HOUSINGNEWS REPORT
Given Census bureau data showing homeownership rates dropping to a 51- year low in the second quarter of 2016 and housing starts that remain below historically normal levels, Cisterna and other experts believe the opportunity for buy-and-hold investors will remain strong for the foreseeable future — particularly for those investors willing to move into lower-value neighborhoods that may be outside of their immediate area. Buying Rentals Beyond Your Backyard “Right now is the peak time for an investor to get in and look at opportunities outside of their own backyard,” said Cisterna, noting that there has been a recent boom in businesses like Denver-based Investability providing information, products and services to improve efficiency in the real estate investing market. “Your best friend in any investment opportunity, whether it’s in a good neighborhood or bad neighborhood, is doing thorough due diligence and surrounding yourself with a team that can execute on your business plan.” HomeUnion is another business that has emerged in recent years to help single family rental investors find, finance, rehab and manage properties — even if those properties are not in the investor’s backyard. In fact, the typical investor using the service is located in a high-priced market but buying in a lower-priced market somewhere else in the country, according to CEO Don Ganguly.
TOP ZIPS FOR INSTITUTIONAL INVESTORS
Zip
Metro
Institutional Investor Single Family Purchases YTD 2016
Percent of Total Sales
Median Sales Price
35215
Birmingham-Hoover, AL
185
33.1%
$58,000
Lakeland-Winter Haven, FL Miami-Fort Lauder- dale-West Palm Beach, FL New York-Newark-Jersey City, NY-NJ-PA
33896
115
29.9%
$135,000
33140
105
21.3%
$554,000
07087
100
44.2%
$140,000
35235
Birmingham-Hoover, AL
91
33.2%
$77,800
Augusta-Richmond County, GA-SC
30906
89
24.3%
$50,000
63033
St. Louis, MO-IL
84
21.1%
$86,000
31907
Columbus, GA-AL
75
23.1%
$76,000
38118
Memphis, TN-MS-AR
72
22.9%
$45,000
Atlanta-Sandy Springs-Roswell, GA
30038
60
21.7%
$78,500
“
If it’s got a lower (neighborhood) rating it will have a higher yield, but it will have a higher degree of volatility.”
Don Ganguly | CEO at HomeUnion Irvine, CA
Cake-And-Eat-It-Too Neighborhoods Markets with a plethora of C neighborhoods include Cleveland and Indianapolis, while markets flush with B neighborhoods include Charlotte, Raleigh, Houston and San Antonio, according to Ganguly. But local markets with plenty of B inventory producing both good rental yields and good potential appreciation are becoming unicorns thanks to the red-hot real estate recovery, according to Cisterna.
rental, crime, schools, and employment data on 110 million U.S. properties in 200,000 neighborhoods to assign neighborhood grades ranging from A+ to D, according to Ganguly. “If it’s got a lower rating it will have a higher yield, but it will have a higher degree of volatility,” he said, noting that a C neighborhood typically has homes priced under $100,000. “Investors can decide what they want based on their appetite for risk. … The folks looking for (rental) income will do Cs. The folks looking for (home price) growth and income will do Bs.”
“If I’m investing in California right now I’m not banking on yield; I’m banking on
Using data science, the Irvine, California- based company leverages property,
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