Government data shows Americans are leaving expensive coastal cities and heading back inland for cheaper property and increasing job opportunities.
According to US Census Bureau data, an estimated 39% of our population are now living in heartland America, an increase of 2.65% from four years ago.
This trend could be important if you’re a property investor because we’re seeing increasing values in key heartland cities where rental accommodation could be premium in the months and years to come.
Analysis by Barron’s – part of the Dow Jones group of companies – says the rate of internal migration is outpacing population growth (2.59%) for the first time since 1959.
Some of the major cities benefiting from net internal migration include Nashville, Austin, Indianapolis and Columbus in Ohio.
Affordable housing isn’t the only reason. Realtor.com economist Jiayi Xu says younger Americans are being lured by a mixture of lifestyle and well-paying jobs in technology, finance, health care and manufacturing.
“The job market in many of these regions is growing, with relatively low unemployment rates,” says Xu, citing Nashville (2.9%) and Austin’s (3.7%) as being below the national unemployment rate of 4.1% .
If you’re looking to purchase your first investment property or expand your current portfolio, it could be worth looking at these growing cities.
Here are some key tips for buying an investment property beyond your own city limits:
Research is paramount – You need to be confident your target urban centers have an increasing population with a growing jobs market and stable industrial base. These factors combine to provide a consistent rental demand and property value appreciation.
Rent-to-price ratios – Compare median home prices to average rents to ensure there’s a good cash-flow potential. A strong rent-to-price ratio indicates a healthy rental market.
Do the numbers – Analyze all potential costs, such as property taxes, insurance, HOA fees (if applicable), maintenance reserves, potential vacancy rates and property management fees. Use a professional financial adviser to help you see the picture clearly and accurately.
Landlord-friendly laws – Some states and cities have regulations that are more favorable to landlords, such as easier eviction processes and fewer rent control restrictions. Avoid markets where rules can be an expensive burden.
Build a local team – A great agent, attorney and reliable property manager are crucial. Use an agent who specializes in investment properties and has experience working with remote buyers. A property manager is non-negotiable – they’ll handle tenant screening, rent collection and maintenance.
Make a visit – It’s not essential, but if you can make at least one trip to view potential properties, meet your team and get a feel for the market, it can be invaluable.