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July 2017   Volume 43, Number 7      
 

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The Best, Worst Metros for Real Estate Investors

Many people enter the world of real estate investment with the hope of making extra money without having to spend a lot of time. Although buying rental property and collecting checks from tenants might seem like an easy path to financial stability, the reality can be a bit more challenging.

Investment returns aren’t guaranteed and housing markets aren’t predictable. In addition, finding an affordable home to lease out in an area where rents are on the rise can be tough. So where should real estate investors consider buying now? Here are the best and worst metros for real estate investors.

Out of all of the metros in the United States, for the first quarter of 2017 Cleveland was named the best for single-family investment houses, according to HomeUnion, a company based in Irvine, Calif., that helps everyday investors find, buy, and manage their properties.

Single-family homes in Cleveland are still affordable with the median price of an investment home coming in at just $75,512, according to the report. Single-family rentals in the metro appreciated 16.2% annually from the first quarter of last year to the first quarter of this year. They also delivered an 11.5% return on investment for all cash-sales in 2017.

“The Midwest and the Southeast generate the highest returns,” says HomeUnion’s director of research, Steve Hovland. “The rents are high and the prices of the homes are low compared to most of the country.”

The majority of investors in these markets came from more expensive states, such as California, New York, Colorado, and Texas, where residents are having a harder time affording a home. So they’ve resorted to buying rental properties in cheaper parts of the country and using the income to plump up their nest eggs, finance their retirement, or even save up for a down payment on a home in their area.

“You can buy a property, get a mortgage on a property, and then you can have a tenant who will not only pay off your mortgage, pay for your management company, pay for your repairs, and put a profit in your pockets,” says James Wise, owner of the Holton-Wise Property Group, a local company that buys and sells homes for investors and offers property management services. “You can’t do that in L.A.”

Cleveland wasn’t the only metro that made sense for potential real estate investors, according to the HomeUnion report. The other metros that ranked in the top 10 were Cincinnati, Ohio, Columbia, S.C., Memphis, Tenn., Richmond, Va., Oklahoma City, Okla., Indianapolis, Ind., St. Louis, Mo., Pittsburgh, Pa., and Philadelphia, Pa. These cities are mostly located in the Midwest or are former manufacturing metros with affordable homes on the market.

The worst markets for budding real estate investors were primarily located in the nation’s highest-priced cities along the California coastline. The top 10 were San Francisco, Calif., San Jose, Calif., Orange County, Calif., Los Angeles, Calif., San Diego, Calif., Seattle, Wash., Sacramento, Calif., Salt Lake City, Utah, Oakland, Calif., and Portland, Ore.

While the cost of homeownership in the 10 worst metros has skyrocketed in recent years, home prices could decrease in the future says Hovland. That would make it possible for investors who are uncomfortable with taking on risk to invest in these areas.

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In this issue:

The Best, Worst Metros for Real Estate Investors

Five States with the Highest, Lowest Cost of Living

Americans’ Confidence in Economy Reaches Post-Election Low

EB-5 Program Extended Through September 2017

Flexible Workspace Real Estate Trend Set to Take Off

Home Builders Target Millennials with Lower-Priced Homes

Housing Starts Decline 2.6 Percent in April

Luxury Real Estate Starting to Cool Off

Market Competition Intensifies for Millennial House-Hunters

How Realtors Are Using Mobile Technology

 


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