On the hunt for an investment rental? The best deals are not in hot markets, but in cold ones.
New findings out of HouseCanary, provider of predictive real estate analytics and insights, reveal that at this time of year, when activity declines, investors are likely to have more opportunities in markets with chillier temperatures. In other words: Better investment prospects are linked to markets in which slowdowns coincide with colder temps.
Case in point: In the Greater Cleveland metropolitan area (the Cleveland-Elyria metropolitan statistical area, or MSA), activity drops off—and frost sets in—at the end of year. Greater Cleveland also has a high effective gross yield (EGY), which factors local prices, rents and taxes into rental yield, at 13.0 percent.
Conversely, in the Greater Los Angeles metro area (the Los Angeles-Long Beach-Anaheim MSA), activity is at an even keel throughout the year, thanks in part to warmer weather. In Greater L.A., the EGY is 4.5 percent.
“It’s well known that real estate markets exhibit seasonal fluctuations in terms of both demand and pricing, but it’s not always well known exactly where those seasonal fluctuations occur,” says Alex Villacorta, executive vice president of Analytics for HouseCanary. “And for real estate investors who want to buy at lower prices in strong rental markets, this can mean the difference between an acceptable acquisition and minimal return on investment.
“For example, even though the Memphis MSA has the highest effective gross yield (EGY) at 13.7 percent, its relative small average change in home price growth from Q2 to Q4 means that there’s no real market slowdown in Memphis—it’s a year-round home-buying season,” Villacorta says. “Conversely, investors in Cleveland can bank on an average 7 percent decrease in home price growth rates during the winter months to add to the already attractive 13 percent EGYs in the area.”
For more information, please visit www.housecanary.com.
Suzanne De Vita is RISMedia’s online news editor. Email her your real estate news ideas at sdevita@rismedia.com.
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