Despite talks of a recession looming around the corner, the U.S. housing industry remains strong. Read on for some of the best places to invest in real estate once you retire from the workforce.
In this article:
- Factors to Consider Before Investing in Property
- How to Decide on a Location
- Locations for Your First Real Estate Investment
Best Places to Invest in Real Estate in the U.S.
Factors to Consider Before Investing in Property
Time and Money
The amount of time and money you have available to invest in real estate dictates where and what properties are the best for you. Busy retirees will want to look into real estate investment trusts (REITs), which are essentially mutual funds for real estate.
What are real estate investment trusts (REITs)? These are companies that pool money from multiple investors and use them to purchase properties. The income generated is then distributed back to the investors.
Those who have more time (and money) on their hands can look into investing in rental properties or house flipping.
What is house flipping? It’s the practice of buying a property at a low rate, doing some improvements on it, then selling it again for a profit.
Whatever you choose, make sure to only fork out as much as you can to remain comfortable and don’t cut into your living expenses.
Your Risk Profile
Any investor needs to know how much risk they can tolerate. Some investments like REITs don’t carry as much risk compared to investing in a piece of property on your own.
There’s no such thing as zero-risk in investing. You need to make sure the investment you choose aligns with your risk profile.
Just like any other investment, you need to first arm yourself with the right knowledge before you invest in real estate. Next, ask yourself what do you want out of your investment.
- Do you want a place to diversify?
- Are you a passive or active investor?
- Do you need a regular source of income?
Your answers to this can pave the way for the right strategy for your needs.
How to Decide on a Location
Before you decide where to invest your first piece of real estate, here are the things you should look into to assess whether it makes sense to invest in that location.
- Median Property Price: This refers to the average price of a property in a certain location. The cheaper this is, the less money you need to fork out to buy property in that area.
- Median Rent Price: The average price of rent in that location
- Economic Growth: This dictates how many job opportunities are present.
- Property Demand: The lower the supply and higher the demand, the better the opportunities will be for your return on investment.
- Price-to-Rent Ratio: The median property price divided by the average annual rent price in that location. The lower the ratio, the cheaper it is for someone to buy a home in the area as opposed to renting.
Locations for Your First Real Estate Investment
Now that we laid out what you need to take into consideration before diving into real estate, here are some of the best places to invest in real estate on with lots of opportunities for investors to make money in.
Note: All median property and rent prices are based on data from real estate data analytics platform Mashvisor.
1. Seattle, Washington
- Median Property Price: $665,618
- Median Rent Price: $2,315
- Price-to-Rent Ratio: 24
The Seattle housing market has been showing strong improvements after years of inflated property rates. House prices have dropped approximately 0.5% since the previous year, and the trend is projected to continue over 2020.
For retirees on the market for their next property investment, property prices dropping mark plenty of opportunities to snag good deals (perfect for house-flippers). Another good news is that the city is in the middle of the longest expansion in American history, which means an influx of renters.
2. Charlotte, North Carolina
- Median Property Price: $385,600
- Median Rent Price: $1,512
- Price-to-Rent Ratio: 21
Charlotte’s low property prices make it one of the best places for retirees with limited budgets to invest in real estate. Its booming finance (it’s the second-largest banking center in the country), technology, and energy sectors generate demand for both aspiring homeowners and renters alike.
Due to its limited housing supply, you can expect prices to rise even more.
If you manage to find a place you want to invest in for rental property, act fast. Once you do, you’ve locked in on one of the best places to invest real estate in.
3. Dallas-Fort Worth, Texas
- Median Property Price: $389,626
- Median Rent Price: $1,799
- Price to Rent Ratio: 18
Despite the lack of access to the sea, the Dallas-Fort Worth area remains one of the fastest metropolitan areas in both GDP and population growth. In fact, global auditing firm PwC named the area as the #1 real estate market to watch in 2019.
Much of this is due to its strong job market that attracts professionals to relocate to the area. Because of this, there’s always a big demand for rental properties, so you can expect good returns on your investment.
4. Nashville, Tennessee
- Median Property Price: $432,124
- Median Rent Price: $1,757
- Price to Rent Ratio: 20
Nashville has the lowest unemployment rate of 2.6% out of all metropolitan areas in the U.S., making it very attractive for aspiring renters, homeowners, and investors. Another plus is its rapid population growth and diverse economy.
For those who desire to invest in property as an Airbnb rental, you’re in luck, as the city gets as much as 15 million tourists every year. However, if you’re planning to do this, take note that once 2022 rolls around, you’d need to secure a permit to use your property for short-term leases and don’t plan on occupying the property yourself.
5. Orlando, Florida
- Median Property Price: $339,654
- Median Rent Price: $1,701
- Price to Rent Ratio: 16
Orlando is heaven for aspiring homeowners — you can score a good home in good neighborhoods for under $200,000. Here are the advantages this location offers for aspiring investors:
- Low insurance and property tax rates
- No state income tax
- Warm and humid weather
Despite the low price of homes in the area, many choose to rent a place instead. So if you’re looking to acquire some cheap real estate and earn money out of it (regardless of how you do it), this is great news.
6. Austin, Texas
- Median Property Price: $547,449
- Median Rent Price: $2,069
- Price to Rent Ratio: 22
Austin boasts of one of the most unique and eclectic cultures in Texas – much in line with their city slogan “Keep Austin Weird.” With its array of local businesses and major tech companies like Dell and Google setting up shop in the area, the unemployment rate in Austin is at a low 2.7%, and the city has a higher job growth rate than the national average.
Coupled with a fast-growing population, and you have a city with everything a real estate investor desires. With property prices rising by as much as 75%, better move fast to get a good price.
7. Boston, Massachusetts
- Median Property Price: $881,681
- Median Rent Price: $2,720
- Price to Rent Ratio: 27
Boston may be expensive, but that doesn’t stop investors from investing their money into this city though.
With its close proximity to schools like Harvard, MIT, and the Berklee College of Music, the Boston Metropolitan Area commands a massive talent pool. Along with it comes an equally booming job market due to Fortune 500 companies like General Electric setting up headquarters in the area.
Those are just some of the best places to invest real estate in this year. With many locations chock full of opportunities around the corner, there’s no time but now to get started in investing for retirement.
Have you bought a piece of real estate as an investment? Where did you invest in? Share your experiences in the comments section below.