Top U.S. Cities for Real Estate Investment in 2008

HomeVestors (the “We Buy Ugly Houses” folks) has named the top 10 cities for real estate investing and 10 junior markets for real estate investing in the first quarter of 2008 (Junior markets are cities with a population of 150,000 or more). They are as follows:

1. Dallas, TX
2. Houston, TX
3. Atlanta, Ga
4. Fort Worth, TX
5. St. Louis, MO
6. Philadelphia, PA
7. San Antonio, TX
8. Denver, CO
9. Minneapolis, MN
10. Phoenix, AZ

Top 10 Junior Markets

1. Columbus, GA
2. Panama City, FL
3. Springfield, MO
4. Brevard County, FL
5. Greensboro, NC
6. Lubbock, TX
7. Columbia, SC
8. Ft. Walton Beach, FL
9. Kent/Sussex Counties, DE
10. Michigan City, IN

These findings are based on the number of houses bought in each market by HomeVestors in Q1 of quarter of 2008 (source http://www.homevestors.com/inthenews)

As the Dallas-based franchise company specializes in buying, rehabbing and selling single-family houses and rescuing homeowners from ugly houses and ugly real estate situations, the current downturn in residential real estate makes for a fantastic acquisition environment. As I mentioned in a previous blogpost, this climate of falling prices, inventory oversupply, and resulting homeowner desperation to get rid of their houses, is a prime time for smart investors to go heavy on property acquisition. As long as your exit strategy is to buy and hold, and not to flip (which is going to be very very difficult in today’s climate), and as long as you can afford to hold the property for at least 5-7 years, you should definitely take advantage of these conditions.

I have to admit that I don’t completely trust this data. I mean, I do not doubt that these are the areas where some of the best bargains can be had: HomeVestors does enough volume to observe significant trends. But there are so many other factors that make a city a hot investment market, which can not be ignored; the HomeVestors press release doesn’t address those factors explicitly. For example, the city’s economic development plans, jobs growth outlook, and other macroeconomic factors must be considered. Also, the rental outlook must be considered. As you buy a property, the low acquisition price is only one factor that determines whether you will see positive cash flow (or at least break even). Rents must also be strong and in demand. Overall, there is strong rental demand right now across the nation, as many homeowners lose their homes to foreclosure and many other hopeful homeowners can’t get a mortgage due to tougher standards. But some cities are definitely hotter rental markets than others. If people are fleeting a city due to lack of jobs, rental market will suffer. The HomeVestor list seems to be very TX-centric. By a sheer coincidence, the company is based in Dallas. Hmmm….. I would be very interested in hearing from our readers what they consider to be the top cities for investing.

Another question for the readers: would you consider investing away from home? What are some factors that you consider whether or not you feel comfortable with investing away from home? What resources do you use? Do you work with another local investor to show you the ropes? We are working on a tool that can connect investors to each other, based on area of interest, as well as other investing goals. As various areas of the country may become attractive to investors than their own home turf (Gulf Region GO Zone, for example), we see more and more people venturing outside of their own backyard. And we would love to help investors make the process a smooth one.

Focus is good for a tough market

A colleague has shared the following blogpost by Seth Godin with me. Even though it talks about how to stand out from the crowd as a real estate agent, I found it quite applicable for us, investors, as well. Especially in this tough real estate market, when sellers abound and the battle for buyers’ attention is only getting fiercer. How will you stand out as an investor wholesaling your property, flipping your property, or even trying to get your property rented. It’s through focus, says Seth. Become a super-expert in what you do: specialize in a zip code, in a particular property type, in a particular investing strategy. Possibilities are endless really, in creating a niche that is yours and only yours. Become that person that everyone will think of when they think of, say, a short sale, a lease-option, etc. Raise your visibility by giving talks, seminars, blogging. Seth gives a great idea in his post: have relevant clubs and organizations meet in your office. That’s one other way to become the hub and the absolute authority. Simply awesome! In short… Get creative. Do what others aren’t doing. And become an expert.

At the risk of sounding unoriginal… Use the current technologies to help you. Get out in the blogosphere. Get on Facebook. Get on Meetup. It amazes me how few real estate investors I know are on Facebook. Think about it.. If you are renting your apartments to the 20-somethings and 30-somethings, that’s where they are. So you have to be there too. And it’s a great way to spread your message very quickly and virally. (And besides, Facebook is no longer for folks under 35). Become the blogging / Facebook expert of lease-options in zip code 12345.

Here is to your wealth in 2008!