Happy Friday!
Perusing real estate blogs, found some interesting “Top 10″ lists on Real Estate Bloggers. There are several lists, but as an investor, I find these most relevant:
Top 10 most stable real estate markets
Top 10 best cities for job and wage growth
Have readers of this blog had any experience with any of these markets? Please post your comments!
HomeVestors (the “We Buy Ugly Houses” folks) has named the top 10 cities for real estate investing and 10 junior markets for real estate investing in the first quarter of 2008 (Junior markets are cities with a population of 150,000 or more). They are as follows:
Top 10 Junior Markets
These findings are based on the number of houses bought in each market by HomeVestors in Q1 of quarter of 2008 (source http://www.homevestors.com/inthenews)
As the Dallas-based franchise company specializes in buying, rehabbing and selling single-family houses and rescuing homeowners from ugly houses and ugly real estate situations, the current downturn in residential real estate makes for a fantastic acquisition environment. As I mentioned in a previous blogpost, this climate of falling prices, inventory oversupply, and resulting homeowner desperation to get rid of their houses, is a prime time for smart investors to go heavy on property acquisition. As long as your exit strategy is to buy and hold, and not to flip (which is going to be very very difficult in today’s climate), and as long as you can afford to hold the property for at least 5-7 years, you should definitely take advantage of these conditions.
I have to admit that I don’t completely trust this data. I mean, I do not doubt that these are the areas where some of the best bargains can be had: HomeVestors does enough volume to observe significant trends. But there are so many other factors that make a city a hot investment market, which can not be ignored; the HomeVestors press release doesn’t address those factors explicitly. For example, the city’s economic development plans, jobs growth outlook, and other macroeconomic factors must be considered. Also, the rental outlook must be considered. As you buy a property, the low acquisition price is only one factor that determines whether you will see positive cash flow (or at least break even). Rents must also be strong and in demand. Overall, there is strong rental demand right now across the nation, as many homeowners lose their homes to foreclosure and many other hopeful homeowners can’t get a mortgage due to tougher standards. But some cities are definitely hotter rental markets than others. If people are fleeting a city due to lack of jobs, rental market will suffer. The HomeVestor list seems to be very TX-centric. By a sheer coincidence, the company is based in Dallas. Hmmm….. I would be very interested in hearing from our readers what they consider to be the top cities for investing.
Another question for the readers: would you consider investing away from home? What are some factors that you consider whether or not you feel comfortable with investing away from home? What resources do you use? Do you work with another local investor to show you the ropes? We are working on a tool that can connect investors to each other, based on area of interest, as well as other investing goals. As various areas of the country may become attractive to investors than their own home turf (Gulf Region GO Zone, for example), we see more and more people venturing outside of their own backyard. And we would love to help investors make the process a smooth one.
Last weekend, I attended a networking event in DC, at which Neil O. Albert spoke about the city’s urban development projects coming down the pike. Mr. Albert is the Deputy Mayor for Planning and Economic Development (DMPED). The event was held at Hotel Monaco in the MCI Center / Chinatown area of the District (the hotel itself if gorgeous; a visit to the website reveals that it’s an historic all-marble building that is a Registered National Landmark). I came into the area via New York Ave from the north. I hadn’t been to this area of the District in a little over a year, and I was blown away by all the new construction that was happening. Huge office and residential complexes, shiny and new. As I found out later at the talk, this is part of the NoMA (North of Massachusetts) revitalization plan, which is one of the key initiatives of the DMPED. There is a whole lot more development planned in that part of the NE, making it a mixed-use community, with office, residential and retail assets (check out this blog entry and this release from the DMPED).
At the heart of the DMPED revitalization strategy is the utilization of existing transportation assets, i.e. existing Metro stations. This is an approach that makes a whole lot of intuitive sense, as the underlying infrastructure is already established. In addition to NoMA, DMPED plans to invest in revitalization of Anacostia (including Anacostia Metro station and Ballpark District, which will revolve around a new baseball complex for the Washington Nationals). Bringing this huge project to Anacostia (SE) is a great initiative, as it will bring jobs to the area which has been economically depressed for decades. All in all, $10 billion will be spent on this area over the next two decades! However, my concern (and I am sure a lot of others are concerned about it as well) is whether or not there will remain affordable housing for the area’s current residents. Also, knowing from living in the DC Metro area, how saturated the DC Metro area is with condos, I hope that this new development doesn’t stick the city with a lot of unsold inventory. On the other hand, by the time this construction is finished, we will probably be in an “up” real estate cycle. Having spoken to several real estate folks at the networking session afterwards, there seems to be a lot of exciting development and investment in the area, and most of it doesn’t seem to be hit by the real estate meltdown (at least not as much as the suburbs). Their view is that the demand for real estate within city limits of DC is still strong. We will have to see if this remains true, as the down cycle progresses.
