Top Real Estate Markets in 2021 and beyond

Investing in the right market and sub-market is a critical factor in actually making money in real estate. 

Previously I wrote about how to identify emerging markets: 

https://www.biggerpockets.com/...

This information can be also used to identify emerging neighborhoods in the market that you are in. With this information, I have come up with some of my favorite markets to invest in that have a bright future.

As you look at the list be aware that in most large cities you will have several neighborhoods that are somewhere within its own cycle that you can capitalize on. Please also be aware that some neighborhoods may never see the recovery stage – or at least no time soon, so look out for those areas.

How to identify an emerging market: 1. Job creation, 2. Increase in population and future expected growth, 3. Building proposed (permits pulled), 4. Government planning 5. Affordability 6. Absorption rate and vacancy rate. 7. Courage. One of the other major factors that I look at, is if there is opportunity to buy value add properties, meaning buildings are being sold in the asset class and size that I desire and there are building being sold at a discount due to a problem needing to be solved.

With all of that said, my list is made up of cities that I see with potential, but many cities I have not fully dug deep into them. I would do your own search, then pick a handful of cities and dig deeper. Then pick 2-3 and dig really deep. One of my suggestions is to get the CoStar or Axiometrics report of the city and neighborhoods you like within the city, then visit and then invest.

Top cities (in no particular order) 

1. Tampa Bay, Florida

2. Jacksonville, Florida

3. Phoenix, Arizona 

4. Raleigh, North Carolina

5. Atlanta, Georgia

6. Savannah, Georgia

7. Cincinnati, Ohio

8. Des Moines, Iowa

9. Memphis, Tennessee

10. Huntsville, Alabama

11. San Antonio, Texas

Some black swans: These are cities that miss some criteria, but could be really good picks if the right things happen.

1. Detroit, Michigan – In 2012, I was sitting in a meeting with several people and I said we should invest in Detroit, they all laughed at the idea. Well, look at Detroit now! Could Detroit continue to rebound? The population projections are really weak at only 0.1% annual growth, but if companies continue to choose Detroit that could drastically change.

2. Cleveland, Ohio - This city has seen a lot of gentrification and has seen some companies come in and invest money. The rent affordability is solid, prices/cap rates are great and value add is abundant. It is a city to keep an eye on, but the population growth has just not been there, so it misses the list. 

Some smaller cities with potential:

1. Lubbock, TX 

2. Greensboro, North Carolina 

3. Cape Coral, Florida

There are other cities that have had tremendous growth for a long time and seem poised to continue with that growth. These did not make my list for one reason or another, but came in close. The issue with these top cities is can you find opportunity? I know investors are still buying in these cities, but can a new buyer come in and buy a quality deal?

1. Dallas/Fort Worth, Texas

2. Austin, Texas

3. Orlando, Florida

5. Charlotte, North Carolina

6. Provo, Utah

7. Salt Lake City, Utah

I am sure that I left some cities off the lists, but the cities that made my lists needed to hit as much of the criteria as possible. There are plenty of cities with population growth or great cap rates, but then failed on other items. Others had great fundamentals, but the rent is not affordable and the cap rates come in so low it's hard to make a profit.

Let me know what you think are the best real estate cities to invest in.

To your success!

Todd Dexheimer