your research and/or work with someone who is experienced to reduce your risk.

IF YOU LIKED THIS PODCAST, we would love if you would go to iTunes, Stitcher, GooglePlay, iHeartRADIO and Spotify and Subscribe, Rate & Review our podcast.  This will greatly help in sharing this podcast with others seeking to learn real estate investing as aCBRE means to achieve a successful retirement.

Check out our other podcasts at olddawgsreinetwork.com.

Get a FREE copy of our 3-Minute Rental Property Analyzer at olddawgsreinetwork.com.

Additional Episode Sponsor: Meno Studio – menostudio777@gmail.com