As interest rates have fallen and home ownership has become increasingly widespread, perhaps the next American Dream is to use real estate as a wealth-building tool. When it comes to choosing a place for such an investment, you should ask one major question: What makes a particular locale a good investment choice and a prime real estate market?
Some things are fairly obvious, like the weather and proximity to a major city or airport. Other logical things that help create solid real estate value, but are not as easily identifiable, include commercial and business growth and the variety of amusement and recreational activities. So, if businesses of all sorts are moving in, there are customers in the area and a community is forming with an infrastructure to support it. You certainly would not want to buy up property in a place where the businesses are all leaving for greener pastures.
Where are these places that fit the above mold and are showing the promise of increased real estate values? They may be easier to find than you think. Despite the well publicized real estate slowdown and sub-prime lending woes, 63% of the top 100 markets in the U.S. are slated to show a rise in value in 2007. Here are some suggested places to consider when investing in real estate.
Jacksonville is also a hub of business diversity and, according to Forbes, is one of the top 10 places in the country to relocate to find a job, and it’s rated as one of the most livable big cities in the U.S.
Jacksonville’s geographic location, access to water, and facilities make it a primary transportation hub for air, rail and boat. Additionally, Jacksonville has healthy employment rates and opportunities in manufacturing, financial services and professional services.
Gilbert, Arizona
Outside Phoenix, Arizona, there’s a town called Gilbert and it’s home to more than 191,000 people, which makes it the largest town in the country. Gilbert is marketed as a family friendly, affluent place to live. The median income is roughly $70,000 and the median age is 30 -- less than 4% of the population is of retirement age. In short, this is a young town that is relatively well-to-do. Additionally, more than 50% of the households have children and nearly 70% are married.Between 1990 and 2000, Gilbert was labeled the fastest growing city or town in Arizona, and the people plan to stay and raise families. These trends provide some very strong arguments for the real estate market and investors should take notice. Gilbert also has plenty of room to grow. With 43.2 square miles and a job growth rate of 31% from 2000 to 2005, many say that this prime real estate market has yet to reach its value potential.
Salt Lake City, Utah
The Western United States is home to the five coldest real estate markets in the country -- a trend that is expected to last through 2008; however, Salt Lake City bucks the trend as the fourth hottest real estate market in the country and it’s expected to show growth in 2008 and 2009. The home prices are also affordable; the median home price rings in at $186,000 and offers plenty of upside considering prices are almost 50% less than the median price in nearby Las Vegas.Anyone looking at a map should be able to gauge Salt Lake City’s importance in the region from a logistics standpoint: The city is a thriving regional distribution center and transportation hub with tons of business flowing through each day via truck, rail and air. In short, there’s a lot of business and a lot of jobs here, which means commercial growth to support and increase the value of the real estate market.
Historically, the state has had a very low crime rate, which many credit the Church of Latter Day Saints for fostering. It is less known; however, that the same church has very shrewd business people and real estate developers who are responsible for the $1 billion City Creek Center -- a major hub of shopping, residential dwellings and office space. Considering that the investment rivals that of many of the major Las Vegas Strip hotels and resorts, it would seem that confidence is high that the best is yet to come.
The center is expected to be completed by 2011 and to have a major economic impact on the area, which will make it even more attractive to real estate investors. Throw in great skiing, hiking and an up-and-coming NBA team, and we seem to have a recipe for real estate success.
McAllen-Mission, Texas
You’ve probably never heard of this place, but if you’re looking for fast growth and low prices (two important factors that comprise prime real estate), look no further than McAllen-Mission, Texas. This town, located at the southern tip of Texas and borders Mexico, is the fastest growing real estate market in the entire country. With median home prices under $70,000 and sporting projected real estate value increases of 8.5% and 9.8% in 2007 and 2008 respectively, the odds are that you can get some value for your dollar and solid growth prospects.The area is also very attractive, especially for avid runners and tennis fans. McAllen boasts a very active summer tennis season with plenty of tournaments and leagues. It is also the home of the International Friendship Run, a 10k race that’s labeled as the No. 1 running event in South Texas. McAllen, with about 123,000 people, is also a good launching point to visit other large urban areas in Texas -- a region that’s home to four of the top 10 fastest growing real estate markets in terms of housing values in the nation. Being situated on the Rio Grande and home to Quinta Mazatlan, a renowned birding center, adds some character to this prime real estate locale.
