486: Top 11 Real Estate Investing Markets for 2021

SHOW NOTES FOR EPISODE 486: TOP 11 REAL ESTATE INVESTING MARKETS FOR 2021

The pandemic has impacted every facet of society, and real estate is no exception.  But there are some cities in the U.S. that not only survived intact but are actually thriving.  In this podcast, Bill examines the 11 best major metro areas that offer the best opportunities for real estate investors during 2021

Tip of the Week

Terminology: “Clear Title”

There really is no such thing as clear title.

In the United States, with the early land grants, the promoters, the crooked politicians, the illiterate population, and even honest mistakes, every parcel of land has some cloud on the title from the past 240 years.

What we usually deal with is what is called “insurable title.”

This means that the Title Insurance Company has searched the public records for all the documents that affect the title to the property. And they have concluded that although they cannot show that title is clear, they believe that the items that might affect the ownership of the property held by the seller are so unlikely to come up, that they’re willing to pay the buyer for any loss he may suffer as the result of such an event.

Title is not clear, but it is insurable.

It’s the best we can do.

Taken from:  The Language of the Deal – Real Estate Investing  Vocabulary of Terms – Meanings and Explanations by Michael Lantrip

Top 11 Real Estate Investing Markets for 2021

Are you looking to invest in real estate?  Finding the right location will make or break your investment.  Keep listening to learn the best real estate cities in the United States to invest in.

How to Determine if a City is Worth Investing In?

The following factors are helpful rules of thumbs to determine whether a city is worth investing in or not:

• Has there been an increase in well-paying jobs from business-friendly policies
• Is there significant population growth?
• Are there housing inventory shortages?
• Is it tax friendly?
• Is there a low cost of living and high quality of life
• Is it a landlord-friendly area

An influx of well-paying jobs and companies is another key sign. It indicates business-friendly policies. This makes it easier for your tenants to afford the rent. Higher-income people also tend to respect the property too.

Housing inventory shortages cause a steady rise in house values. States with inventory shortages will allow your investment to appreciate in value.

Tax friendly states are also a must. They help you avoid getting large chunks of your cash flow eaten up each month. Low taxes also attract high-income workers. It makes paying expenses like rent easier for them too.

Lower cost of living is another key factor. Affordable states tend to have growing populations unlike New York or California. This makes it easier for tenants to make their rent payments. Low costs of living will make investments more affordable in the beginning. Making your mortgage will be easier.

Higher living standards also mean their money goes further. People with decent living standards are more likely to stay in one place. This increases the profit and lifetime value of each tenant.

People in these situations will also be less maintenance. People in low quality of life places care less about their landlord’s property. Every state has areas that easily cash flow on paper.  The problem is these areas can be in less desirable areas with tenants that don’t care about the property. Smart landlords avoid this when it’s possible.

Looking at these factors and others, I also looked at various other experts’ surveys, the Forbes annual report and the Annual Report by the Urban Land Institute called the Emerging Trends in Real Estate Report showing where the top real estate institutions in the U.S. are going to focus in 2021.

The Emerging Trends in Real Estate report is a massive document that’s over 100 pages long.  There’s lots of information to wade through each year, and this year especially, they cover everything related to the economic shutdowns we’ve seen in 2020 and its impact on the real estate market.

The best part of the report to me is the “markets to watch” section. They survey ULI members, who represent some of the most prominent real estate investment, brokerage and lending firms in the country, regarding 80 key geographic markets across the US.

They rank these 80 major metro markets as to where they believe rents and values in these markets are going to go as a result.

So keep in mind, I’m mixing this report with general housing data, other surveys and reports that would reflect single family, small multis, to large apartments and even commercial like office and retail.

Anyway, let’s get on with list…

#11 Atlanta, GA

1. Atlanta, GA is also one of the best places to invest in real estate. Atlanta offers attractive buying prospects for the savvy rental property investor.
2. The city’s population has grown by over 14 percent in the last decade. This increasing population is driven by the housing demand.
3. Atlanta has shown promising population growth and employment, which are two signs of a healthy emerging real estate market.
4. Atlanta is Georgia’s capital and economic center. It is considered to be one of the 10 most productive states that contribute to the USA’s GDP annually. As the city continues to go through an economic boom, prices of properties in Atlanta are forecasted to increase in the following years. People will want to beat out the competition and purchase soon if they’re looking to develop a successful career, surrounded by a diverse community, especially for today’s youth.

