Maximizing Investment Property Returns In Hot Job Markets

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For investors looking to make a solid financial return in 2019, the property market continues to offer opportunities due to the stabilizing U.S. jobs market. The U.S. Bureau of Labor Statistics recently released data showing that nonfarm payroll employment increased by 304,000 in January of 2019. The report showed unemployment edged up to 4% due to the government shutdown in early January. However, shifting demographics across the nation show that job seekers are pursuing opportunities in more densely populated cities, which will help stabilize the job market as more work becomes available.

Southern cities top the list of a recent survey evaluating job growth going into 2019. Other locations that made the list include Houston, Phoenix and San Francisco. Houston remains a strong investment option due to the improved job market that has seen an 8.7% job increase since December 2017, according to the January 2019 report. Phoenix saw a 6.7% increase in jobs for 2018, and San Francisco saw a 5% increase overall.

What do all these figures add up to? A simple truth: Booming job markets create great opportunities for investors to add real estate to their investment portfolios.

Investing in cities with high demand for rental properties, such as New York, Los Angeles and Houston, can create additional opportunities for investors. One analysis found that New York has invested the most in multifamily buildings since 2000, followed by Los Angeles, then Dallas and Houston. In Texas, the excessive demand for rental properties in the wake of historic Hurricane Harvey prompted area developers to erect a number of new residential projects throughout Greater Houston. Demand for workforce housing in addition to housing for those displaced by Hurricane Harvey has resulted in a gradual stabilizing of the rental market. Investors should utilize the combined expanding jobs and property data to forecast future investments.

The Opportunity For Property Managers

Related, the surge in demand for rental properties offers a unique opportunity to boost floundering occupancy rates. Diligence in tenant screening can maximize the long-term returns of low tenant turnover and a stable occupancy rate. Property managers should also consider earmarking some marketing dollars to promote investment properties during times of increased demand.

Fundamental practices also are important for property management agencies striving for the greatest return on investment. Those fundamentals include understanding a specific region (location, location, location!) and effectively screening tenants to maximize long-term lease opportunities. Approximate indicators for potential property investment include new service stations, hotels and infrastructure, such as new freeways and overpasses.

Property managers based in major cities can anticipate increased demand, considering the influx of job seekers moving to job hot spots. It would be beneficial for investors to emphasize using resident demographic data — collected on initial rental applications and from surrounding job hubs — to compile a list of local businesses, employers and schools where they might market directly to potential residents.

Investors and property managers should consider the following best practices for taking advantage of a hot jobs market:

Analyze consumer data: An investor’s best gauge for cost of living and inflation for consumers is the Consumer Price Index (CPI). These numbers are updated and analyzed regularly by the U.S. Bureau of Labor Statistics. Key sections analyzed include CPI for urban wage earners and clerical workers, and the CPI for all urban consumers.

Monitor developments: Keep in mind any local city governments or developers will be filing permits or plans for future developments for their region. This information can be used to help keep on top of potential investments.

Update management software: Don’t forget to give the back of the house a good look, too. Given the potential for a rise in rental applications, there’s no better time to review existing software tools to ensure they are making the grade. Using an app on a smartphone or tablet to facilitate instant access to property dashboards will only improve the process of leasing and keep day-to-day office operations efficient and organized. New software can also be utilized to keep up with routine maintenance checks while keeping both new renters and investors happy.

Analyze the competition: Stay up to date with the housing market in 2019. Realtor.com noted a modest inventory gain for the housing market; however, mortgage rates are expected to hit 5.5% by the end of 2019, with monthly mortgage payments expected to rise by 8%. Use this information to gauge potential investments and capitalize on those families considering the move into apartments.

Source: forbes.com