Posted on Think Realty by Mike Kalis -CEO
To most people, the idea of taking 42 business trips in one year may not sound like a whole lot of fun. That’s what my 2016 looked like – but I actually loved it. Why? Because I’m one of those annoying people who thinks he has the greatest job on earth. I eat, sleep, and breathe real estate investing. On these trips, I get to hunt for great new-construction investment opportunities for my company’s clients. It’s important for me to get it right because we guarantee our results. If an investor purchases a brand-new home through one of our partner builders, we guarantee the rent for up to six years. In 2016, I visited countless American cities, cruised their neighborhoods, assessed their markets, and learned what big builders like Lennar and D.R. Horton have in store for them. Along the way, all the people I spoke with expressed what I’d call pensive optimism. They were feeling upbeat about how their markets were shaping up, but at the same time, they weren’t willing to guarantee a full-on rebound anytime soon. So, what does that mean for real estate investors? Everyone has their own valid theories, and here’s mine: You should invest when and where everyone else isn’t. It may sound risky, but I believe America’s under-the-radar cities — the ones that aren’t garnering tons of publicity for how terrifically they’re rebounding — are the ones we should invest in. In other words, if how healthy a city’s real estate market amazes everyone, you’ve already missed the investment train. That said, during my recent travels, I fell in love with the investment potential hidden within these five humble American cities:
1| Birmingham, Alabama
Just two years ago, Birmingham was crowned the most affordable city in America, thanks in big part to its low property tax rate – half a percent of the price of a home. You can get a whole lot of house in Birmingham. New construction costs less than $100 per square foot, which means a 2,000-square-foot property may run as low as $160,000, and your annual tax bill would be a paltry $800. Birmingham boasts a dynamic tech startup scene and a growing job market. Furthermore, new corporate development is poised to stimulate the real estate scene. Mercedes Benz, for example, recently closed on a new 225,000-square-foot industrial property, and global auto supplier Grupo Antolin just announced it will create 150 new jobs in the city by 2020.
2 | Grand Rapids, Michigan
As a Michigan native, I’m extra-passionate about the exciting renewal happening around my home state. Grand Rapids is a small city with a strong, emergent economy. The metro area is home to billion-dollar company Amway – a brand that employs nearly 20,000 people. Spurred by the rebounding auto industry, Grand Rapids also enjoys one of the fastest-growing manufacturing sectors in America. Over the past five years, the local job market in manufacturing alone has grown nearly 25 percent. Property taxes in Grand Rapids run right around 1.7 percent of a home – not Alabama, but certainly not a bank breaker. The sweetest perk of this real estate market? Residents are eager to rent. In fact, my company helped an investor purchase a new construction home for $180,000, and within three days of closing, it rented for $1,800 a month.
3 | Rio Rancho, New Mexico
Just outside of Albuquerque, New Mexico, Rio Rancho is endowed with hard-working middle-class residents. Intel has a huge plant in the city that employs thousands of people, but the plant’s future is in limbo. Over the past few years, a steady flow of layoffs has sent real estate prices tumbling. However, New Mexico’s government is investing heavily in localized job creation, and as a result, companies ranging from s to Facebook have planted roots in the area. At this rate, Rio Rancho’s economy will rise sooner rather than later. A brand-new $130,000 home in Rio Rancho will be worth exponentially more 10 years from now. Along the way, you can benefit from the fact that Sandoval County’s property tax rates run less than 1 percent.
4 | Jacksonville, Florida
For beach-style living sans beach-style prices, the greater Jacksonville area is the place to be. The city’s large military presence supplies ample jobs, a steady job market, and a consistently strong rental demand. The federal government plans to boost military spending over the coming years, so we can expect plenty of growth in this area. Last time I was in Jacksonville, I learned that a large developer’s growth target is nearly 2,000 building permits by 2018. That’s just one builder; you can be sure other companies also have grand plans for this market.
5 | Greenville, South Carolina
Greenville has it all: a great industrial base, a vigorous job market, and a strong military presence. The metro area hosts Michelin’s U.S. headquarters and large manufacturing plants for brands like 3M, General Electric, Honeywell, and Lockheed Martin. Even with healthy growth and industry, Greenville’s real estate prices still haven’t dramatically rebounded from the dropout. You can acquire decently sized new-construction homes for less than $200,000 — and property tax rates are less than 0.6 percent. The hottest real estate markets in America aren’t necessarily the big cities everyone is writing about; they’re smaller, hard-working towns that fly under the radar. Although builders and local realtors may only feel pensively optimistic about the current housing market, you should feel very optimistic about the investment opportunities located in the five cities listed above.
President, Marketplace Homes