#10 – Birmingham, AL

• Birmingham, AL also ranks on our list as one of the best places to invest in rental real estate in 2021.
• The Birmingham AL real estate market continues to take steps in the right direction. Single-family rental homes are the single most common housing type in Birmingham AL real estate, accounting for about 60% of the city’s housing units.
• Property appreciation rates are so strong in Birmingham real estate market that despite a nationwide downturn in the housing market, Birmingham AL real estate has continued to appreciate much faster than most other top performing real estate markets in the US.
• There has been a distinct trend of people moving to the largest metropolitan area in the region to find the greatest opportunities. The Birmingham area is home to more than 1.2 million people.
• LendingTree ranked the Birmingham area as one of the least competitive real estate markets in the country. There were more potential buyers than sellers, forcing many would-be homeowners to rent instead.

#9 – Tampa, FL

• Tampa, FL is also on the list of best places to invest in real estate in 2021.
• With a population of more than 4 million, Tampa, FL is not only an attractive metropolitan area but is also one of the most frequently visited tourist destinations.
• There are several economic and development prospects attached to this market and Tampa was described as one of the hottest real estate markets in the US in the past year.
• There’s a tremendous amount of pent-up demand for entry-level single-family homes in Tampa. The median home value is $251,287 (according to Zillow).
• The Tampa housing market is growing steadily, prices are still low and properties have a good chance for a strong appreciation in the coming years.
• Home values have gone up 5.3% over the past year. There is less than 2-months of available inventory in the entire Tampa metro area – down almost 21.4% over last year. This is one of the key factors in rising home prices. The benchmark for a balanced market (favoring neither buyer nor seller) is 5.5 months of inventory. Anything lower than 5.5 months of inventory is traditionally a sellers’ real estate market.

#8 – Orlando, FL

• Orlando, FL is a tourism and entertainment favorite, because of it remains a strong real estate investment destination. Investors have a choice of targeting the long term residential or holiday markets with their properties. Both offer strong returns.
• While improving the Orlando real estate market and flourishing tourism are two of the most important reasons behind Orlando’s economic stability, these two industries have a lot to gain from the successful economy.
• This expansion is related to the growing population and job opportunities in this city, this translates to more rental income and tourism leading to a better economy for the city.

#7 – Nashville, TN

• Taking the number 7 spot on the list this year was Nashville, Tennessee.
• The Tennessee Capitol ranked seventh among all major metros, especially by recommendations for multifamily properties. Third among all major metros and, by recommendations for office properties,
• It also place 3^rd on the ULI list among all markets for investor demand overall similar to other cities on this list
• Nashville is expected to see 1.1% annual population growth over the next five years ahead of that 0.7% national average.
• And the cost of doing business in the city is 4.1% below the national average as well.
• Rent as a percentage of household income was also just 19.3% in this market, compared to an average of 29.5% at the national level.

#6 – Huntsville, AL

• Huntsville was ranked #1 on this year’s Top 10 Emerging Multifamily Markets list compiled by the Multi-Housing News
• In recent years, Huntsville has reported robust multifamily fundamentals, thanks to its diversified economy attracting a highly skilled workforce. In fact, its population rose 13 percent between the 2010 Census and July 2019 – according to estimates, a rate far higher than any other metro in Alabama. As a result, pre-pandemic estimates anticipated Huntsville becoming the state’s largest city within this decade.
• It remains to be seen how these trends have been affected by the current crisis, but one thing is clear: Huntsville’s occupancy tates outperformed the national average by more than 200 basis points, standing at 96.8 percent in September 2020.
• With positive demographic trends also came an increase in development activity over the past two years. Developers completed more than 1,100 units between 2018 and 2019, 44.8 percent more than during the previous two years. And while deliveries year-to-date through September were rather low, with only 274 units, the same cannot be said about transaction activity. The per-unit price for deals closed in 2020 through September rose 95 percent compared to the similar period of the previous year, while the total sales volume increased more than three times to $293.3 million.

