“I’m looking to buy a rental property, but the numbers in my local market aren’t viable.” It’s an all-too-common conundrum for many aspiring real estate investors. For example, affordability and projected returns on rental units in urban metro areas along the coast are typically less than ideal, even though many would-be rental investors reside in these communities. Luckily, thanks to technology, it’s now easier than ever to purchase and manage rental properties on a remote basis. Yet the conveniences of the modern real estate industry raise yet another question: With so many options, where should you invest? Although there’s no perfect area to invest in, you can weigh potential markets by their economic and demographic dynamics. To help get you started on your rental property investment journey, the experts at Jcap Private Lending have crunched the numbers for you to identify the following markets that are promising locations for successful rental property investments.
Identifying Ideal Markets
Before we delve into the specific markets that are primed for rental property growth, let’s touch on what market aspects you should pay particular attention to in order to evaluate investment potential. Always keep in mind that rental properties should be thought of as a long-term investment. They are not like short-term approaches such as fix-and-flip projects, and thus investors need to take a long-view approach when contemplating a city’s viability. Here are some key metrics you can use to determine the potential strength of a given market:
- Home Value Index: The median home valuation is tied to affordability. Think about it: if you can’t afford a $350,000 down payment on a $1.5 million rental property in the Bay Area, then there’s no point in even considering that market. You can use online resources like Zillow’s Home Value Index to zero-in on markets that fit your budget
- Year-over-Year Home Price Increase: This is the percentage historical growth of home values annually for a given timeframe
- Forecasted One-Year Home Price Increase: This is the anticipated rise in home values over the next 12 months
- Unemployment Rate: As an indicator of economic performance, the unemployment rate provides an insight into whether homebuyers in the area can afford homes. Additionally, a booming local economy draws more residents, thereby increasing population growth and housing demand
- Average Age: Generally speaking, the younger the population is, the better the long-term economic stability and population growth rates are
- Job Growth Rate: This is the percentage increase in all jobs in a given area over a year’s time, which is directly correlated with real estate demand
Based on these metrics, here are some promising real estate markets to consider investing in a rental property.
Orlando, FL
The Orlando economy is simply booming and experienced a 3.46% increase in the number of jobs year over year. Similarly, both the population and average rental income are trending upwards as well—all indicators that an investment property will do well in this market for the foreseeable future. Ideally located along Florida’s central Sun Belt community, Orlando is the epicenter of a world-renowned tourist industry, a popular destination for relocating retirees and offers plenty of employment options for younger generations. There are plenty of affordable rental homes on the market, and with the projected one-year home price growth in the area sitting at a healthy 3.4%, your rental asset will quickly appreciate, thereby optimizing your overall return.
Charlotte, NC
A key component of the area’s famed “Research Triangle” named after the trifecta of world-class universities, Charlotte boasts enviable job and population expansion—a trend fueled by the entrepreneurial dynamics of the local economy, with CNBC listing it amongst its top cities in the entire country to start a company in last year. With the population growing at an astounding 21.3% over the past decade and the fact that the majority of these new residents are well-paid professionals willing to pay premium rent installments for the right flexible housing option, it’s easy to see the appeal of Charlotte from a rental investor’s perspective. Now is the time to get involved in the market. With home values quickly rising, investors should make their move now before being priced out of this red-hot market so they can take advantage of what all signs suggest will be continued growth and expansion for years to come.
Houston, TX
The Houston metropolitan area weighs in as the fifth largest in the entire nation with more than 7 million residents—and it’s still growing to the tune of double the national average. Houston is regarded as a business-friendly hub, which fuels its outstanding employment and economic performance. The city plays host to 53 corporations listed on the Fortune 1000 list, trailing only New York and Chicago in terms of concentrated economic power. What’s even better for investors is that despite Houston’s great economy and population growth, real estate is still affordable compared to other major urban markets—making it a great option for new investors to break into this promising market.
If you are in need of a rental loan, Jcap Private Lending is your go to lender! We constantly fund rental loans across the country and are here to guide you through the process.
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