Where to Invest (Part 1)

You know, people ask me all the time – where should I invest? What are the hot markets? Are there places that have any good deals left?

Well, that’s where I am going to take you today; this posting is the first in a two-part overview I’m going to write on what markets have good potential. In this part I, I’ll be taking a look at the first 4 of several states that have fantastic investment potential. Part II and forward will continue the examination to the states I don’t cover today.

But, first, I want you to understand some of the forces that are driving the areas I'm highlighting. If you’ve read the prior two postings, you saw the references I made to places like Phoenix and Las Vegas. Understand that those fast and furious run-ups were more driven by speculation than anything else. Fix and flip style investors (actually, more appropriately the “buy and flip” speculators), primarily from California were going into those markets en-masse buying property with the expectation that another investor (probably of the same mentality) would come in an pay them more money…because they expected someone to come behind them…well you get the picture.

If there ever was the definition of a bubble, that was it, and bubbles do burst. Enough said.

I don’t look place much credence on those forces. Oh sure, I am keenly aware that money can be made under those circumstances, but that’s speculation, and speculation leaves a lot of debris. Trying to second-guess speculative forces is tricky, and quite simply, it’s not sustainable. Only those that get in early make any money…and those that are too late…well, please turn out the lights!

I am an investor (and I am assuming you are as well), and not a speculator. Investors, by definition buy with the expectation that things will increase in value over time, but we are not subscribers to the greater fool theory. We rely on valid, sustainable market forces and good value to give us a return on investment over time. We rely as much as we do on our own negotiation and knowledge of a given market as we do on rampant forces over which we have no control.

With that in mind, the most fundamental economic force is supply and demand, and the greatest market force that plays into supply an demand as far as real estate goes is the designs of the baby boomer population and what they are doing – housing wise – as they approach retirement.

There are, depending on who is counting, some 70-80 million baby boomers in the age range from 60 down to about 45. There are clear paths this population is taking in buying properties for their retirement and recreation. Simply put, as a group, they are in a position to buy their dream homes, and they are doing it. Any coastal area, for example, has seen a healthy run-up in values in the last 10 years, mainly because boomers are buying homes in coastal locations.

The interesting thing is, there is still about 15 years of boomer migration yet to happen. Those later bloomers may not get a house on the beach simply because they are too expensive now. But, it is clear that certain areas will become the next ones in line for late boomer interest. Anything near the water, for example…be it ocean, lake, or river is attracting attention. Any area noted for recreation – golf for example, is going to be on the radar.

With that basic premise in mind, I want to cover a preliminary set of 4 states that are attracting this kind of evident attention, and in a broad way point you to areas within those states to pay attention to. I am going to be somewhat general in this and the next blog. My intention in later postings is to get into some intense depth on a state by state, city by city basis. For now, I want to merely build a framework of where you ought to be paying attention.

I’ll begin on the East coast, and work my way South and West. I’ll begin my discussion with SouthEast Virginia

Virginia’s proximity to the Metropolitan Washington DC area makes it a perfect retirement choice for people who are from DC. Chances are, they’ve vacationed in places like Virginia Beach and Williamsburg, and their thoughts turn to that area as a life destination.

Richmond Virginia, is still a sleeper, although the area has seen a run-up in prices over the last 10 years. On a national average basis, though, Richmond homes are less costly than average, and you get a lot of house for the money. It’s not uncommon to find a relatively new SFH for about $160,000 in a nice neighborhood. One particularly notable characteristic of the Richmond metro area is the multitude of planned recreational communities.

Tidewater Virginia – Williamsburg, Newport News, Hampton, Norfolk, and especially Virginia Beach probably represents one of the best values in coastal living in the country. The western edge at Williamsburg is pretty pricey at this point unless you look towards rural housing. Move towards the east to what is knows as the “peninsula” and it gets more suburban, less elite, and less expensive. Hampton is a real sleeper of a waterfront town that has just now blossomed. It has a beautiful harbor, and attracts a big boating population. The city is going through its second renaissance, and has some pretty grand plans for downtown.

Portsmouth & Norfolk have all the trappings of a major city, but are packaged like small towns. The area is virtually surrounded by water, and there’s a lot of renaissance in older areas at still-great prices. Chesapeake, Virginia is a bedroom community that has some pretty good values by Tidewater standards. Virginia Beach is both a resort, and a traditional city once you get off the shoreline, and while it’s gotten much more expensive than in decades past, there’s still a lot of value there. In all of these cities you have a good pick of condos, townhouses, and single-family homes.

Next, let’s move down the coast to North Carolina.

The areas collectively known as the Albemarle Sound still offer a great deal of opportunity both in terms of price and in potential growth. The outer banks areas – areas like Nags Head or Cape Hatteras are probably out of the reach of anyone unless they have deep pockets. But, get into areas like Elizabeth City, Washington, or New Bern, and you’ll find beautiful port towns, at reasonable prices, and still within a short drive of the oceanfront. No doubt, these areas are positioned for increased activity and we are beginning to see it now.

Charlotte is a major urban area – part of the new South that is still reasonable in terms of cost, has an amazing volume of amenities and quality of life, and abundant housing. Just yesterday, I found a 2 bedroom condo, in a complex with a pool and tennis for under $30,000!

The Research Triangle area – Raleigh/Durham/Chapel Hill also benefits from the New South phenomena, the effects of several major universities, a “tech” economy, and has the pricing and quality of life that still make it a treasure find.

South Carolina – nearly all of it is still priced amazingly well by national averages. The coastal areas are still affordable – even Hilton Head has condos under 150K. Look to areas around Charleston and Myrtle Beach which both have good quality of life, lots of amenities, and abundant housing in all price ranges. Columbia, the capitol city, is a real sleeper and I feel waiting to be discovered. My personal secret is the college town of Clemson and it’s surrounds – truly beautiful, affordable, and just now beginning to grow.

Georgia looks a lot like South Carolina in many ways – throughout the state there’s a great quality of life, and you can pick anything from a large city in Atlanta (which still holds promise), to college towns like Athens, which are great investment areas, or even the coast – such as around Savannah which holds good investment promise.

In my next edition I am going to profile the state of Florida. South Florida and certain other parts have followed the bubble-burst of many locations, but Florida as a whole still has an amazing amount to offer.

Until next time - follow your real estate dreams!

William Flood
Your Coast to Coast Real Estate guide