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Five Optimal Places to Invest in Real Estate in 2023

Resindential building

Tara Winstead from Pexels

As a real estate investor, predicting the next place to buy property should never be a shot in the dark. There are several traceable factors that impact a city’s promise as a good investment location. But in the wake of the pandemic, the housing boom, and now sky-rocketing insurance rates, choosing your next investment feels a bit less straightforward. Here, we break down all the factors and highlight five cities where real estate conditions are ripe. 

The Ever Shifting Market 

The median home price at the end of 2020 was $245,000. By June 2021, that number rose to $295,300, according to the National Association of Realtors. The pandemic has affected both supply and demand. Mortgage rates fell, which led to a decrease in the cost of home loans and an increase in demand, then rocketed up again. The economic recovery has made it possible to buy homes and work from home, further fueling demand for property purchases. The Federal Reserve continues to support the housing market by buying $40 billion in mortgage-backed securities each month. As more buyers buy homes in less crowded suburbs, the supply of affordable housing has shrunk. Meanwhile, those who would otherwise have listed their homes for sale own them or are getting off the market by selling their properties at bargain prices with the help of real estate agents in Raleigh NC.

Business is no different. Large employers have come to Texas from high-paying states like California. The national movement sparked a market boom in cities such as Raleigh-Durham, Austin, Boise, and Phoenix. People are relocating from bustling urban centers like San Francisco and Los Angeles to places with a favorable business environment, job growth, an educated workforce, and affordable real estate that can be purchased at attractive prices.

All of this has resulted in several markets where buying a single-family home, an apartment building, is a smart and financially sound investment. As long as the inventory of homes for sale remains low, demand in the rental market will remain high. According to the Census Bureau, the average occupancy rate for single-family homes in the third quarter of 2020 was 95.3%. 

But, as always, real estate is a local investment. So, if you are in the real estate market, now is the time to do some thorough research on the best places to invest, which you can do with the valuable information that realtors in North Carolina can provide you. When evaluating potential investments in the real estate market, several key criteria for purchasing rental properties should be developed. Here are some factors that influence the real estate market in each place and five cities that make excellent choices for future real estate investments.

Factors that Bode Well for Real Estate Investments

Below are some key factors we consider when deciding if a city has the potential to be profitable for investors.

The Job Market

Some cities benefit from the location of large companies, while others encourage location with tax breaks and other incentives, so some cities create more jobs. A recent study identified the best cities to work in 2021 based on key metrics such as job growth and unemployment rates.

Population growth and business opportunities

Not surprisingly, significant population growth, especially in regions where growth is already high, increases the chances of successfully finding investments. You can check job listings and occupancy rates on sites like Zillow Research. Availability figures may vary by region, so check for up-to-date data.

Affordability and Cost of Living

City affordability metrics include median home price, median rent, state, and local tax rates, cost of living index (a measure of affordability compared to the national average), and many other key metrics, such as the average cost of utilities, rent, food, and transportation costs.

Upgrade Potential

When looking at an investment property in any market, you need to assess the potential of the property to generate rental income. This can be done by comparing the rental history of similar properties. It is also worth considering the potential future value of the property. For example, if the rent on a property hasn’t increased significantly, but its value has increased, it could still be a good buy.

Potential income

You need to assess the potential income you will get from buying real estate, and first determine if it is a good, profitable investment. You can do this by subtracting your expenses (income) from your income and dividing it by your cap rate (the annual rate of return you expect on your investment property). A good equity ratio is usually considered to be 10%. Remember, it’s best to think broadly about the real estate market. Are there cultural or sports attractions, walking trails, or many city parks that make the city more attractive?

 Resindential building

Top 5 places to invest in real estate in 2023

Raleigh/Durham, North Carolina

Raleigh/Durham is one of the best places to invest in rentals over the next year. Nearly a third of Americans rent, including 43% in Raleigh and 52% in Durham. One of the key reasons is not only a large number of students but also the young people who move here for work. Other reasons to invest in Raleigh/Durham:

  • Median home prices in Raleigh and Durham have steadily increased over the past year to $340,303 and $304,217, respectively.
  • The job opportunities here are endless. Raleigh is the second largest city for available tech jobs after Austin.
  • Family houses are the most common type of housing.
  • Raleigh and Durham have lower unemployment rates than the national average and higher average annual income than the national average.
  • The median rent for an apartment in Raleigh is $1,287, up 3% from a year ago.
  • From 2017 to 2018, Raleigh’s population grew by 1.19%, and median household income increased by 1.6% from $64,660 to $65,695.

Austin, Texas

Austin, Texas is a thriving city with a growing job market, which has contributed to a housing boom. Major companies like Tesla, Samsung, and Apple have moved in or opened large offices, and the city offers tax breaks to businesses that relocate there. In 2021, Austin grew by 45% compared to the previous year and is actively attracting new residents. The city’s unemployment rate is low at around 4.2%, which is below the national average. The cost of living in Austin is lower than in San Francisco, with an average monthly rent of $1,431, which is steadily increasing. The real estate market in Austin is a lucrative long-term investment, as housing prices have risen by almost 90% since 2012. Last year, home prices rose 30.5%, and they are expected to increase by 37.1% this year, according to the Zillow Home Forecast.

Las Vegas, Nevada

The Las Vegas real estate market has been through some ups and downs, including a major downturn during the coronavirus pandemic. However, it is now recovering quickly, thanks to factors such as low cost of living, tax incentives, and a diverse business environment. Many people and investors are buying property in Las Vegas, and prices are on the rise. The city’s population has grown by over 14% since 2010, with more than 2 million people now living there. Las Vegas has expanded beyond just tourism and hospitality to include healthcare, high technology, and commercial real estate. The lack of state taxes for individuals and businesses and lower corporate taxes make it an attractive place to live and work. The average rent for an apartment is currently $1,196, up 9% from the previous year. Las Vegas is currently one of the top-selling real estate markets in the United States.

Dallas, Texas

A key strength of Dallas is its diverse economy, which provides jobs for people of all income groups. Homeownership rates are among the lowest in the country, renting is cheaper than buying, and demand for rental housing has increased in recent years. The population of Dallas is growing rapidly. Dallas is the sixth fastest-growing city in the country and makes for an excellent potential investment option.

Charlotte, North Carolina

Charlotte is growing rapidly, with strong job growth in the financial and technology sectors, as well as 25 universities that attract and promote young talent. The city also has lower property taxes compared to other tech hubs, making it a more affordable place to live. Despite a 16.4% year-over-year increase, the median home price in Charlotte is $302,570, and the average rent for a home increased by 6% to $1,259. With its booming economy and great quality of life, Charlotte is consistently ranked as one of the best places to live. Employment in Charlotte has grown by 2.3% since 2018-2019 and is expected to grow by 45.2% over the next ten years, surpassing the national average.