Those Americans who still consider real estate the best long-term investment can look to Forbes magazine for help in determining where in the United States they should buy rental properties.
Forbes’ contributor Ingo Winzer reported July 29, 2016 on Forbes.com on the top 20 American cities for investing in real estate rentals. Coming in at the top: Provo-Orem, Utah; Austin-Round Rock, Texas; Nashville-Davidson-Murfreesboro, Tenn.; Riverside-San Bernardino-Ontario, Calif.; and Charleston, North Charleston, S.C.
These are local markets where the odds of success in real estate rental investing are higher because of high demand by renters.
One long-term trend that is fueling rental market demand, according to Forbes, is that the U.S. has been evolving into more of a service economy, in which low-paying jobs are becoming more the norm. Factors impacting the change are foreign outsourcing and less opportunity for manufacturing and middle management jobs, which tend to be higher paying, because of computerization.
The bottom line is that the trend is affecting and will continue to impact what Americans can afford in housing.
The calculations, which take into consideration such things as the latest home prices versus income prices, suggest investors in some of the top 20 markets will be able to buy properties, fix them up a little and make income by renting them out to a single tenant or family. In other markets, the high cost of buying the properties makes getting the rent needed for a good return impossible. In these cases, investors might have to split properties into distinct rent-producing units for a solid return, according to Forbes.
An article by Real Estate Forum and GlobeSt.com managing editor Paul Bubny reported rental rates are rising faster for low-end units, but the supply is increasing more for high end units. In fact, in 11 of 15 multifamily markets analyzed by Zillow, the least expensive third of apartments saw double-digit annual growth in rents, according to “Low End Units See Faster Rent Growth,” posted July 29 on GlobeSt.com.
Given the shrinking middle class and growing aging population (made up of people who might want to reduce expenses and rent), investors should consider the mobile home market, according to an investing blog on USNews.com.
In “Mobile Home Parks are a Viable Investment,” contributor Joel Cone reported mobile home parks offer affordable housing options to low-wage earners — even those living in poverty, which according to the U.S. Census Bureau, is about 46.7 million people. The Social Security Administration estimates that 38% of all U.S. wage earners are making less than $20,000 a year, according to USNews.com.