#5 – Dallas, TX

• Coming in at number five is the Dallas/Fort Worth Metro. The DFW is part of what’s called the super sunbelt market category, which includes cities like Atlanta, Phoenix, San Antonio, Houston and Tampa, which are all among the top 10 fastest growing cities in the US, as companies continue to flock to these areas for their business friendliness, access to talent and low cost of living for their employees.
• The super sunbelt markets are expected to generate 28% of the country’s new jobs between 2019 and 2025, even though only 16% of the country’s total population currently resides in these areas
• Dallas Fort Worth also ranks high in investor demand, local public and private investment availability of debt and equity capital and the health of the local economy overall.
• And even with a 7% higher median home price than the national average, Dallas/Fort Worth is still expected to see positive net migration of over 91,000 people over the next five years, which represents a 1.4% annual population growth versus the 0.7% national average.
• And on top of that, renters are still only spending just 17.7% of their household income on rent, indicating that the Dallas, Fort Worth Metro offers higher salaries, relative to the cost of housing for the majority of its residents.

#4 – Boise, ID

• Boise has a record of being one of the best long-term real estate investments in the U.S. The supply and demand dynamics continue to drive home prices up in Boise.
• The Boise housing market was ranked as the #1 in the U.S. by Realtor.com’s metro level housing forecast for the year 2020. Their main criteria were based on the combined yearly percentage growth in both home sales (0.3%) and prices (8.1%) expected in 2020 among the top 100 largest markets in the country.
• Home prices are soaring and breaking records despite the coronavirus pandemic. Persistently tight inventory in the entire Boise Metro Area housing market, coupled with historically low 30-year fixed mortgage rates are keeping the demand high, which in turn is pushing home prices up in this region.
• The real estate appreciation rate in Boise in the latest quarter was around 2.44%, which equates to an annual appreciation rate of roughly 10%. For sellers, a nice profit is on the horizon.
• Nearby areas like Meridian and Nampa are also experiencing significant growth and are poised for be the next hot areas

#3 -Austin, TX

• Austin, Texas, ranks number 3. The ULI report ranked number one in investor demand, number four in development and redevelopment opportunities. And number four across all markets in by recommendations for industrial multifamily, and office properties,
• The Texas State Capitol was also projected to see a whopping 2.1% annual population growth over the next five years, which was the highest of any Metro by far, with only Boise Idaho coming anywhere close at 1.8%, and projections for other high positive net migration cities like San Antonio, Phoenix, Orlando, Houston, Dallas and Charlotte are only hovering at around 1.3% to 1.5% per year
• Austin was also projected to see huge job growth at a clip of 3.2% per year

#2 – Charlotte, NC

• The median home price in Charlotte, in 2020, was $280,000, which represents around 7% less than the national median price of homes at 300,000.
• Renters in the Charlotte Metro spend only 13.5% of their incomes on rent, so there is still significant room to run and rents, which gives real estate investors opportunities to buy older multifamily product, renovate those properties and charge rental premiums on those renovations, while still keeping costs low enough for renters comparative to salaries in the market.
• According to the data, Charlotte was also expected to see 1.3% annual population growth through 2026, which is almost double the national average of 0.7%.
• Job growth in the market is expected to grow at 3.6% per year compared to the national average of just 2.2% on an annual basis.

#1 – Raleigh/Durham, NC

• The Raleigh/Durham area of North Carolina ranked number one on our list, especially in development and redevelopment opportunities. In the ULI report, it ranked number on, in multifamily and industrial and number two in by recommendations for office properties as well
• The Raleigh Durham Metro area also came in at number three in the local economy list in the ULI report.
• And speaking of job growth Raleigh Durham ranked third among all markets in five year projected employment growth at 3.7% per year
• Raleigh/Durham residents who rent their living spaces are also spending only 15.1% of their incomes on rent.
• This gives multifamily investors room to increase rents and run with buying and renovating apartment properties, while still keeping housing costs, well within reason for most renters, even with renovation premiums big debt.

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