With the loom and gloom of current events about our beloved real estate market and economy at large, we could use some humor. I found this great video while reading real estate blogs, The Real Estate Bloggers post, to be specific. We can always count on Steven Colbert to infuse some humor into the otherwise grim world of real estate of 2008.
Blame the little girl!
(Ooooops, for some reason I can’t get the embedded video to work any longer. In the meantime, while I look into it, please click on this link to watch the video. It’s worth it, I promise!)
I love running. In fact, I am training for the NYC half-marathon this July (wish me luck getting selected by the lottery). I also love cool-looking buildings. What is the connection between these two seemingly unrelated facts? When I run, I love looking at buildings and getting to know neighborhoods on foot. Running gives you an advantage, because you get to cover more ground than when walking. I absolutely love taking new streets as I run and checking out buildings, new and old, and fully breathing in each neighborhood’s character. I live and work out of downtown Jersey City (Hamilton park), where there are a ton of little neighborhoods, all with a distinct personality. I am still pretty new here, and the weather is only now starting to be a bit more fit for outside runs (except for tonight), so I am aggressively canvassing the neighborhoods.
I was running by this very cool building yesterday on 2nd st. and Luis Munoz Blvd (see picture). It looks like an updated spin on a old industrial building. And although residential industrial-looking loft buildings are anything but a new concept, lofts captivate my attention like nothing else. This building is gleaming and new, but fits into the local landscape.
The condo market is a bit overbuilt on the riverfront, so when I see new buildings going up, I wonder how these units will get sold, especially in this market. I looked at a couple of units a year ago (I didn’t live in Jersey City then) to turn in to luxury rentals, but the financials didn’t make sense. Would be interesting to see how these riverfront properties have fared in this market, and if the financials make sense for an investor (I guess I have some investigating to do). The Waldo Lofts, however, stand distinctly apart from the other new construction.
This building stayed on my mind and I had to do some research. This building sits in the Powerhouse Arts District, which is set a couple of blocks inland, between riverfront and historic downtown where I live. I always wondered why it was called that. Digging around uncovered a New York Times Article that talked about the project in May of 2006, before it opened in September of 2006. Turns out that the Powerhouse Arts District (PAD, as I will now refer to it - I hope I get to be the first one to coin it!) is an 8-block warehouse district, currently being redeveloped as an artist-centric district. The basic premise is that a thriving artist community is good for the neighborhood and for real estate, as it raises the “coolness factor” and yuppies start to move in to be close to the artists. Usually this movement develops on its own, but in the PAD example, artists are being enticed to move and congregate around a particular area. Apparently, there is a fairly large artist community in Jersey City already.
Waldo lofts took this approach to new heights and installed industrial features into its brand new lofts, as well as set aside seven of its lofts to be sold below market value to artists who are certified by the city’s Arts Commission (this is actually required by regulation in every arts district building).
As I checked out the NY Times Real Estate section today, I came across another such endeavor in Dumbo (Down Under Manhattan Bridge Overpass in Brooklyn, for those not from around here). Two Trees Management, a father-and-son team of developers, owns 3 million square feet of real estate in Dumbo, are subsidizing rents for artists and art organizations, and have attracted over 1,000 of them. Like the PAD effort, this is designed to add value to the neighborhood, based on the basic assumption that yuppies follow artists. Unfortunately for the artists, this seems like a temporary offering: after the area gets sufficiently gentrified, these rents can no longer be guaranteed to the artists. So if the artist doesn’t mind moving, initiatives like these help him/her afford city living, amongst pricey real estate. I should have studied urban planning / development!
Update: Turns out, other people have used the PAD abbreviation. So I didn’t get to coin the term. Oh well… Better luck next time!
