HomeVestors of America along with Local Market Monitor have just released a list of the best markets in which to invest in rental property with Las Vegas coming in at the top spot. HomeVestors is a real-estate investment company while Local Market Monitor is a forecaster of real-estate markets.
Home prices are down 45% in Las Vegas since the market peaked in 2006. While that might sound bad, it is good for investors. In addition to that, many people who work in the casino industry are renters which is even better for investors. This just means that investors can buy homes at low prices and have a nice-sized pool of renters that they can choose from.
According to Co-President of HomeVestors David Hicks, “What we’re looking for is how do you rank based on the return you get on the rentals, counterbalanced with the risk and what the price is.” The slogan for HomeVestors is “We buy ugly houses” if that helps put some perspective on things. The return could very well be short-term, long-term or both (er…full-term?), according to Hicks. The risks include future potential home price drops in the market as well.
The report looked at single-family home rentals in particular. Nearly 14% of single-family homes in the country are maintained as rental properties. Renting a single-family home could be very attractive to families who may have lost their homes due to foreclosure. “Once parents have had a backyard for their children to play in, they often don’t want to live in an apartment home,” Hicks said.
Traditionally, HomeVestors franchisees only buy 12% of houses with the intention of fixing them up for a rental agreement. An even greater percentage of homes bought are done so to be renovated and resold immediately. However, that mindset is changing and more and more are looking for income properties.
According to Hicks, “We see a lot of investors stung by the stock market over the past few years and now they’re turning to real estate. Even counting the past few years, if you take long-term investing in properties and land, the return on that is some of the best investments people have ever had.”
The report’s calculations assumed markets’ three-year home-price forecasts as well as gross rents to assign them a risk-return premium. Las Vegas had a 4.7% risk-return premium relative to the national average. San Francisco, which ranked 100th in comparison, had a -2.4% risk-return premium.
Source: Market Watch – Best Cities to invest in rental homes