SS23: What Are The Best Places to Invest in U.S Real Estate in 2021

Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing the best places during 2021, to invest into U.S real estate.

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Talking Points:

Best can often be a subjective term, after all, are, we talking about the availability of housing stock? The lowest overall prices? Highest rental rates? We are going to be weighing several factors in determining the best places in the U.S. to invest in real estate this year.

Factors to Consider
● Single-family rental homes have a higher cap rate than a typical apartment complex (6-8% median), which is ideal.

● High rental occupancy rate – The national rental vacancy rate as of Q1 2021 stands at 6.4%, with this number being slightly lower in suburbs (5.5%), and several states also being below the median.

● Low tenant default rate – During normal times, the national rental default rate is below 10%. That being said, 2020 has changed a lot of things. Primary among these is the % of U.S. households now renting their homes, which now stands at 32% (this tests the most recent high of 1986-1988 which was 36.2%). According to a July 2020 CNBC article.

● Property prices and the trend – Given historically low 30-year fixed mortgage rates and fiscal stimulus, property prices are going up everywhere, but there are still some pockets where they are both still relatively low and growing faster than the average.

● Favorable population demographics – More people moving into the state than leaving, low cost of doing business, job, and overall population growth are all contributing factors to your return on invested capital. Lastly landlord friendly

Best Places in the U.S. to Invest in Real Estate in 2021
1. Alabama (Birmingham)
– Low median home value: $148,000
– The average rent is up 3% compared to the previous year (RENTCafe)
– Birmingham, AL is a leading banking center and HQ to a large number of construction and engineering companies
– 12.3% vacancy rate, which is higher than the national average and the only one of our metrics AL ranks lower in

2. Florida (Orlando)
– $236,000 median home value
– Median home rental per month: $1,599 in Orlando
– Ranked #2 among America’s Fastest-Growing Cities – Forbes
– 7% vacancy rate (in line with the national average)

3. Georgia (Atlanta)
– $190,000 median home value
– Median rental per month: $1,500
– 3-year single-family home price appreciation forecast of 9.3%
– Population growing by more than 1% year-over-year (2019-2020)

4. Idaho (Boise)
– $233,000 median home value
– Population and job growth triple the national average
– Median rental per month: $1,271

5. Texas (Dallas)
– $186,000 median home value
– Median rental per month: $1,800
– 3-year appreciation forecast of 11.4%

Outro
These are objectively some of the top markets to buy real estate across the nation today. Tellingly the Midwest, mid-south and southeast come out on top, but some other notable markets which ranked high according to the metrics we previously mentioned are Nevada, Colorado, Arkansas, Arizona, and Illinois, rounding out the top 10.

Transcript:

Charles:
Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing what are the best places in the U S to invest in during 2021. And this is a question I get all the time. Where’s the best place to invest, Charles, where should I be looking? Where are the trends heading to, and best can be a subjective term after all? Are we talking about the availability housing stock, the lowest overall prices, highest rental rates. We are going to be weighing several factors into determining the best places in the west to invest in real estate this year. So some factors to consider single family rental homes have a higher cap rate than typical apartment complexes. Six to 8% is average, which is ideal, which is definitely higher than most apartment complexes today. High rental occupancy rates, the national rental vacancy rate, as of Q1 2021 stands at 6.4% with this being slightly lower than the suburbs, a five and a half percent.

Charles:
And several states also being below the median low tenant default rate during normal times, the national rental default rate is below 10%. That being said 2020 has changed a lot of things. Primary among these is the percentage of us households now renting their homes, which stands at 32%. This test the most recent high of 1986 to 1988, which was 36.2%. Next is property prices. And the trend given historically low 30 year fixed mortgage rates and fiscal stimulus property prices are going up everywhere, but there are still some pockets where they are both still relatively low and growing faster than average. These are the places we want to look for next favorable population, demographics, more people moving into a state and leaving low cost of doing business in that state and then job and overall population growth, which are all contributing factors, which will increase your return on invested capital.

Charles:
My last thing that I like looking here is called landlord friendliness. So it’s another thing we’ll add in when we’re looking at a state best place in the U S to invest getting right into it. So number one, Birmingham, Alabama, low medium home value hundred and $48,000. Average rent is up 3% compared to the previous year. Those numbers and stats from rent cafe Birmingham, Alabama, Alabama is a leading banking center and headquarters to large number of construction in the engineering companies. There was a 12.3% vacancy rate, which is higher than the national average, but in the knee, in the future, this is going to be an area that has just starting to take off next Orlando, Florida. Now Orlando was something that a lot of investors veered away from during COVID because of the amount of their economy dependent on entertainment and hospitality, $236,000, medium home value, medium home rental per month of $1,599.

Charles:
Ranked number two among America’s fastest growing cities from Forbes 7% vacancy rate in line with national average next Atlanta Georgia hundred and $90,000, medium home value, medium rental per month, $1,500, three years. Single-Family home price appreciation forecast of 9.3% population growing by more than 1% year over year 2019 to 2020. Well, apparently it’s going to take a lot more than COVID to slow down the growth in Atlanta because Atlanta and Georgia did not see any decrease in rents or in population growth during 2020 or 2021 so far or 2019, Idaho Boise, $233,000 median home value population, job growth, triple the national average and that median home price is thanks to everybody from California. Moving to Idaho, medium rental per month is $1,271, which is much lower than you would expect for, for a medium home value of 233,000. Showing that rents will most likely be increasing here in the near future.

Charles:
I don’t know to what, but that’s something where as more people move in, it’s going to definitely drive up the rental prices in not just the medium home prices. Next number five, Dallas, Texas Dallas has been on our radar for years and $186,000 median home value, medium rental per month of $1,800, three year appreciation forecast of 11.4%. So these are some objectively top markets to buy real estate across the nation today, tellingly the Midwest mid south and the Southeast come out on top, which is exactly where we invest, but some other notable markets, which ranked high, according to metrics, we previously mentioned our Nevada, Colorado, Arkansas, Arizona, and Illinois, Illinois, definitely being a tenant friendly state, rounding out our top 10 in closing, please remember to rate, review, subscribe, submit comments, and potential show topics at global investors, podcast.com look forward to more episodes next week. See you then

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