Best Cities to Invest In Real Estate in 2024
Last Updated: September 02, 2o24
Steve Nabity
August 21, 2024
Best Cities to Invest In Real Estate in 2024
Why did the entrepreneur move his business to a bakery? Because he had heard that it was probably the best place to make dough.
Elon Musk has been in the news lately for choosing to move his SpaceX business to Texas. Entrepreneurs in the past and present have placed a lot of importance on getting the location right for their business. Jeff Bezos picked Seattle for specific reasons, Warren Buffet chose to be based out of Omaha, and Bill Gates picked Bellevue for growing Microsoft. Think of any other famous names and you will see how carefully they select a location for their businesses to thrive.
Investing should also be no different from a business. Where you choose to invest is very important, especially when the investment is real estate. It goes without saying that in real estate, the location matters a lot.
Through this blog, we aim to give you some insights into selecting the most promising locations for real estate investments. We will also feature a few upcoming markets and explore the trends in those locations.
Nashville, Tennessee
The Music City is best known for being the birthplace of country music. It does have a thriving music scene even today and a strong economy to go along with it. The population in the Nashville MSA has been growing at over 20% every decade for the past 3 decades. This number is far higher than the national average. Advanced manufacturing and automotive manufacturing are among the largest employment-providing sectors in the area. Educational institutions like Vanderbilt University provide the STEM talent needed to fuel the growth of the technology and healthcare-related industries. The unemployment rate is also around 3% as per data from FRED, much below the national average of 4%.
Home prices, as per the Zillow Home Index, have shot up from around $225,000 in 2016 to well over $440,000 in 2024. There is an influx of new residents seeking a vibrant lifestyle and new construction to support the growth. Demand for housing has also led to an increase in rents. Nashville has lately been ranking among the top cities for the highest year-on-year rent increases.
As new supply begins to hit the market, the vacancy levels have begun rising. However, Nashville’s population is projected to grow over the medium-to-long term and this new supply is expected to get absorbed.
( https://www.matthews.com/multifamily-market-report-nashville-tn-q1-2024/ )
This presents an interesting opportunity to find the right deals to buy and hold or add value and improve low occupancy properties while pushing up rents.
Skyline Point Capital invested in Keystone Farms, a luxury 90-unit apartment complex located 20 minutes from downtown Nashville and in close proximity to golf courses and beautiful lakes.
Dallas, Texas
Dallas-Fort Worth is the fifth-largest metro area in the US. It is home to several Fortune 500 companies and has a diversified economy. No one sector is dominant which provides a certain degree of stability during downturns. Among the key industries are technology, healthcare, manufacturing, telecommunications, and retail.
The growth in the metro area’s economy has translated into a growth in the population. During the past couple of decades, the population grew by close to 20% every 10 years. The number of employed persons, as per data from FRED, grew from close to 3.5 million in 2016 to over 4.2 million as of 2024.
One of the benefits that Dallas offers to incoming residents is a relatively lower cost of living. The median price of a home as per the Zillow Home Index is $315,154 while the median price per unit for a multifamily property is also below the US average.
( https://www.colliers.com/en/research/dallas/q1-2024-dallas-fort-worth-multifamily-report )
Texas has a business-friendly environment with reasonable tax policies. The Dallas-Fort Worth area is so large that there are multiple suburbs to choose from when evaluating investment opportunities. Thus, there are several reasons that make the Dallas-Fort Worth area an interesting choice for real estate investments, be it residential, industrial, or commercial properties.
Skyline Point Capital has invested in properties ranging from 110 units to 310 units across various neighborhoods of the Dallas metro area.
Austin, Texas
Austin has, perhaps, been the hottest real estate market for the past 3 years. It is like the Silicon Valley of the southwest region. There are several high-tech firms with operations in Austin. While Tesla might be the most well-known company headquartered in Austin, other firms like Dell, Apple, Amazon, Nvidia, Blizzard Entertainment, and Applied Materials have offices in Austin.
Austin has a few educational institutions that attract students and young people to the city. The University of Texas at Austin is the best-known and is among the largest employers in Austin. Besides young professionals, people from the creative industries are attracted to Austin due to its vibrant cultural scene and festivals like South by Southwest. The warm and sunny climate also works in favor of Austin over other cities up north.
Austin’s population grew over 35% every 10 years from 1970 to 2000. The growth rate has moderated to 20% since then and even that, for a 10-year period, is still impressive. From about 250,000 in 1970, Austin’s population is now close to 1 million. The number of employed persons in the Austin-Round Rock MSA has tripled from around 450,000 in 1990 to over 1.4 million as per the latest data available with FRED.
