Bracing up to diversify your investment portfolio and venture into real estate? Well, the timing couldn’t have been better!
While New York City continues to be the most expensive property market in the world, you have several lucrative investment avenues in Los Angeles and Chicago too. Property values in several localities in these cities have been escalating.
The balanced economy of Chicago has been fuelling the demand for real estate over the years. The city has no sector that employs over 12% of the working population. Besides, the city is the third-highest economy in the US.
Let’s unveil the hottest regions and cities to target in the US as you explore the potential of real estate investments. However, have a look at the prime reasons to invest in real estate in the first place.
5 reasons to target top metropolitans for real estate investment
Real estate goes a long way in anchoring your investment portfolio. While mutual funds, stocks, or the money market looks volatile, real estate investments significantly consolidate your assets. Besides, calculated investments in the hottest metropolitans can fetch you passive income through rent. You can also benefit from frequently-overlooked benefits like tax breaks and equity.
Let’s look at the prime benefits of targeting cities like New York, Chicago, or Los Angeles while tapping the potential of real estate.
Investing in top cities in the US can fetch you impressive returns. While property price appreciation is on the cards, it isn’t a guarantee. This implies that a research-oriented approach to investments can yield a decent return. With the right approach, real estate investments go a long way in growing your asset value. No wonder why forward-thinking individuals include real estate investments in their retirement portfolios.
How about renting out your property in top cities like NY, Chicago, or LA to stream consistent rental income monthly? At 37.9%, NY recorded the steepest increment in rent. Investing in the right locality would fetch you a recurring income over the coming months.
Did you consider tax advantages like deductibles on your real estate investment? As you hold an investment property, you are eligible to deduct several expenses related to your mortgage interest, property taxes, property insurance, property management charges, and maintenance costs.
Even when you sell off your property for a profit, it would be considered capital gains. Typically, the tax on capital gains is lower than your income tax.
Financial experts recommend including real estate in your asset mix to boost portfolio diversification. While economic turmoil like recession and inflation looks menacing, investment properties will continue to stabilize your portfolio. Given that inflation in 2022 hovered around the 6% mark, it is expected to increase in the next decade. Real estate investments can secure your asset mix from losses.
Why not take advantage of your home equity when you invest in real estate? In Chicago, the average property costs $ 379,417. As you start clearing your property loan, you free up your home equity. Leveraging capital from real estate investments, you can ease up financial pressure whenever it threatens you.
Best localities in NYC to buy properties
Now that you know the advantages of real estate investments beyond property price appreciation, let’s narrow down the hottest localities in New York City.
The Upper East Side
As an investor, you would consider your affluence to afford a property in the UES a privilege! The real estate boom in this locality in NYC makes it a lucrative investment avenue. On average, property prices hover around the $1.8 million mark. Investing in luxury apartments can fetch decent rental income for property owners.
With the property market rebounding, it’s an excellent time for investors to explore residential and commercial investment properties here.
To the West of Lexington Avenue, be prepared to shell out anything between $2,500 and $3,000 per square foot. Properties near Yorkville are more affordable, priced at $1,500 per square foot.
A relatively affordable locality in Manhattan, Inwood is ideal for residential property owners. The locality has low-rise homes with a mix of apartments and single-family homes. Although zoning changes have been proposed to allow tall buildings in the locality, the plans haven’t matured yet. Property price appreciation has been steady, and the locality doesn’t have buildings taller than eight stories.
The last five years have witnessed property prices in Inwood appreciate by 14%. Now, investing in a locality that might potentially be redeveloped with high-density housing around can stream in higher returns.
The best thing about this locality is the presence of Inwood Hill Park and its natural forest. The area won’t lose its walking trails and green patches anytime soon. Besides, the family-friendly ambiance in Inwood makes it a hotspot for residents. The median property price in Inwood is slightly more than half a million dollars. Rental returns in residential properties hover around $2000 a month.
Washington Heights appeals to real estate investors as yet another lucrative locality in New York City. Currently, it has a buyer’s market with an adequate supply of homes. However, forward-thinking investors should identify the steady trend in property price appreciation.
Investors can also go for condos, which cost less than $1000 per square foot. Besides, you can capitalize on the tax abatement condominiums where rental rates are high, while you wouldn’t repent paying manageable tax bills.
Washington Heights has several expensive colleges in the region. Naturally, you’d find tenants easily, which primarily flows from the student population.
On average, the selling price of 2-bedroom homes is $650,000 in Washington Heights. The last 5 years have yielded around 20% returns as a result of price appreciation.
Best localities in Chicago to buy properties
Chicago boasts a relatively large property inventory. With affordable living costs and easy-coming tenants, property investments in its localities look lucrative. The median property prices are around $290,000, with a high probability of appreciation.
Check out the best localities in this city and ride the growth of real estate.
With an average monthly rental income of around $1,199, Rogers Park continues to be a popular locality in Chicago. This is an old neighborhood with a lot of single-family homes. Apart from these century-old residences, multi-family apartments dominate the locality.
What drives tenants to Rogers Park is the seamless access to all types of amenities, including parks and beaches. Students at Loyola University constitute a majority of the tenant population at Rogers Park. On average, investors buy these properties for $222,000 before renting them out.
Investors eyeing high rental returns in Rogers Park should target the beach areas. The lakefront green spaces and walkable localities make it one of the most popular places to reside in Chicago.
