Have you ever considered investing in real estate, but wondered about how to find the right opportunity? Many investors tend to look “in their own backyard” when considering real estate investments, but there may be other regions of the country you should consider. Some markets are growing faster than others, and investing in real estate outside of your home area allows you greater diversification.
There are many factors to consider when choosing where to invest. In this article we’ll discuss what we believe are some of the key considerations, and share an example of a real estate market that fits our criteria. Whether you’re interested in investing on your own or are considering a managed real estate investment, as an accredited investor you should consider the importance of “location, location, location.”
What to Consider When Choosing Where to Invest
Broad market trends can be critical when investing in real estate, as it’s typically a longer-term investment and you’ll want to make sure the geography where you invest is stable or growing. Here are a few market dynamics we’d suggest you consider:
Is the area a leading destination for business?
Whether you are investing in a residential or commercial property, finding an area with strong businesses can be important. New businesses drive growth in an area, and business growth supports the local economy. You’ll also want to consider whether an area has a diverse economy, or one that is overly concentrated in a single industry or even a single company. That kind of concentration can create investment risk if that business or sector starts to decline.
Is the area an increasing magnet for people?
During the pandemic, many people found greater geographic flexibility when working remotely and took advantage of opportunities to relocate to a more desirable area. Before investing, you’ll want to consider whether a geography you’re considering is continuing to grow or starting to decline. Fast-growing metropolitan areas tend to feature stronger job and wage growth which can be good for real estate investors looking for high occupancy rates and strong rental yields.
Does the area have favorable housing dynamics?
Favorable dynamics may include things like rents that are appreciating at rates above the national average, but currently are at a relatively lower base. Starting from a lower base allows for future growth and could also allow investors to diversify among multiple properties with an investment amount that might only purchase a single property in a more expensive market. Local dynamics that should be considered also include details like the ease of the permitting process, local zoning rules and whether there are rent control regulations.
Do you have relationships in the local area?
To successfully invest in an area, you’ll likely need a network of relationships – from engineers and contractors to bankers and even other property owners. These key relationships can make or break your investment – particularly if you don’t live in the local area and are trying to manage your investment remotely.
One Example of a Potential Investment Market
While there are many real estate markets that may be good choices for potential investors, Domicilium Capital Partners focuses most of our investments in the Southeast. Here we’ll highlight just one of the markets that we like so you can see an example of an area that fits the investment criteria suggested above.
Charlotte, North Carolina
Again, many markets may meet the suggested investment criteria, but we believe Charlotte is particularly strong. Here are a few reasons:
North Carolina is top state for business
CNBC named North Carolina as America’s Top State for Business in 2023 – for the second year in a row. The Charlotte area in particular has attractive tax rates and incentives. It’s home to Bank of America and other financial firms, but also attracts small business startups and will even be the future home of the Atlantic Coast Conference (ACC) headquarters.
Charlotte is a growing market
Charlotte has recently ranked in the top 10 hottest housing markets for 2024 according to Zillow, and has been a top ranked real estate market for years according to Pricewaterhouse Coopers. These rankings consider factors such as expected home value appreciation and new jobs per housing unit, as well as the speed of home sales.
Charlotte has positive dynamics
Home values are growing in Charlotte, yet it remains more affordable than many other metro areas. In addition, North Carolina does not have rent control laws.
The Importance of Local Relationships
Domicilium Capital Partners, LLC is able to exploit a proprietary network of relationships in the real estate community that includes tradesmen, lenders and other real estate investors. This has given the funds access to off-market transactions, portfolio sales, and opportunities to partner with other property owners and investors. Charlotte is one area where we have strong connections – you can read more about that here.
If you’re an accredited investor interested in learning more about investing in attractive local markets, we invite you to reach out to the team at Domicilium.
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**The information contained in this blog post is subject to the disclosures set forth here.