Whether you’re looking to buy a home or are into real estate investing, chances are you’re looking to purchase a home that will increase in value over time — preferably quickly so you can sell it off at a profit down the road.
Earlier this year, Bigger Pockets, a well-respected social network for real estate investors and real estate education, released their 2015 Real Estate Investment Market Index, which outlines of the best markets for real estate investors. Here are some of the hottest markets in real estate according to their findings.
Dallas is at the top of the list when it comes to market returns. Their quickly appreciating market can have investors looking at a 19.5% return.
According to a Dallas Morning News report, home prices were up 8% from the previous year in July. The average home price is also 15% higher than it was before the recession. Homeowners have also already recuperated whatever equity they may have lost during the housing crisis.
A booming local economy coupled with construction that can’t keep up has led to astronomically rapid increases in home value. The report states that two new houses are built for every new job that’s being created to accommodate all the people moving into town. The Dallas/Ft. Worth area is seeing at least 100,000 jobs being created each year, but the houses aren’t being built fast enough to keep up with the demand.
Denver is seeing a similar situation as Dallas. Too many people are moving in, and there are not enough houses. This has lead to a quickly appreciating housing market where investors can see as much as an 18.9% return.
Colorado home prices rose 9.8% from February 2014 to February 2015. A big part of this was the Denver area that saw home prices jump over 11%. Between January and February Denver housing prices rose 1.8%, which would equate to a mind-numbing 21.6% for the year. Of course, this would be assuming the rate kept up.
Miami was one of the hardest hit areas during the housing crisis, but the Magic City’s real estate market seems to be making a major comeback. Investors in this area could see as much of an 18.57% return on their properties.
New developments and a renewed interest in real estate have made Miami’s market one of the fastest-growing in the nation. Higher property values have also led to much higher rents. According to an August 2015 Zumper National Rent Report, rent in Miami was at an average of $1880 a month. There was an $80 increase even during Miami’s “slow” season, which means rents are set to appreciate even more during busy seasons.
The rent prices in Miami are also increasing sharply year after year. Over the last year, one bedroom and two bedroom prices have risen 10.6% and 10.9% respectively. This is very good news for investors who are looking to make a return with rental properties in South Florida.
Houston is another Texan city that is seeing some major growth in the real estate market. The housing market, in general, is seeing a boom, but their condominium market is out of control.
To make the deal even sweeter for investors, Zillow also found that Houston is one of the best areas to get a discount on a property. In other words, you find a home at a good price and enjoy the rewards of a quickly appreciating market.
Atlanta has been seeing a housing appreciation in recent years. So much, in fact, that it was deemed by several media outlets as one of the housing markets to watch in 2015 and 2016. Atlanta has not disappointed in this department and investors are now seeing a 16.45% return on their investments.
Similar to Miami, Atlanta was also very hard hit by the housing crisis and had one of the highest foreclosure rates in the country. That's turned around in recent years as investors swoop up properties before the "For Sale" sign is even in the yard.
Like the other cities on this list, Atlanta is also experiencing high demand and low supply. According to the September 2015 briefing by the Atlanta Relators Board, the amount of homes for sale keeps decreasing while demand keeps increasing at a rapid pace.
What Investors and Homebuyers Need to Know About Hot Markets
Before jumping into buying property in one of the hottest real estate markets, there are a few things investors and homebuyers need to take into account.
First, you’ll need to look into why these markets are booming and research their local economy. Rachel Hernandez, a real estate investor and author of How to Deal With Change and Find Success As a Real Estate Investor, suggests making sure that the local economy isn’t dependent upon one particular company.
“Markets usually become hot because of an influx of employment opportunities. From there it tends to trickle down into home builders and retail” she says. "People should be wary of areas with one big employer or low populations as this could be a huge risk.”
Second, you may want to have more cash on hand. “Hot areas are usually dealing with multiple offers. In a seller’s market, cash is king,” says Hernandez. Additionally, Hernandez warns that American buyers aren’t just competing with each other, but with foreign buyers as well. This could have significant impacts on the economy so proceed with caution before making rash decisions. (For more on real estate investing, visit: Exploring Real Estate Investments.)
The Bottom Line
If you’re looking to invest in rental property, try one of these markets on for size. Booming local economies have led to a significant increase in home values and could be a sound investment. However, as with any investment, you’ll want to proceed with the utmost caution and make sure you’ve done your homework.