My investments are concentrated in the Atlanta region, where I live, and I've been fortunate to ride the Atlanta wave for years. It's still a good investment area, but the word's out and Atlanta is becoming expensive. So what's the new hot investing area?
Three words: the Rust Belt
Cities of the Midwest and Northeast United States, where most of the country's manufacturing took place, are known as the Rust Belt. We're talking cities like Detroit, Cleveland, Pittsburgh, and Syracuse, New York.
These once-thriving cities fell into decline when factories closed, causing people to migrate to other parts of the country looking for better opportunities. Post-pandemic, people are starting to come back to this region. The house prices are low, many people can work from home, and many of these cities are near attractions such as rivers and lakes, including the Great Lakes.
How to pick a good investment spot
One goal of real estate investing, specifically buying single-family homes to rent, is to buy in a location that's just starting to gain value, a city on its way up. You want to find such a place using what I call the Goldilocks approach: Look for an area that's not too hot, not too cold, but just right.
If the area is too hot, it'll be expensive to get into it. If the area is too cold, it might be too weak to generate demand for your product, which in this case is rental property. Ideally, you want an area that's been cold but is warming up.
The risk is buying in a cold area that stays cold or gets colder. You probably don't want to do that. However, here are some features of an overlooked (cold) area on the upswing:
- Low price of entry
- Investor interest
- Net migration to the area
- Near amenities (green space; river, lake, or ocean; transportation hub; city features)
- Strong or strengthening employment
- Good payment-to-income-ratio (income is enough for people to afford housing)
A look at Youngstown
Youngstown, Ohio, is located in the Rust Belt, with one of the lowest prices to entry in the nation. Although a low entry price alone doesn't necessarily make a good investment, it's worth looking into, and in this case, it might pay off.
The median price for a home today in America is around $350,000, yet the median listing price of a home in Youngstown is a reasonable $115,000. And that's just the median. Forbes reports that investors are scooping up homes at a price tag of $60,000 to $80,000 and renting them out. Lots of investors buying in an area is another sign of an area in transition.
So far, we have low prices and investor interest in Youngstown. Also, Youngstown's location is good. It's only a few miles from the Mahoning River, about an hour's drive southeast to Pittsburgh and an hour's drive northwest to Cleveland.
The per-capita personal income is lower than other Ohio cites, such as Toledo, Akron, Cleveland, and Dayton, so that's a bit of a risk factor. But people are starting to buy there because of the low house prices. Lots of young buyers are moving to (bad pun alert) Youngstown, where they can get more indoor and outdoor living space.
Other Rust Belt options
Other Rust Belt cities where the median price of a home is under $200,000 include:
- Toledo, Ohio: Median listing price is $128,400. This college town (University of Toledo) is popular with Gen Z renters.
- Akron, Ohio: Median listing price is $147,450. It offers a small-community feel and a low crime rate.
- Cleveland: Median listing price is $169,450. Investors are already buying here, particularly on the east side.
- Scranton, Pennsylvania: Median listing price is $182,400. Scranton gets mixed reviews on whether it would make a good place to invest. Price of entry appears to be its most attractive feature.
- Syracuse, New York: Median listing price is $184,900, making this the cheapest place to buy a single-family home in New York. Renters who want to remain in New York are showing interest in Syracuse.
- Pittsburgh: Median listing price is $197,000. People are leaving Pittsburgh, which isn't a good sign, but wages are up, which is. The city is also emerging as a tech hub.
- Dayton, Ohio: Median listing price is $197,450. It has not been a hot spot for investors, but the single-family rental market is strong.
- Buffalo, New York: Median listing price is $199,450. The city has been in decline and didn't fare well during the pandemic, but low prices are attracting out-of-town buyers to the city.
There are always risks when it comes to investing. You can lower yours by becoming familiar with your investing area. The more signs of life you see returning to a once-thriving city, the better. You might want to put such an area on your radar.
Bottom line: If you don't live in the Rust Belt, it might be time for a road trip.