The age group of 25-34 constitutes the largest segment of Austin’s residents. They are a key demographic for rental housing. The high demand for rental housing from a growing population led to strong increases in rents.
However, that also attracted a lot of new construction as the supply has risen significantly. This has led to a drop in occupancy levels while rents have stagnated. The near to mid-term could present interesting opportunities to enter a fundamentally strong market.
Omaha, Nebraska
Omaha might not be the first place that you think of when looking for real estate investments. Sure, the city is best known for being the home of Berkshire Hathaway and Warren Buffet. But, there is more to the city than the Berkshire annual meetings. Omaha is located at the convergence of the Platte and Missouri rivers. So, Omaha has historically been a transport hub. Union Pacific Railroad is headquartered in Omaha. The finance and insurance industry also contributes over $10 billion to the local GDP.
Omaha is not a massive metropolitan area like New York or Los Angeles. So, it is relatively cheaper and has a lower cost of living. There is rental demand from students and young professionals at the University of Nebraska at Omaha and Creighton University. The population of Omaha grew by close to 19% from 2010 to 2020.
The current unemployment rate for the Omaha-Council Bluffs MSA, as per FRED, is 2.8%. This is far below the 4% unemployment rate for the country. The vacancy rate for multifamily properties is also 5-6%, something that markets like Austin or Dallas cannot match. The absorption has not been completely disconnected from the new supply either.
( https://www.lee-associates.com/wp-content/uploads/2024/04/2024-Q1-Omaha-Multifamily.pdf )
Overall, Omaha offers an interesting alternative to the usual “hot markets” and is an area where Skyline Point Capital has the expertise and the network to get deals done. In fact, Skyline Point Capital is based out of Omaha. We have invested in a 24-unit property in Fremont, located northwest of Omaha, The Southport Retail Center, and an event venue called The Barn in the Holler.
Raleigh, North Carolina
Raleigh’s location is strategic. It is part of the famed research triangle and is close to Chapel Hill and Durham. Several world-class educational institutions like Duke University and UNC Chapel Hill are located in the research triangle area. They provide a steady flow of top-notch talent that fuels technology and science-based businesses. The local area’s culture of research and innovation has driven companies like Cisco, IBM, GlaxoSmithKline, etc. to establish offices in the region.
The growth in the local economy has translated into a growing population in Raleigh. From 150,000 in 1980, the population was above 482,000 as per 2023 estimates.The population grew by 30%-40% every decade since 1980. The decade from 2010 to 2020 saw that growth rate moderate to 15.8%, which is still a strong number. The number of employed persons, as per data from FRED, has also grown from around 500,000 in 2010 to 781,000 in 2024. The unemployment rate was 3.2%, much below the national average of 4%.
The demand for rental housing has been strong and rents rose significantly post 2020. In recent quarters, however, rent has stayed flat as vacancy began rising due to incoming supply.
From a long-term perspective, Raleigh appears to have the fundamentals of education, talent, industry, and location to continue its growth trajectory. In the short term, elevated supply levels could keep a lid on rent growth and occupancy levels. This may present interesting opportunities for investments in specific pockets.
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How We Choose Which Cities to Invest In
At Skyline Point Capital, we rely on meticulous research when selecting the best place to invest in real estate. We work towards developing a deep understanding of the urban dynamics of the locations that we consider. We like locations that have growing population numbers, a healthy job market, and strong economic growth potential. Rent growth is also an important metric that we consider. We also look out for any demographic shifts that can positively impact rental housing. Our team also monitors supply and picks micromarkets where there is limited scope for building new units.
Having business-friendly policies and a supportive regulatory environment are also important as that is what makes any investment strategy sustainable. States that are landlord-friendly are preferred by us. Lastly, partnering with the right local experts allows us to execute our business plans effectively once we have closed a deal.
Conclusion
We hope you now have a better understanding of how to look at different locations and submarkets for real estate investments. In this blog, we discussed some of the most promising locations for real estate investments. We did not just write about a list of cities that looked good on paper. Rather, we showcased cities where Skyline Point Capital has invested. We currently have investments in a few multifamily properties in the Dallas area. We also have an investment in a 90-unit property in Nashville. Lastly, as Omaha is where we are based, we have retail and multifamily investments in Nebraska.
In this blog, we also listed some key factors that Skyline Point Capital analyzes before selecting a market to invest in. Hopefully, that gives you some insight into our thought process and investing style. If you want to learn more, then we highly recommend you download our free ebooks to get a primer on the subject. You can also reach out to us or request an invitation to be in the loop on promising real estate investing opportunities currently on the market.
Here’s to a prosperous investing journey! May your curiosity, patience, and strategy bring you great rewards.
