Smart investors are always on the hunt for the next big thing. I have been studying real estate investing trends for years, and I have identified trends that greatly affect investors. Here are a few of them:
“Secondary” City Growth
Many years ago, I began predicting great areas to invest in based on criteria I personally follow. These criteria have never let me down. One of the criteria I always look for is the incline and decline of “Primary” or “Secondary” cities.
In order to understand real estate markets, you must research both the primary and secondary cities in an area. For example, in the Pacific Northwest, if you want to see where the trends in real estate investing are, you must first research the primary city and then its surrounding secondary cities.
This is extremely critical because investors are looking to find “the next big thing” but often they are looking in the wrong place. It is natural for investors to look at the bigger primary cities, but it is often the secondary cities that offer the most opportunity. Secondary cities are those golden gems that aren’t overpriced yet like their neighboring primary cities. When a primary city becomes too high priced, it forces many homebuyers and investors to consider a secondary city in search of better pricing. This is a trend that will absolutely continue as double-digit growth continues to push secondary cities upward in price and opportunity.
Many employers are choosing secondary cities as new locations to expand to and this drives demand in those markets, making them perfect places for investors to buy as these areas support continued rising real estate values.
In most investment areas that contain primary and secondary cities, you will find that the primary city increases the demand in the secondary city – which ultimately drives price growth upward. And that is good news for investors. While others flock to invest in primary cities, smart investors are buying in secondary cities while prices are still low.
Real estate investors are paying attention to the new tax incentive that was included in the Tax Cuts and Jobs Act of 2017 for investments in qualified opportunity zones (QOZ’s). This tax incentive allows for deferment, reduction and complete elimination of capital gains taxes for certain types of investments. Get to know these zones and understand how this tax incentive can benefit you.
At this time, renting is still more affordable in over 60% of US housing markets. Because home prices have increased so dramatically, it has driven rental demand upwards. With the share of affordable homes dwindling in many areas due to rising home sale prices, it has created an opportunity for investors in the multifamily markets. When affordable housing becomes a problem, demand for multi-family increases. This is an opportunity for investors to expand their property portfolios in markets where housing affordability is a challenge. This demand will push rents upwards and will increase investors’ profitability.
The Millennial Buyer
Baby Boomers have now been outnumbered by the Millennials. This large demographic is now at their prime homebuying age and therefore they will dictate trends in housing. Smart investors are building the type of product that Millennials want: smart space, good location and simple clean design. The smart investor is targeting the Millennial client.
Whatever your investment interest is, you need to pay attention to the trends in real estate. These trends will dictate what you invest in, where you invest and when you make that investment.