How To Best Invest In Real Estate In The Midwest
The most surprising feature about housing markets in the Midwest is that home prices in most of them are still below the level where local incomes dictate they should be . If youre a real estate investor, this means two things. Firstly, there are bargains still available in these markets. Secondly, demand for housing not been very strong, at least not yet.
Midwest Housing Market Overview
The lack of rebound in the Midwest housing market following 2008 is largely due to the specific types of local economic growth that prevailed before that . The housing recession came coupled with a lengthy, slow decline in manufacturing. The availability of an educated but low-cost labor force had encouraged the growth of big financial operations in Des Moines, Minneapolis, Omaha, Sioux Falls and Green Bay. However, manufacturing still has a large role in Fayetteville, Davenport, Peoria, Rockford, Gary, Fort Wayne, South Bend, Wichita, Milwaukee and Green Bay .
An uncharacteristic feature housing investors contend with is many Midwest markets have agricultural roots, with manufacturing later added on top. Since land was readily and easily available during their growth, they tend to be spread out. This combination produces low home prices, but increased difficulty for investors to select a locality. After all, the saying real estate is about location, location, location, rings true in most cases.
Established Demand
Local Market Monitor, Inc.
Growing Demand
Midwest Real Estate: Stats And Trends For 2022
Midwestern real estate markets have been ranked among the hottest markets in the U.S. by Realtor.com.
In many midwestern markets, home prices are still relatively affordable, with a large number of homes occupied by renters. Many smaller markets in the Midwest are witnessing double-digit increases in rents and home values.
Keep reading to learn more about Midwest real estate markets, and why the Midwest could be an attractive place to consider investing in rental property this year.
Key takeaways
- Chicago, Cleveland, Columbus, and Detroit are four of the largest cities in the Midwest.
- Smaller cities in the Midwest, such as Des Moines, Fargo, and Madison, are out-performing the region and the U.S.
- Home prices in the Midwest are still relatively affordable compared to major urban areas in other areas of the country.
- People are moving to the Midwest to find a higher quality of life and a lower cost of living, driving double-digit rent increases in many real estate markets.
Search For Affordability Continues To Drive Geographic Diversity
As pricey West Coast markets have lost some appeal due to a combination of affordability concerns and work-from-home flexibility, activity has spread out across the country. However, notably the pricey Santa Maria-Santa Barbara, CA market has emerged on the 20 hottest markets list in November as the countrys 5th hottest market. Overall, 13 states were represented on our list of top 20 hottest housing markets in November, paring down from Augusts record-breaking 17 states.
California, which in January 2018 claimed 13 of the top 20 spots, now accounts for just two of the markets on our list, Eureka and Santa Maria-Santa Barbara.The West region has 3 markets, including the two California markets and Yuma, AZ, among the top 20, a notable decline from the 9 West region hottest markets in November 2020.Midwestern markets accounted for 9 of the top 20 markets, while the Northeast accounted for 4 of the top 20.Southern housing markets have sustained 4 spots among the top 20, up from two a year ago. North Carolina and Indiana sustained their popularity, holding 3 metros each on the list for the second month in a row.
The states featured in our top 20 list this month are: Arizona, California, Florida, Indiana, Kansas, Massachusetts, Missouri, North Carolina, New Hampshire, New York, Ohio, South Dakota, and Wisconsin.
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Reasons To Invest In Midwest Real Estate
Theres a certain charm to living in the Midwest. Among affordability for real estate investors, the Midwest also has a reputation for friendly people, a low-stress lifestyle, a family-friendly environment to raise children, and a slower pace of life. Here are some of the reasons to get you excited about investing in the Midwest real estate market.
Buyers Continue To Search For Affordability
There are no West region markets on the list this month, a departure from the June 2017-2021 average of 7 Western hot markets. The popularity of Western markets tends to wane in the summer months, but these markets have never in the datas history been absent from the list altogether. Pricey western markets have been replaced with more affordable markets in the Northeast and Midwest, which account for 19 of the 20 hot markets.Overall, 16 of Junes hottest markets had median listing prices below the national median. The average listing price for the 20 hottest markets was $359,000 in June 2022, 20.3% lower than the national median, the biggest gap between the metrics since .Overall, 11 states were represented on our list of top 20 hottest housing markets in June as buyers zero-in on states with affordable metro areas.
The states featured in our top 20 list this month are: Connecticut, Indiana, Kansas, Massachusetts, Maine, North Carolina, New York, New Hampshire, Ohio, Vermont and Wisconsin.
