Why Are Blue State Buyers Investing in Red State Rentals?

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Whether they have a first-class seat on the #TrumpTrain or prefer to #DumpTrump, many blue state denizens are putting politics aside to capitalize on the lower-priced real estate markets in red states and buy more affordable rental properties, according to a recent report. Real estate mogul-turned-president-elect Donald Trump would likely approve.

About 3.4 million single-family homes are now owned by out-of-state investors—companies, investment firms, and individuals who crossed state lines to get a good deal, according to a recent report from ATTOM Data Solutions, a housing data firm that is the parent company of  RealtyTrac. That represents 16% of the nearly 20.4 million single-family rentals nationally as of mid-November.

The in- and out-of-state investment property market is booming overall, with investors purchasing about 31% of all single-family houses that were sold last year, according to the report. That’s up from 28.2% in 2014, but it includes institutional investors such as private equity firms and hedge funds.

“Many rental homes owned by out-of-state investors are concentrated in red states, likely because they are relatively inexpensive markets,” Daren Blomquist, senior vice president at ATTOM, said in a statement. “Meanwhile there are many investors from blue states owning elsewhere, likely because their own backyard markets are so high-priced.”

Many of these mom and pop investors are young professionals with good-paying jobs, or baby boomers with an eye toward retirement who want to invest some of their home equity into these lower-cost properties, according to the report.

“A lot of demand is people in the Bay Area and New York City looking to buy in the Southeast,” Gary Beasley, CEO of Roofstock, an online marketplace for single-family rentals, told ATTOM.

“We have one Google engineer who just bought his sixth house,” he continued. “He said, ‘this is fantastic. Real estate is so expensive here, and I don’t want to be tied just to Bay Area real estate.'”

Here are the six states with the most out-of-state-owned investment homes—along with their median listing price from realtor.com®:

1. Florida: $230,000
2. North Carolina: $160,000
3. Tennessee: $105,000
4. Arizona: $210,000
5. Georgia: $180,000
6. Texas: $236,000

In comparison, real estate prices are often higher, particularly in the big cities, leading some residents to look across state lines for investment properties. (Florida and Texas are two exceptions on the list.)

Here are the six states with the most out-of-state rental property owners (also with median listing price):

1. California: $400,000
2. Florida:  $230,000
3. Texas $236,000
4. New York: $300,000
5. Illinois: $179,000
6. Virginia: $220,000

The post Why Are Blue State Buyers Investing in Red State Rentals? appeared first on Real Estate News and Advice - realtor.com.

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