How To Develop Your Residential Investment Strategy In The Southeast

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Because so much of the Atlantic South originally was suitable for farming – and the small-scale manufacturing and commerce that’s attached, it now contains a large number of middle-sized markets that serve their surrounding country-side. The migration of textile and furniture manufacturing from the North, and the subsequent loss of many of those jobs to China, didn’t change this basic structure.

The result – for investors in real estate – is that these markets largely are economically independent of each other. You can see this in the very different levels of economic growth within each state.  Some markets right now have good job growth, some have very poor growth, but your risk of investing is mainly limited to the risk of the local economy, not some state or region-wide slump.

Local Market Monitor, Inc.

Atlantic South – 2017

Another consequence of history is that most of these markets have surrounding land that’s easily available for new construction, and therefore they don’t go through sharp real estate cycles. We expect a range of home price increases over the next few years, but the danger of an over-priced market is far away – except possibly in Charleston.

Income generally is below-average in this region, and so are home prices. That makes this an easy place to invest in single-family rentals. A lot of people would like to have a single-family home, but many can’t afford to buy one.

In addition, the region is over-stocked with colleges, ideal places to have single-family rentals because the administrative staff and faculty of colleges are constantly turning over. Don’t rent to undergraduate students, though: that’s a specialty with unique risks.

A further consequence of the local-hub nature of most markets in this area is that healthcare is a large and growing sector because each market serves a wide area. Healthcare produces lots of renters who want to live close to their place of work, often in the center of the city.

One group of markets still has a large dependence on manufacturing: Lynchburg, Greensboro, Hickory, Greenville SC, and Spartanburg. In these markets, because of the risk of future job losses, you’ll want to use a higher cap rate to calculate how much you’ll pay for a property – higher by 1 percent at least.

Source: forbes.com