Logan Square has been a hotspot for real estate investors, particularly since 2020. Property prices in this Chicago locality are around $500,075. A steady appreciation in real estate value makes it suitable for investors. Renting out studios would fetch you $1,300 to $1,700 per month. You may also go for a 2-bedroom apartment, which can yield a monthly rental income between $1,600 and $2,400. For 3-bedroom apartments, investors can expect the rental yield to be $2,500 a month.
Interestingly, the share of renter-occupied homes in Logan Square stands at 65%. This reveals the potential the property market in this part of Chicago holds for you. On average, properties on sale remain on the market for just 20 days.
Millennials love the old locality with tree-lined streets. Besides, you have the Palmer Square green space and grey stone buildings in the city. Besides apartments, you can also explore the beautiful bungalows in Logan Square.
Affordable homes, the proximity to beaches, and the fabulous jazz music of Uptown make it a popular residential zone. In Uptown, the median property price for residential homes is around $312,000. Property rates in this part of the city increase by 1.2% year-on-year. For investors, this locality in Chicago presents a great investment opportunity.
Renter-occupied homes account for 68% of the properties in Uptown. On average, you can expect monthly rental returns of $1,600 from these properties. Properties on sale remain on the market for 34 days on average. With a population of 58,979, Uptown has a sizable mix of tenants, bringing in rental income for investors.
Best localities in Los Angeles to buy properties
The median selling price for Los Angeles properties in April 2023 was $1,049,000. The ridiculously low vacancy rates of LA properties often intrigue tenants. So, if you are planning to invest in real estate in Los Angeles, here are the localities to explore.
Pasadena is a popular city for investors in Los Angeles. Located 10 miles northeast of LA Downtown, this locality offers an urban lifestyle and luxury. Residents appreciate the suburban comfort and the essence of community living in this part of the city. Pasadena hosts the renowned Rose Bowl Stadium, several historical sites, and a plethora of museums and theatres. Residents love the time eating out or seeking their dose of adventure on the hiking trails.
Pasadena also boasts three out of the leading 10 high schools in LA. Tenants looking forward to raising a family after settling down often go for Pasadena. Investors would love to own a property in Pasadena to rent it out for consistent rental returns.
Marina del Rey
Marina del Rey is another popular residential locality in Los Angeles. Residents with a fascination for cherishing the beach or coastal lifestyle habitually hunt for rental properties here. Away from the bustle of the main city, Marina del Rey presents the perfect environment to reconcile. Interestingly, rental property prices in Marina del Rey are increasing by 9.74% annually, while the national average stands at just 2.40%.
The biggest marina and port in LA is located in Marina del Rey. The neighborhood has restaurants along the beaches, with boats lining the docks. Tourists and residents love spending their leisure hours around the calm waters or going kayaking. The cool and laid-back lifestyle attracts residents to this locality.
Also, the residents love free community events and outdoor movie screenings in this part of Los Angeles. Then there’s a farmer’s market, shows, and music. People who love the essence of community living often rent homes around this neighborhood. A number of public schools are also available close to the town.
Investing in this locality can fetch you lucrative returns through rental income.
The median property price in Brentwood is around $2.5 million, while the city has a healthy rental population of 36.29%. This locality in Los Angeles is close to prominent places like West L.A, Westwood, and Santa Monica. The demand for rental property in this city has been consistently high, given that residents appreciate the tree-lined streets and lots of backyard space. Besides, most homes in Brentwood come with luxurious landscaping and generous parking spaces.
The low population density in Brentwood makes it ideal for residents. So, people willing to have a few pets or raise a family often look out for rental properties here. The locality also has boutique shops, high-end eateries, and gyms. Residents longing for the typical LA experience look out for rental accommodations here. Naturally, investors find Brentwood ideal for purchasing investment properties.
Invest in real estate now!
This article has shortlisted the best investment avenues in three US metropolitans. Investors are free to explore their opportunities beyond this list but remember, investing in these nine cities won’t disappoint you.
If you are yet to include real estate in your asset mix, make sure to invest early to bank on the booming market. Holding real estate significantly stabilizes your assets, particularly as you inch toward your retirement.
How to save money to purchase real estate?
Investing in real estate is a serious financial decision. Start saving money through SIPs and accumulate your savings in a high-yielding savings account. Consider downsizing if you are low on budget. While many homeowners purchase these properties through bank financing, you can also wait and accumulate enough savings to purchase an investment property.
What to consider before investing in a property?
Before making a property investment, considering the following aspects:
- Growth of infrastructure in the locality
- Chances of property value appreciation
- The average selling value of existing properties
- The demand for rental homes in the region
- Rental yields from students or the working population
What is the right age to make a property investment?
The ideal age to purchase a property is between 30 and 35. Delaying your purchase further might deprive you of the potential property price appreciation. So, after you consolidate your career for the initial five to ten years, try to invest in real estate. This would also help you balance your investment portfolio.
What types of properties can I consider for investing?
This largely depends on the locality you are eyeing to purchase your property. Both residential and commercial properties can yield healthy returns. Look out for multifamily homes, retail spaces, office spaces, industrial properties, and co-working spaces to invest in.
Which cities are ideal for purchasing investment properties?
Metropolitans have historically proven to be great investment avenues for properties. Look out for localities in cities like NYC, Chicago, or LA to buy an investment property. The working population in these cities, as well as students, look out for rental accommodations.