Migration to the Sun Belt region is soaring faster than ever! How could investors profit from this historic market shift?
Migration to the Sun Belt region is soaring faster than ever!
How could investors profit from this historic market shift?
Migration to the Sun Belt region has been underway for years now and Covid combined with the opportunity to work remotely for most people only accelerated this process.
Booming economies, well-developed infrastructure, superb weather, thriving real estate market and attractive tax benefits are enticing benefits attracting more people over than ever before.
With the immense influx of new residents, the real estate market in the Sun Belt region is reaching new all-time highs, and providing incredible capital appreciation for real estate investors.
How long is this going to last, and how could real estate investors position themselves during such historic market movement to maximize their future returns?
Why is the Sun Belt attracting so many new residents and businesses?
The Sun Belt region, which covers the southern United States, is seeing unprecedented inward migration, resulting in a significant shift in housing and commercial real estate supply and demand.
Between 2010 and 2019, the southern states of South Carolina, Texas, Florida, North Carolina, Georgia, and Arizona saw a population gain of at least 10%, and it comes to no surprise that since 2015, the inward migration from the Snowbelt to the Sun Belt is happening at an accelerated pace.
From 2016 to 2022, in the case of southwestern states Arizona, New Mexico, Texas, and Oklahoma, manufacturing output increased more than any other region in the U.S. according to data from Bureau of Economic Analysis.
The Sun Belt is home to some of the fastest-growing cities, with people and investors attracted by the region’s attractive environment, low cost of living, and appealing low tax rates.
Location, location, location is everything in real estate, and the Sun Belt has so much to offer. Both home values and rent prices have climbed by double digits in numerous Sun Belt real estate markets over the last year, two crucial metrics for rental property investors.
Which are the hot spots in the Sun Belt region?
While migration to the Sun Belt is not a new trend, it has only been expedited by Covid.
The option to work remotely provided impetus for a number of residents to look for more affordable housing in southern states, better weather, or job prospects in large economic hubs.
In the past year, cities like Austin, Dallas; Houston; Charlotte, Tampa, Phoenix, and Atlanta had the most inward migration.
Despite the incredible growth, many real estate markets in the Sun Belt still have relatively affordable home prices compared to major East and West Coast markets.
Sun Belt states including Utah, Idaho, Texas, North Dakota, and Nevada have had population growth of 15% or more in the last ten years.
In fact, the cities with fastest growing economic opportunities are located in the Sun Belt region, including Austin, Fort Worth/Charlotte, Durham/Raleigh, Charleston, Jacksonville, Miami, Tampa, Atlanta, Phoenix, and San Antonio.
Is this market movement going to last?
The Sun Belt region has seen a surge in population growth for years from an influx of people looking for growing economic opportunity, a lower cost of living, and baby boomers seeking retirement in a warm and sunny climate.
With concerns such as auto-oriented infrastructure, rising income inequality and housing costs, and a lack of traditional mechanisms to solve them, Sun Belt cities will have to come up with progressive ideas to deal with these difficulties.
And, as we face difficulties this century ranging from climate change to a widening wealth divide, finding innovative approaches to solve those problems could provide a path ahead for the entire country.
Many housing communities in the Sun Belt region have had double-digit increases in both home values and rents year over year, which are two critical measures that every rental property owner wants to see.
Considering the current unique competitive advantage encompassing booming economic and job growth, favorable climate and tax incentives and well-developed infrastructure of the Sun Belt region that is putting new residents, businesses and local governments in a winning situation, this ongoing market movement is likely to only accelerate in the future.
How could real investors position themselves to maximize their returns in this situation?
It’s crucial to understand how to join in on this trend.
Today, people are putting emphasis on their outdoor lifestyle even more after Covid, and spacious outdoor living spaces and amenities are on top of their wish list.
New residents relocating from the East, West and North to the Sun Belt, are accustomed to an active lifestyle with high benchmark of expectations when it comes to their future new homes.
When this target demographic gets exactly what they want, they are willing to spend more and stay longer, resulting in higher and more predictable long-term income for real estate investors.
Residents in the past had a strong affinity for quality outdoor amenities that enhance their active and healthy lifestyle. The pandemic has only increased the appeal for better entertainment-based amenities, private outdoor spaces with walking paths and landscapes that enable residents to connect with nature and experience tranquility in the comfort of their own living space.
The most desired amenities by residents that support their active and healthy lifestyle include fitness center or gym, discount or free membership to local gym, basketball and tennis courts, rooftop decks, recreation rooms, designated pool areas for adults and children, designated grill areas, movie theatres, pet friendly properties, and strong convenience focus including free high-speed internet, contactless entry and delivery, automated alerts for package delivery, mailrooms with mailroom management software, bicycle parking, valet parking, 24-hour security and surveillance, and children playgrounds.
Investors that will make smart investments in multifamily housing properties that are positioned according to the needs of these target groups and offer amenities that best match their lifestyle will be at the forefront to benefit from this trend through attractive organic cash flow and property appreciation.
Clearly, one of the most obvious ways to profit from the shifting demographics is through multifamily investments tailored to the tastes of new residents, short- and long-term rentals, and attractive commercial real estate that will fit the needs of new businesses can yield the highest market returns for real estate investors.
Multifamily housing is a very popular option among baby boomers that downsize and millennials that like the flexibility that comes with renting. With growing number of remote working opportunities, secondary and tertiary markets are also gaining popularity.
Demand is also strong for Class B and Class C multifamily housing. Investors can find attractive opportunities for value-add renovations that will justify higher rents.
Reinvesting in a property through improvements and property enhancements might have a nearly immediate payback and newly renovated rental units tend to attract new high-quality renters with higher purchasing power, who value property and amenity upgrades that match their active lifestyle.
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Telephone: (954) 570-0300
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About Adivo Construction
We are a national general contractor with over 50 years of combined construction expertise specializing in the value-add improvements of apartment communities.
Our mission is to assist our clients in finding the right balance between capital expenditure and appreciation potential by designing and executing customized renovation programs that are focused on increasing cash flow return and overall return on investment.
We have completed over 100 repositioning projects for publicly traded and privately held domestic and foreign companies in states such as Florida, Texas, Kentucky, Oklahoma, Georgia, South Carolina, Utah, North Carolina, Tennessee, Indiana, Michigan, Missouri, Arkansas, Ohio, Arizona, Nebraska, and Kansas.