Unless you like to gamble, investing wisely in real estate – and especially in rentals – means paying attention to the long-term financial returns of your property. And this in turn means paying attention to the economic health of the market where you choose to invest.
It’s pretty simple; you have a better chance for reliable returns where there is – and will be – good demand for housing. And that usually requires a growing local economy.
In the time of Covid-19, in 2020 and probably 2021 as well, that simple analysis logic is upended because almost every local economy is not growing. Furthermore, many kinds of jobs will be permanently lost as a result of the Covid-19 recession, which will affect some local economies more than others. This means that investors have a more complicated task; it boils down to playing defense, to focus on local markets that are most likely to produce good returns in the future because they’re least likely to suffer long-term harm.
How do we do that? The data we usually analyze, like jobs and unemployment, can be misleading right now; some states shut down their economy, others didn’t. Recent data on home prices and rents reflect transactions that were started many months ago, before Covid-19 was even a word; they’re not much of a guide for the future.
Let’s be strategic; look at the underlying structure of local economies to see which are more fundamentally solid than others. Markets that were strong before Covid-19 should do well after Covid – with some exceptions.
We’ll start with demand for housing, measured by rising home prices the last few years. That’s a reliable measure for renters as well as homeowners. What we’re looking for is a consistent increase at a sustainable level. Ranking the 100 largest local markets, we get the Top 20 list in Table A. Phoenix might be on the high side for sustainability, but a consistent 5 to 6 percent
Next, let’s see which local economies were doing well in the years before Covid*19, measured by job growth. Again, we’re looking for consistent growth, not boom economies. Ranking our 100 markets we get the list in Table B. There’s a wider range here, from more than 3 percent to just over 1 percent annual increase shows solid demand.
Unless the pandemic continues unabated for several years and the real estate markets collapse, investing in rentals will be a good idea. There are a number of favorable local markets for investors, even during this time.
The markets listed in Tables A. and B. are all candidates; those listed in Table C. are even stronger choices; and the eight markets with low Covid-19 vulnerable jobs give you the least to worry about: Atlanta, Austin, Columbus, Fort Lauderdale, Houston, Phoenix, Richmond and San Antonio.
If you’re considering investing in real estate, when you’re ready to close on a deal, Ideal Title will be here to help. They have the professionals to assist investors with their title and escrow needs. To find out what title insurance and closing services options are available, contact Ideal Title Agency. They’re glad to help you navigate these questions. Contact thems at info@idealtitleagency.com or check them out on Facebook: facebook.com/idealtitle .
Source: Forbes Real Estate