As the cost of living and long-term property prices continue to rise in coastal United States markets, real estate investors from out-of-state are turning to America’s southern and Rust Belt cities. Metropolitan areas such as San Antonio, Tampa, Indianapolis, Jacksonville, and Charlotte, North Carolina, are emerging as prime destinations for long-distance investors.
This is what Dameion Kennedy, a real estate analyst with Lima One Capital, recently explained. The reasons for this trend are due to local regulations for landlords, property taxes, labor availability, population growth, and local knowledge for specific real estate investors to find properties, which have pushed these locations to the top of the list. He added that these cities are cheaper than West Coast markets because of long-term prices and cost of living.
Investing in Long-Distance Real Estate Properties – The New Possibilities for You and Your Family
As you could imply, Successful real estate investing depends on the individual property rather than the geographic area. While these markets have individual properties worth investing in, the best investors know that success depends on finding the right property. Remember that there is no zero-risk investment, not only in real estate, but in any field.
Data compiled by Lima One Capital shows that real estate investors are benefiting from above-average occupancy and rental rates under current market conditions, which play a key part in supercharging cash flow for portfolios. This has led to higher interest rates pricing out would-be homebuyers and pushing them towards single-family rental homes.
Some locations like New Jersey, Colorado, or Illinois, that were strong real estate markets in the past, now are being left behind.
But Watch Out for the ‘Cons’ of Long-Distance Real Estate Investments
This al sounds amazing, but nothing in life is just good news: elevated interest rates have also made it harder for investors to scale portfolios, as they face difficulties making the debt-service calculations (DSCR) pencil out on new purchases. In 2022, MetLife Investment Management estimated that institutions owned some 700,000 single-family rentals across the U.S., making up about 5% of the 14 million single-family rental homes.
By 2030, MetLife forecasts that institutions will increase single-family rental holdings to 7.6 million homes, accounting for over 40% of the market. According to Kennedy, institutional investors are jumping into “hot” cities to construct multifamily properties and build-to-rent developments that include hundreds of houses for rent rather than sale. Long-distance investing can include home flipping or buying existing homes to use as rentals.
According to the mentioned research, Arizona, Georgia, and Tennessee are the top 3 US states destinations for institutional investments, while Nevada and North Carolina complete the top 5. The top cities with outstanding share of institutional investors selling properties are Memphis (TN), Jacksonville (FL), Macon (GA), Atlanta (GA) and Clarksville (TN).
In 2022, Arizona was named the most popular state to move in, and we’re still to see which one will be the 2023 winner in this category.