Our Hottest Housing Markets, by design, are the areas where homes sell fastest and have lots of potential buyers checking out each listing. As a group, Realtor.coms 20 Hottest Housing Markets received 1.5 to 3.2 times the number of viewers per home for sale compared to the national rate. These markets are seeing homes-for-sale move up to 20 days more quickly than the typical property in the United States.
| Hottest Metros |
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Why Is Real Estate Considered To Be An Inflation Hedge
Home prices tend to rise along with inflation. This is because homebuilders’ costs rise with inflation, which must be passed on to buyers of new homes. Existing homes, too, rise with inflation though. If you hold a fixed-rate mortgage, as inflation rises, your fixed monthly payments become effectively more affordable. Moreover, if you are a landlord, you can increase the rent to keep up with inflation.
The Investment Trends Ive Ridden
In 1997, I studied abroad in China for six months. There I realized its economy was on the verge of explosive growth. So I minored in Mandarin and joined the Asian Equities department at a major investment bank. It was my way to ride the opening up of the Asian region.
I was probably the dumbest donkey in the industry. However, being Asian, knowing how to speak Mandarin, and having the good sense to hustle for 13 years was good enough for me to retire at the age of 34.
During the financial crisis, I realized it was now or never to start a website to at least try and take advantage of web 2.0. I had no plan. All I knew was my happy days were numbered due to a structural decline in the banking industry. Increased regulation and narrowing spreads made work less fun.
12 years later, Financial Samurai is now an established brand in the personal finance space thats generating much more than I ever made in investment banking with 80% less work.
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Reasons To Consider Midwest Investments
But theres more. When was the last time you felt like a kid in a candy store? With deals so sweet you will feel like a kid again, the Midwest is sure to bring back some great feelings. Why? Properties are available between $50,000-$70,000. In addition, many of these $50,000-$70,000 properties will bring in a rent of $700-$1,000 per month. Now, I dont know how good your math is, but this gives you a ridiculously high ROI. Many of these houses could be found in solid B areas! You can think of the Midwest as a hidden gold mine waiting to be explored. In many parts of the Midwest, a mere $1 million will buy you a stunning mansion with acres of open space surrounding it. You might even get a lake-facing property, or one with a huge pool and a car collectors garage!
Lets face it life is too short to be spending your time in cramped spaces. Many people feel that way, and thats why the Midwest is such a success for families. Of course, living in a place that doesnt resemble a chicken coop is a big plus as well.
Take advantage of the low cost of living and low-priced properties. Invest in properties that give you a perfect ROI and do not burn a hole in your pocket. And there aint any place like the Midwest to do that! Here are five things that we absolutely love about the Midwest:
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Focus On Affordability Remains
After holding 5 spots on the hottest markets list in January, California metros are on the decline once again with no metros on the list in April. This is the first month in the datas history in which no California markets are in the top 20 hottest markets.These pricey California markets have been replaced with more affordable markets in the South, Northeast and Midwest. Overall, 12 of Aprils hottest markets had median listing prices below the national median. The average listing price for the 20 hottest markets was $376,000 in April 2022, 11.5% lower than the national median, and 23.6% lower than Marchs average. Overall, 13 states were represented on our list of top 20 hottest housing markets in April, indicating diversified demand as affordability becomes harder to come by.
North Carolina boasted 4 markets on the list in April , the most of any state.Rounding out the southern region with these North Carolina locales was Johnson City, TN and Kingsport-Bristol, TN. Northeastern markets have returned to the list with gusto as spring arrives, holding 8 spots, the most of any April on record. The Midwest held 5 markets on the list, and the West had just 1 .
The states featured in our top 20 list this month are: Connecticut, Indiana, Massachusetts, Maine, Missouri, Montana, North Carolina, New York, New Hampshire, Ohio, Tennessee, Vermont and Wisconsin.
| Hottest Metros |
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Why Investors Are Interested In Midwest Real Estate
For many real estate investors, theres plenty to like about the Midwest and the seemingly countless opportunities for investing in single-family rental homes and small multifamily buildings.
In many real estate markets across the Midwest, home prices are still relatively affordable, and there may be deals to be found.
Smaller cities such as Des Moines, Fargo, and Madison benefit from strong demand for housing as people move from larger urban areas to secondary and tertiary markets where the cost of living is lower.
Even before the pandemic struck, the Midwest was home to some of the hottest real estate markets, according to Realtor.com. The 12-state Midwest Region is home to numerous small metro areas and towns where homes are reasonably priced and in-bound migration is strong.
Earlier this year, an article in The Ascent by Motley Fool listed three reasons why the Midwest is the best lace to buy a house right now:
- Average home prices in the Midwest typically fall on the low end.
- Higher quality of life compared to the crowded and expensive urban areas on the East and West Coasts.
- Low cost of living paired with high salaries help keep population growth robust, the job market healthy, and the demand for rental real estate in the Midwest strong.