Jacksonville, Florida
It’s no secret that Florida is a prime real estate market. The weather, the beaches, the golf courses (and the related Players Championship and PGA Tour headquarters), and laid-back atmosphere make it attractive to tourists, retirees and people relocating -- all of whom need a place to live. Of course, it’s also no secret that Florida has been hit hard by the real estate slowdown and buyers are few and far between.This slowdown could be a blessing in disguise for the investor, and if you have a long-term horizon, you may be able to name your price on an investment property of your choosing or take advantage of the foreclosure market. So, what makes Jacksonville such a great real estate opportunity, apart from the professional sports teams, several universities and an established history of arts and culture? Although Florida as a whole is expected to show a 3% to 5% decline in real estate prices in 2008 and 2009, forecasts call for Jacksonville to retain real estate values during the same period. Granted, it is not growth, but that just makes it an opportune time to make a purchase at a favorable price. Furthermore, consider that the median home price in the area is just under $200,000 -- that’s 30% to 50% less than the other major real estate markets in Florida.
Tacoma, Washington
Tacoma’s real estate prices are not cheap with the median home price exceeding $250,000 (though average rental rates range between $600 and $900 per month). But, when you compare to neighboring Seattle or Southern California, it appears that you might be getting a bargain.Tacoma, like Salt Lake City, has shown tremendous resiliency in the ice-cold real estate market and it’s poised to post real estate price gains of 4% in 2007 and 2% in 2008. This apparent success is not an isolated incident as Seattle and Portland, Oregon, also expect to show growth.
The entire Tacoma area, like Jacksonville, has been noted as one of the most livable places in the country. Perhaps most importantly, Self magazine named Tacoma the Most Sexually Healthy City in the U.S. in 2006.
Tacoma is a trade force due to its access to ports and the Puget Sound, and its proximity to major metropolitan areas. The city has capitalized on the opportunity and continues to emerge as a preferred trade destination for businesses, both domestic and overseas. Boeing and State Farm Insurance, for example, have chosen Tacoma to be the home for some of their major operation centers.
The Tacoma government, though, has not let the economic success go to their heads. The area retains much of its small-town charm, accented by its view of the mountains (great for vacationers and real estate investors). More specifically, downtown Tacoma is going through what many call a renaissance and money has been poured into the city to strengthen its branch of the University of Washington, cultural centers, and commerce development opportunities. The end result of such an investment is a flourishing downtown, where many people are choosing to call home or to set up shop. Other municipal projects, such as aggressive measures to reduce crime (which have been very successful) and create America’s No. 1 wired city provide positive momentum and sweeten the real estate deal for investors.
real estate, the new frontier
Any investment venture is a game of risk to some degree. Fortunately, you’re smart enough to dig deep and do some research before throwing your money at an empty promise or a money pit. Hopefully the cities discussed here have prompted you to think about making an investment in one of their markets and given you enough starter information for your research.Resources:
http://money.cnn.com/2006/12/20/magazines/fortune/bestmarkets.fortune/index.htm - 10 best places to own real estate
http://money.cnn.com/magazines/moneymag/bplive/2006/snapshots/PL0427400.html - Best places to live
http://money.cnn.com/popups/2006/fortune/invguide_realestate/2.html - Hot spots, cold spots
http://en.wikipedia.org/wiki/Main_Page
http://www.mcallen.net/
http://www.ci.gilbert.az.us/
http://www.businessweek.com/bwdaily/dnflash/content/jun2007/db20070614_838245.htm
http://www.mostlivable.org/
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