Markets in the Carolinas, Florida, Texas and Ohio showed the highest return-on-investment for investors in 2019.
It’s often said that purchasing a home is the most significant financial investment that anyone can make because it’s seen as a vital stepping stone to building long-term financial wealth. So, it’s easy to see how the stakes are even higher for investors who are snapping up multiple properties for short-term and long-term gain.
Investors often consider the same things individual buyers do when looking at a property, such as a listing price, location and amenities, but they also have to take a macro view at the market, such as an area’s current and projected employment, population growth and average rental yield, which is the percentage value of rental income compared to the property’s market value.
Orlando consistently ranked No. 1 on lists, thanks to the city’s healthy tourism industry that fuels short-term rental opportunities and the relatively low median single-family home sales price of $247,000, approximately $30,000 less than the current U.S. median existing-home price.
“There are several reasons why investors love Orlando. Nearly 70 million people visit Orlando each year, drawn by the area’s world-class theme parks like Disney World and Universal Orlando, dozens of golf courses, and premium shopping outlets,” noted Roofstock data scientist Jeff Rohde in a blog post.
“While tourism and conventions are big business in Orlando, the city is about a lot more than just fun and games,” he added. “Orlando is a major industrial and high-tech center with one of the largest research parks in the country.”
Real estate investing platform RealWealth noted Orlando’s one-year job growth (+4.17 percent) and seven-year population growth (+17 percent) projections ensure the area will be an investing hotspot for years to come, as Orlando’s biggest business leaders (e.g., Universal and Disney) continue to hire more tech workers to lead their expansions.
With a healthy renter population share (46 percent) and a considerable median rent of $1,595 per month, GoBankingRates said investors could expect to experience a rental yield of 5.7 percent.
Lastly, Orlando investors are poised to benefit from the “silver tsunami,” as a large swath of Baby Boomers begin migrating to warmer locales to start their lives as retirees.
Florida dominated several investing lists, with Jacksonville nabbing either the second or third spots. Much like Orlando, Jacksonville is a hub to a number of powerhouse companies, including CSX Corp., Fidelity National Information Services Inc. and Fidelity National Financial Inc., and an NFL team, the Jacksonville Jaguars.
In 2019, Jacksonville experienced healthy jobs (+3.16 percent) and population (+3.1 percent) growth, with RealWealth projecting an 11.55 percent in population growth by 2027, based on U.S. Census data trends.
Jacksonville’s median single-family home price increased 4.1 percent to $190,108, with Zillow projecting a growth slowdown to 1.5 percent in 2020. The median rent in Jacksonville is $1,349 with an estimated average rental yield of 6.8 percent, according to GoBankingRates.
Lastly, Jacksonville’s location makes it a perfect place for renters looking to take advantage of the city’s relatively low cost of living while only being a few hours’ drive from the bustling urban hotspots of Atlanta and Miami.
“The city’s convenient location, business-friendly government, wonderful year-round climate, affordable cost of living, and excellent quality of life help Jacksonville to lay claim as one of the country’s most dynamic and progressive cities,” Rohde noted.
Raleigh, North Carolina
Real estate investors and housing economists have set their sights on the Carolinas, as buyers and renters flock to secondary markets in search of affordable housing. Raleigh and its neighbors have experienced a population boom, with nearly 94,000 new residents coming from expensive coastal markets, namely New York City.
In 2019, Raleigh experienced a 2.6 percent job growth while unemployment rates dropped to 3.1 percent, according to the Bureau of Labor Statistics. The city is poised to experience a bigger boost in jobs growth in 2020, as the city continues attracting highly-skilled workers for software company RedHat and well-known tech brands IBM and Cisco Systems.
Raleigh’s median single-family home price increased 4.4 percent to $283,278, which is relatively cheap to other metros on the coast. The median rent is $1,495, with an estimated average rental yield of 8.93 percent.
Dallas metro area
Dallas and its surrounding cities, including Fort Worth and Arlington, have been stars in investors’ portfolios this year. According to The Balance, Dallas’ low unemployment rate (3.4 percent), strong jobs growth rate (+4.2 percent), and strong corporate community make it a place where renters will flock to for years to come.
With a median rent of $1,750, the average investor experiences a renter yield of 10.1 percent. Roofstock says that rate is expected to hold steady or increase, as median rents continue their upward climb (+5.1 percent).
Dallas’ neighbor, Arlington, nabbed the No. 1 spot on GoBankingRates’ 2019 investing list thanks to healthy jobs growth (+3.4 percent) bolstered by companies such as AT&T, General Motors, JP Morgan Chase and the University of Texas.
“Arlington’s median home price of $240,000 is on the affordable side, yet rents are comparatively high at $1,498,” noted GoBankingRates. “This makes for a strong rental yield and the ability to pay off your property in a little over 13 years. Altogether, this makes Arlington the best city to own investment property.”
The Three C’s — Columbus, Cincinnati and Cleveland, Ohio
Much like Raleigh, Columbus, Cincinnati and Cleveland have been tapped by housing economists as the cities to watch for in 2020 as buyers and renters begin flocking to secondary markets looking for lower prices.
Columbus rounded out GoBankingRates’ top five list, as the city experienced a 7.8 percent increase in median home prices. With a median list price of $179,900 and median rent of $1,184, GoBankingRates estimates investors can experience an average rental yield of 6.85 percent and a pay-off time of 13 years.
Cincinnati’s median home price ($161,508) is nearly $100,000 more than Cleveland ($67,207), but Zillow determined both markets are ripe for home price growth appreciation in the upcoming year (7 to 8 percent growth).
The median rent Cincinnati and Cleveland are $895 and $1,582, respectively, and Cincinnati has a lower average rental yield (12.02 percent) than Cleveland (27 percent).
All three areas have become hotspots for millennials looking for a fresh start. Nearly 6,000 new residents (mainly millennials) moved to Columbus in 2019, and almost 12,000 millennials moved to Cincinnati in 2018.
Meanwhile, in Cleveland, millennials have begun flocking to downtown neighborhoods that offer urban amenities for a relatively low price. That movement has pushed investors to begin pushing loads of cash toward large-scale entertainment and transit projects — another potential rent growth driver.
“Downtown Cleveland has experienced a renaissance over the past several years, with an estimated $19 billion in development completed or planned since 2010,” RealWealth noted. “Just in the last two years, a 10-acre green space downtown was redesigned and has quickly become a gathering place for locals and tourists.”