Why All Investors Should Consider The Midwest
Now, if you are someone who refuses to be a follower, I might have some awesome news for you. Think Midwest. Yes, you heard me. The Midwest is where all the real estate action is. Wake up and smell the roses. City dwellers wont even believe how far their money can go in the Midwestern states. Here, youll end up spending almost one-fifth of what youll shell out on real estate in any area on the East or West Coasts.
Yes, life in the Midwestern region is different. Yes, its less crowded there and a lot quieter, but isnt it better to have more space, more conveniences, and a stunning piece of real estate at knock-out prices? Well, many people with families would argue that it is indeed better to live there than anywhere else. With top-rated schools, the possibility for a high-end lifestyle, and effortless connectivity all finding their way to these locations, there isnt much to complain about.
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Why should you care as an investor? Because these Midwestern families are your future rentals. Theres such a clear demand for rental properties in the Midwest.
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Are Portugals Cheapest Neighborhoods Any Good
Portugal offers much more than just Lisbon, Porto, and the Algarve, despite popular misconceptions to the contrary.
How such a little nation like Portugal is crammed with so much beauty is nearly incomprehensible.
Having said that, it is unquestionably worthwhile to invest in real estate in Portugals less expensive areas. Given that the majority of these locations are regarded as rural areas, you actually stand to gain from Golden Visa Programs.
Additionally, areas like the Azores and Madeira Islands offer a high-quality, leisurely pace of life away from the bustle and commotion of the city.
The cost of real estate is relatively lower, and more investors are becoming interested in these areas. The inland rural areas of Portugal are where youll get the best deals because everything there is more reasonable than in the cities and coastal towns.
Yardi Matrix Data Shows That More Than Two Thirds Of The $15 Billion Closed In The First Quarter Involved Assets In Only Five Of The Regions Metros
The first quarter of 2020 was fairly active for multifamily investors in the Midwest, with a little more than $1.5 billion in deals closing through the end of March, according to Yardi Matrix data. While this shows a notable drop from the $2.4 billion from the same period last year, the number of deals was relatively stable as investors predominantly shifted focus toward value-add acquisitions in metros with lower price points.
While the effects of the COVID-19 pandemic have yet to fully register in the multifamily sector, sales volume substantially declined during the month of March. Overall deals fell to roughly half of January and Februarys totals, adding up to $318 million across all markets in the Midwest.
The table below utilizes Yardi Matrix data to highlight the regions metros with the highest transaction volumes in the first quarter of the year. Combined, the top five markets represent more than two-thirds of the Midwests investment activity.
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Best Investment Returns For Us Rental Homes In Midwest Worst In Western States
Residential News»Irvine Edition | By WPJ Staff | March 25, 2021 8:00 AM ET
According to ATTOM Data Solutions’s Q1 2021 Single Family Rental Market report, the average annual gross rental yield among the 495 counties is 7.7 percent for 2021, down from an average of 8.4 percent in 2020. Within that group of counties, the yield declined from 2020 to 2021 in 87 percent of counties. However, it’s not all bad news for rental property investors.
“Offsetting the declining yields are improved financing terms for such rental properties and portfolios”, said Maksim Stavinsky, co-founder of Roc360. “Across our platform, rates that we are quoting to borrowers have more than offset the waning cap rates on a YoY basis, with the highest-tier rental loan borrowers seeing terms in the low 4% range. This is happening despite a yield curve that has been steepening of late.”
At the same time, home prices are rising faster than rents in most of the country, which could start making home ownership less affordable and put upward pressure on rents.
Top rental returns in Pottsville, Macon, Baltimore, Ottawa and Jamestown areas, as well as Midwest region
Counties with the highest potential annual gross rental yields for 2021 are Schuylkill County, PA, in the Pottsville metro area Bibb County, GA, in the Macon metro area Baltimore City/County, MD La Salle County, IL, in the Ottawa metro area and Chautauqua County, NY, in the Jamestown metro area .
Why Invest In The Midwest
You have to admit, there is a certain magnetism to living and investing in real estate in the Midwest. Here are some of the reasons to get you enthused about investing in the Midwest real estate market:
Affordability
One can notice the difference when going for a rental property in the Midwest. What $700 a month can get you in California, can get you a whole lot more in Kansas City. Many real estate investors are opting to go for Midwest real estate for that reason. Real estate prices are slowly appreciating while offering a great return on investment. Not to mention the cost of living that cannot be matched by metropolitan cities. If youâre looking to invest in an affordable real estate market for both the tenant and the landlord, then Midwest real estate is a great investment opportunity for you to snatch!
Simpler life and calmer living
Midwest real estate offers real estate investors the chance to invest in a calm place. It makes for the best places to live and raise a family and definitely among the best places to invest in real estate. Along with the simple life, the pressure on people to live a certain way decreases. In other words, expect to have happier tenants by investing in Midwest real estate.
Sustainable economic growth
Lower costs than bigger bustling cities
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