Real estate investors are finding opportunity in depressed home prices, sluggish sales and the expanding pool of renters.
Inman News examined housing, demographic and economic data for hundreds of metropolitan areas nationwide in developing a list of 10 markets that may be best suited for house-hunting investors.
The 10 markets are, in order: Indianapolis-Carmel, Ind.; Winchester, Va.-W.Va.; Gainesville, Fla.; Tucson, Ariz.; Tallahassee, Fla.; Hagerstown-Martinsburg, Md.-W.Va.; Salt Lake City; Richmond, Va.; Gainesville, Ga.; and Winston-Salem, N.C.
The analysis considered markets with high affordability, low and dropping prices, a high market share of foreclosure sales, high population growth, an improving unemployment rate that is close to or better than the national average, high projected return on investment (ROI) over the next decade, and a low total cost of ownership-to-rent ratio. On a scale of 1 to 100, properties that score above 50 are expected to outperform the market while those that score below 50 are expected to underperform. The analysis considered only those markets with scores of 50 or above.
After the final 10 markets were chosen, they were ranked according to InvestorScore. Where InvestorScore was the same, the markets were ranked by projected return on investment, another metric created by SmartZip.
Projected ROI is the percentage of money expected to be gained or lost by owning a property in this market relative to the amount of money invested. In its ROI calculation, SmartZip considers total first-year investment (down payment and closing costs), annual net cash flow, 10-year estimated appreciated value of the property, and closing costs associated with the eventual sale of the property.
Seven out of the 10 markets are in the South, two are in the West, and one is in the Midwest. None of the markets are in the Northeast.
The results of the analysis mirror two major economic trends: population growth and improving employment. In the past decade, the South has seen the biggest jump in population, up 14.3 percent to about 114 million people, according to the U.S. Census Bureau. The nation’s second most populated region, the West, saw its population jump 13.8 percent to nearly 72 million.