Choosing the Right Market Is Imperative to Growing Wealth and Establishing Long-Lasting Cash Flows.
Making that final jump from a potential investor to finding the right property can be a challenging journey. There is a lot of time, consideration, and research that goes into finding investment properties for sale that are in alignment with your short term and long-term goals. Turnkey Property Pro focuses on two lucrative markets: Baltimore and Philadelphia. Using these two cities as examples, we are happy to explain our strategy in scoping out potential investment opportunities, as well as highlight some markets that are less desirable.
With Baltimore being the #1 ranked rental market in the United States by Realty Trac and Bigger Pockets, it is an obvious choice for investment. It is the largest city in which the number of renters outnumbers the number of homeowners. In Seton Hill, a neighborhood located near Saint Mary’s Park, 84% of residents are renters, providing excellent opportunities for landlords. Despite the rental demand, purchasing residential properties is still affordable. The median sales price hovers in the mid $200,000s, making it easy to break into this lucrative market.
The Baltimore economy is optimal for a steady rental demand. The last thing you want is for a city to be dependent on one industry. As we saw with Detroit, with one sole focus, you risk the population leaving or becoming chronically unemployed. Baltimore has a great diverse pool of careers in both the private and public fields, leading to sustainability in both rental demand and income for residents. For all these reasons, Baltimore provides the safest and most reliable returns compared to other cities its size, with an average of 10-16% ROI.
As the 6th largest city in the nation and seventh largest metropolitan economy, Philadelphia is the perfect combination of a low cost of living, high demand for rental properties, and appreciating market with fewer homes for sale each quarter. The average median property price, like Baltimore, hovers around the mid $200,000s, leaving investors with a 2.59% cash on cash return with room to grow.
Philadelphia has a rich history attracts consistent tourism. As a first nation’s World Heritage City declared by UNESCO, more than 41 million tourists visit Philadelphia each year. There is a lot of talk about the national housing market taking a hit in 2019, but Philadelphia shows no sign of slowing down. Philadelphia housing values are expected to rise by 14.8% this year, up from 11% in 2018. A younger population is moving into the area due to the proximity to large educational hubs, job opportunities, and bustling nightlife. Millennials are pumping new life into the city of Philadelphia and providing landlords with unprecedented investment opportunities.
Where to Not to Purchase Investment Properties for Sale
Just like it is essential to educate yourself on hot markets, it is equally as helpful to inform yourself on where not to purchase. As a general rule, you want to look at the purchase price versus the rental rate. If the purchase price is so high that it doesn’t provide you with enough of a return to justify the initial investment, it is likely not an optimal market. Cities like San Francisco, Los Angeles, Seattle, and New York have extremely high purchase prices, and would not yield high cash on cash returns relative to markets like Baltimore or Philadelphia.
On the other side, you don’t want to choose cities that have low rental demand or low population growth. Smaller towns that lack economic diversity and have a trend of home value stagnation like Corpus Christi, TX and Wichita, KS tend to be poor choices for real estate investment. A good rule of thumb is to invest in a real estate market that you would be excited to live. Are there opportunities for career growth? Highly-rated school districts? Entertainment for both families and single individuals? Historical significance or areas of natural beauty? When you have even a few of these market characteristics, you are likely to find excellent investment opportunities.
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