Residential Appreciation on the Rise in the Southeastern States

If you’ve spent even a small amount of time searching for turnkey investment properties you’ve likely come across more than a couple of sales pitches that stress the regular income and steady cash flow you can generate via tenant rents from an investment property. Bringing in cash every month from your investment is great, but there’s another less discussed potential profit engine driving returns – property appreciation

Where Can You Find Appreciating Turnkey Properties?

Finding an adequately cash-flowing, reasonably affordable rental property isn’t easy. You’ve got thousands of other investors out there looking for deals- in addition to the countless homebuyers jumping into the market at any given time. Now add appreciation potential to that list and you’re going to face an even greater challenge finding the right property. There are no shortcuts to finding the perfect property. 

With that being said, we utilize several strategies to find such properties, and on the top of our list is identifying and executing within the right markets – specifically in Chattanooga, Tuscaloosa, Huntsville, Birmingham. Of course, in a hot market, you’ll find some level of property appreciation in most regions, but not all appreciation trajectories are created equal. 

Economic Tailwinds in the Southeast

Out of the many positive appreciation-related characteristics present in the Southeast, two stand out – its history of long-term, sustainable growth, as well as the growing diversity of its industrial base.  The primary drivers of growth in the region include long-standing manufacturing concerns, logistics facilities, tourism, and tech; all of which are positioned to take advantage of a post-covid rebound. 

Markets like Nashville and Raleigh are underpinned by a well-educated labor force and strong market fundamentals. Smaller markets, such as Birmingham, Greenville-Spartanburg, and Greensboro-Winston-Salem are leading the way in terms of manufacturing growth, while Memphis and Savannah lay claim to highly developed and growing logistics base. 

A Welcoming Environment for Accelerated Appreciation

The housing market in the South, and in the Southeast, in particular, has spent the past decade or so defined by growth, in-migration, and affordable quality of life not available in many previously affordable regions like the Mountain West, Southwest, and Pacific Northwest. Historically, the Southeast has not been considered as a primary market on the same level as Boston, NYC, or San Francisco, but this casual overlooking of the region has helped lead to amazing opportunities for accelerating appreciation.

Why Appreciation Matters

Alongside regular rent payments and tax advantages, property appreciation is one of the three main pillars of successful real estate investing. In an ideal scenario, an investor would purchase a real estate asset, generate regular income from that asset, and also benefit from property appreciation in the long-term, while shielding their capital from Uncle Sam by leveraging depreciation, Opportunity Zone benefits, and generally favorable tax policy for investments in real estate. 

Even a relatively low appreciation rate of 1-2% a year can go a long way towards defraying ownership costs and defending your investment from economic shocks like reduced renter demand, tenant/nonpayment issues, repairs and rehab projects, and the other potential money sinks that come with the ownership and rental of residential properties. 

Appreciation in the Context of the Southeast

The current climate of accelerated appreciation in the Southeast has the potential to be a huge boom for a growth-oriented investor, alongside the regular income and relative safety of physical assets and real property. This penchant for an accelerated appreciation comes as a result of several factors, including the historic overlooking of the region, trends in remote work, and the growing tendency of millennials- many of whom are starting families- to settle down in less chaotic spaces.

The expectation of appreciation growth has the potential to “super-size” returns, generating value by simply holding the asset, and adding value on top of the regular income offered by tenant rents. In a world where money is cheap and inflation is rising, real estate in rapidly appreciating markets can prove a powerful bulwark against the ever-present headwinds investors face when saving for retirement. 

The Last Word

As an investor, you want property appreciation. But there are no guarantees, and you can’t count on it. However, you CAN try to find undervalued markets in a similar vein to how Warren Buffet and his mentor Benjamin Graham identified and executed stock trades via a value investing strategy, aka, spotting diamonds in the rough before other market participants. 

Here at Spartan Invest, that’s all we do and we’re happy to share the results of our efforts. Get in touch today to find out more about how we identify markets and even individual neighborhoods with the potential for accelerated property appreciation.

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