Investors Seek Higher ROI!

Nef Cortez

By Nef Cortez

Investors worldwide are searching for a higher return on their investment! Throughout the United States, some cities are attracting a higher number of  real estate investors due to many factors, but primarily because their Cash on Cash return exceeds the return if they invested in real estate elsewhere.

Today’s worldwide low interest rate environment provides a very low payout or return on savings accounts. Currently Banks are paying under 1.75% for a $100,000 certificate of deposit, while allowing intermittent access to that cash.

Along with the higher return on investment, Investors also look at the security of their investment, always analyzing the probability of being able to get their money back  or the risk of losing it from whatever investment they make.

Two factors that are typically used to determine whether the real estate investment is to be made or not are the price of real estate, and the return on the investment measured in rental income.  A Low Purchase or Market price paired with a high rental rate is most desirable.

Another consideration for the investor is whether the investment will be for short term rental of the property, or for long term occupancy for the tenant, with typical one year leases. Different areas of the country, and more specifically, different cities in the country, will provide better returns for the two different types of investments.

An area that has more of a tourism industry will tend to generate a higher return on the short term rental market.  An area that lends itself to the more stable demographic will tend to be more desirable to the long term investor.

The top five U.S. cities that currently fit the criteria for the long term investor (per Mashvisor, a rental data aggregator) were Columbus Ohio, Denver Colorado, Baltimore Maryland, San Jose California and Anaheim California.  The analysis took into account certain neighborhoods within those cities and not the entire city itself.  Diamond Bar California did not make the top 20, as the median sales price of $735,000 for a Single Family home paired to the median monthly rental income of $2,800 equated to a rate of return of 4.57%, below the leading cities rates of return of 7-12%.

This article was written by Nef Cortez who is a licensed Real Estate Broker, Ca BRE # 00560181, licensed since 1976. He can be reached for more information via e-mail at nefcortez@gmail.com, or website www.nefcortez.com. Please feel free to email any questions regarding real estate.

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