The 10 Hottest Real Estate Markets for Investors in 2016

Dallas skylineYou’ve heard the old real estate adage before: Success is all aboutlocation, location, location.”

While there are obviously other factors that come into play for someone trying to build wealth through real estate, location definitely plays a vital role in determining one’s overall return on their investment. If you buy a property in an area where prices are dropping or where cash flow is impossible, good returns will likely be nonexistent.

But if you buy in areas where prices are increasing and monthly cash flow can be made, returns far greater than the stock market can be made.

That’s why the real estate investing social network BiggerPockets, led by team member and real estate investor Scott Trench, recently conducted and released its annual BiggerPockets Real Estate Investment Market Index, which looks at the top 50 MSAs (Metropolitan Statistical Areas) to determine those that were most likely to produce outsized returns for residential real estate investors between 2015 and 2016.

(Disclosure: I work for BiggerPockets and am the co-host of The BiggerPockets Podcast.)

Unlike other market indexes, the BiggerPockets Real Estate Investment Market Index looks at more than just the sales prices of real estate; it also looks at the gross rents as a percentage of purchase price to determine the best. The overall calculation reveals, in percentage terms, the markets where real estate investors looking to buy residential real estate properties were most likely to receive a favorable combination of both gross rents and total appreciation per dollar invested over the past year — a period from early 2015 to mid-2016.

Below you’ll find details on the 10 hottest U.S. markets for investors over the past year, starting with the tenth best and working down to the number one best market for real estate investors.

10. Austin, TX

Austin, Texas, home to the South by Southwest festival and nearly a million “Austinites,” makes our number 10 spot on the BiggerPockets Real Estate Investment Market Index, showing a total investment return of 15.55%, primarily led by above average appreciation growth over the past year.

9. Houston, TX

Another Texas city comes in at number nine on this list, and that’s Houston, the most populous city in Texas (and fourth most populous in all the United States). Houston saw a total return of 15.63% for investors.

8. Atlanta, GA

Atlanta, Georgia also made investors wealthier in 2016, coming in at number eight with a 16.20% overall return.

7. Nashville, TN

Nashville, home of country music and the Grand Ole Opry, made the number seven spot on the BiggerPockets Real Estate Investment Market Index. Nashville showed an overall return of 16.73%, led by high appreciation over the previous year.

6. Seattle, WA

The rain didn’t put a damper on the growth of the real estate market in Seattle this past year. This market came in at number six with a 17.18% return for investors.

5. Tampa, FL

Tampa, Florida helped investors experience above average returns over the past year, coming in at number five. Between the growth from equity and cash flow, investors saw a return of 17.62%.

4. Miami, FL

The Miami real estate market took one of the biggest hits in the U.S. housing meltdown in 2007 and 2008, but it is seeing incredible gains since, making the number four position of the hottest real estate markets in America. Miami saw strong growth in both equity and cash flow, giving investors an average return of 18.12%.

3. Denver, CO

Denver, Colorado, home of the Broncos, Coors, and BiggerPockets, saw huge appreciation over the previous year, helping push investors’ returns to 19.23%. According to the United States Census Bureau, Denver is also America’s fastest growing city — something that is likely contributing to the climb in property values.

2. Portland, OR

Perhaps America’s “weirdest” city (I say that with love!), Portland was also the second most profitable city for real estate investors over the past year, showing 19.91% returns for investors. This was primarily caused by the incredible appreciation of property values in Portland, as the average cost of a home climbed nearly 15%, from $280,650 to $321,583, in just a year.

1. Dallas, TX

Finally, we get to the number one spot on the BiggerPockets Real Estate Investment Market Index! Dallas, TX tops the list of real estate markets over the period studied for the second year running with an even better year than last, exhibiting strong price appreciation, while remaining a market in which investors saw strong rents relative to property values. Dallas, TX investors stood to earn 20.7% unleveraged returns over the past year compared to 19.5% the year prior.

Source: forbes.com