Best Cities to Invest in Rental Housing for Millennials
Millennials often find themselves in a challenging position right after college because of outstanding student loans and the rising costs of living. While many of these young men and women look forward to owning a property as part of their adult journey and achieving the American Dream, the cost of homeownership coupled with the lack of sufficient funds to pay for the down payment of a property forces these individuals to choose rental properties as their home into the foreseeable future. This increasingly common scenario has created a window of opportunity for real estate investors to serve the Millennial Dream. However, one question often arises: where should real estate investors purchase property for Millennials?
Naturally, investors should look at cities that have registered the highest growth in rent in the last few years. Single-family homes have emerged as the preferred choice of Millennials. This has led investors across the country to make a beeline to buy these type of properties. Fortunately, investors now have access to an unprecedented amount data, including rising rents in select cities across the country that allow them to target properties that earn the best rental income within their budget cushion. Investors can also look at employment opportunities for Millennials in the surrounding area before deciding to buy a rental property, ensuring that demand will continue to exceed supply. What are some of the cities that top the list?
Dallas remains the first choice of investors
Dallas is a city that ranks at the top when it comes to buying investment homes and condos. Famous for being the headquarters of large Fortune 500 companies such as ExxonMobil and Southwest Airlines; Dallas offers large business diversity, with the Technology sector leading the way. According to City-data, skilled millennials flock to cities like Dallas since it presents plenty of employment options and a lifestyle that meets their needs and wants. Investors can buy property in Dallas with confidence because of the nearly 4% growth in the job market and population growth at a brisk pace in the last 3 years (6%). Median home prices in Dallas stand at $233,000, which is 3.9% higher than median prices last year, but still significantly lower than the peak prices seen during the housing market boom 10 years ago. According to market watchers, the price of properties in Dallas is expected to appreciate by nearly 27% within the next seven years. This means investors may benefit from not only high rents from property in Dallas, but may also receive attractive profits if they decide to sell it in a few years.
Consider these 4 great cities in Florida
Florida is a great proposition for real estate investors. Many millennials are attracted to the Sunshine State due to its warm temperatures and strong economic growth. Investors can make the most of this demand by considering the following cities:
• Jacksonville
• Orlando
• West Palm Beach
• Tampa
While there are many other cities like Cape Coral, Naples, Sarasota, and Daytona Beach where investors can often get a decent return on investment (ROI), the four cities mentioned above are the best cities if millennials are your target group for rental income, as stated by Mashvisor. Florida is one state where demand for properties remained steady even during the financial crisis of 2008-2009. Experts believe home prices in Florida are still undervalued by 20% when compared to their peak prices before 2008. This means investors can buy with less worry as their properties are more than likely to appreciate well into the future. The greatest driving factor behind the four cities being listed above is growth in the job market. Each of these cities have seen a drastic change in economic drivers within the past decade. For example, Tampa, was primarily industrial until the 70’s when the focus switched to service-related and office-oriented positions. Today, the city is a strong financial hub for Florida and a growing medical sector.
Bigger and better in Texas, even for Millennials
Texas is a state where many cities are registering impressive growth in rents. Based on home prices, Fort Worth and San Antonio are two of the best cities in the Lone Star state where you can get attractive ROI. Like Florida, Texas was one of the very few states that remained largely unaffected by the housing crisis of 2008-2009. And, as it bounced back, it led the revival of the housing market in the country. Quite aptly, Texas is second only to Florida in the last 2-3 years in terms of employment opportunities and affordable housing. Investors can still get a property for a low price in the cities mentioned above and reap the rewards of renting to Millennials looking to stay within city walls.
Time to look beyond the mega cities
It’s surprising for many investors not to see the names of mega cities like Los Angeles and San Francisco on the list of Best Cities to invest in Rental Housing for Millennials. Of course, Millennials search for rental properties in these large metro areas, but exorbitant prices and scarcity of homes in these cities means you cannot expect a decent return on your investment. However, as stated by Mashvisor, Boston is one city that has defied this logic and continues to be prime for investors. Even with median property prices in the mid $300,000, it does not deter investors who are confident of getting a good ROI through rental income. Experts say that property prices in Boston are likely to go up by another 20% in the next few years. Boston’s healthcare industry is enough to attract dedicated millennials to move to this coastal city.
There are other large cities in the country that promise a high ROI for investors. Some of these are Atlanta, Phoenix, and Columbus. Not many investors are interested in placing a bet on a place like Columbus – however, home prices are undervalued by almost 20% here. If rental income is the sole reason why you are making this investment, cities like Columbus and Phoenix seem to be a better bet for you as you can buy larger properties demanding higher rent.
Stay away from buying just for bargain
As a real estate investor, you should not fall for the trap of low property prices. Make an informed decision about the city where you are interested in buying rental property because prices are not going to appreciate in a city if its infrastructure and economy are not growing at a rate to support the changes millennials want to make. Be cautious of the advice from real estate agents in an unknown city. Without the proper research, you may never be able to find the tenants/rent you are expecting.
Again, don’t forget to look at job growth
Millennials will form over 50% of the workplace within the next 5 years according to PWC. As we have illustrated above, renting is the most viable option for many people in this generation. Investors should always research cities, especially when entering an unknown market, for job growth. Millennials tend to thrive in cities that have a strong, growing infrastructure and consistent employment growth. With the availability of specialized debt from lenders such as CoreVest Finance, investors can now take full advantage of the above information and build a portfolio targeted to almost 50% of the US workforce.
_____________________________________________________________________________________
CoreVest is a leading provider of financing solutions to residential real estate investors. We provide attractive long-term debt products for stabilized rental portfolios as well as credit lines for new acquisitions.
For more information about how CoreVest can help grow your rental and rehab business, please call 844.223.2231 or submit our contact form.
#IG