After the last article I wrote about the benefits of US real estate a dear friend of mine called and said “I liked your article, now where can I look for properties to invest in the USA?”. I told him it’s not that simple and there is a process.
- Firstly where to invest, what locations are best for you?
- Secondly you need to know how to analyse a residential real estate investment.
- Lastly what is your property investment strategy? (E.g. – Buy & Hold, Flipping or Wholesaling)
In this post we will cover location. In future posts we will cover strategy and how to analyse a residential investment. As discussed in the last post the US has 50 states with varying housing markets and economies.
So Where do you Invest?
We can start by looking at where the major characters in ‘Big Bang Theory’ come from. Sheldon – Texas, Lenard – New Jersey or look at where Walter White was from, in ‘Breaking Bad’ – New Mexico. No I am just kidding, but seriously note these things, you never know how they can help!
When it comes to location the three things to look for are:
- Good economy – A good economy provides a good quality of life and good pay. Good pay will lead to good spending and businesses thrive.
- Employment growth – When businesses do well more jobs are created.
- Population growth – More jobs means more people will move into the state. More people will lead to demand for properties.
Let’s See Some Examples
States with high foreclosure rate: Florida, Michigan, Georgia, Arizona and Nevada (Las Vegas is in Nevada).
Strong cash flow market: Tennessee, Indiana (These markets can provide good cash flow but less growth)
Cash flow and growth: Georgia, Texas (due to its gas and oil industry)
Major cities: Jacksonville, Orlando, Miami and Tampa.
Median house value in Florida is $169,000 (Note: This is median house value not price). Price increase over the last year was 9.6%. The median rent is $1,400. Unemployment rate in the state is 5.6%, largely due to the tourism industry brought by Disney world and universal studios. The only thing to be aware of in Florida is that tenancy laws are slightly in favor of the tenant which means a slightly drawn out eviction process if you ever get into this situation.
Major cities: Dallas, Fort Worth, Houston and Austin.
Median house value in Texas is $139,000. Price increase over the last year was 7.3%. The median rent is $1,300. Texas added 46,000 jobs last year alone. Unemployment rate in the state is 4.6%, thanks largely due to the gas and oil industry. Property taxes in Texas is higher compared to the other states.
Major city: Atlanta
Median house value in Georgia is $139,000. Price increase over the last year was 6.3%. The median rent is $1,050. Unemployment rate in the state is 6.9%. Tenancy laws and property taxes are reasonable in Georgia.
Major city: Indianapolis
Median house value in Indiana is $110,000. Price increase over the last year was 1.4%. The median rent is $825. Unemployment rate in the state is 5.8%. Indiana is popular for the Indy 500. As noted above Indiana is a strong cash flow market and not a huge growth market.
Major city: Memphis
Median house value in Tennessee is $127,000. Price increase over the last year was 5.3%. The median rent is $995. Unemployment rate in the state is 6.6%. Memphis is a strong cash flow market but has some growth.
Each state has varying price points and weather conditions. New York is a great city but can you afford to invest there? Why am I talking about weather, well this affects maintenance – cities with cold weather may have frozen pipes and in warmer climate you may have issues with your HVAC (AC) units. North Dakota has a booming economy (in-fact the best in the US) thanks to its oil boom but is it a good place for a new investor? This market is probably best for an experienced investor who understands the risks of this type of market. You might want to look at crime rates and vacancy rates when you look at a particular city to invest. The objective of this article is to give you a rough idea about the various US states and their property market. Which market to invest will depend on the investors experience, risk profile and strategy.
If you want to read further about the various US states then this is a good read: The 50 US state economies from worst to best.
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