If you look at the REI Nation repertoire of investment markets, you’ll no doubt notice a trend. We tend to gravitate towards southern markets. While we’ve dipped into a bit of the Midwest in Tulsa and Oklahoma City, the farthest we’ve gone north is St. Louis, Missouri.
Naturally, this is a calculated decision on our part. The simplest explanation is that REI Nation was born in Memphis, a distinctly southern city, and we consider it our home base. It’s only natural, then, that expansion would radiate outward from there.
However, there are more reasons for our market picks than a convenient distance from Memphis.
Before we narrow in on our reasons for investing in southern markets, we’ve got to zoom out and see the more broad, universal reasons for investing in these markets.
3 Reasons Southern Real Estate Markets are Ideal for Investors
Affordability
If we look at the South versus northern and western real estate markets, there’s one detail that emerges very quickly: the South gives investors more bang for their buck. Multiple factors contribute to the relative affordability of southern properties: lower cost of living, lower cost for land, more affordable construction labor and materials, and regional income statistics.
A $200,000 house in Alabama is going to offer more square footage and better upgrades compared to a home at the same price point in Virginia.
For real estate investors, particularly those living in other parts of the country where the cost of living is higher, this is highly advantageous. Some of the costs you see in the South may seem downright cheap in comparison to your local markets. Because your money goes farther in these markets, you’ll find that acquiring properties and portfolio diversification is that much quicker.
Though the rental income may be at a lower price point than you would see in primary markets, the opportunity to diversify means that you can multiply your income streams and hedge against risk through diversification.
Climate
Each and every market comes with its own unique risks and challenges. While you can point to the South as being more impacted by tornadoes and hurricanes each year, the North almost always has the guarantee of snow and cold-weather issues that the South typically avoids.
Now, there’s nothing fundamentally wrong with northern real estate markets. However, we have to acknowledge the added costs and challenges. Frozen pipes, roof damage from snow, winter heating costs...these things add up each year. A harsh winter can and will hurt your returns for the season. By contrast, the South rarely sees snow and freezes tend not to last.
Suburban and Rural Spaces
While this has long been a benefit of southern markets, its importance has only been highlighted by market shifts due to the COVID-19 pandemic. Southern markets offer more space and sprawl than more dense, primary urban markets. We’ve seen this year that homeowners and rental residents alike are coming to value their space (which they can afford more of in a southern market), a great climate (which the South boasts), and more space between their neighbors.
Be sure to check out: Despite Real Estate Market Flurry, Renting Reigns
The reduced population density in southern cities is hugely attractive, especially now. Even cities like Houston, TX — though massive and the fourth largest market in the U.S. — covers an astounding 669 square miles. Considering that Los Angeles only covers 468.7 square miles and has a population of over 4 million compared to Houston’s 2.4 million, that’s more wiggle room for Houstonians. Even in the biggest cities in the South, there is room to spread out into suburban and rural spaces.
The REI Nation Rule of Thumb
Those are some general reasons that advocate for investment in southern markets. But what about REI Nation, specifically? While the reasons listed above certainly factor into our decision-making, we are particularly motivated to invest in southern markets for one distinct reason: Quality and reputation.
REI Nation and PPMG (our in-house property management group) have two primary hubs. One is in Memphis and one is in Dallas. When we consider new markets, we’re not looking at what’s hot and what’s going to be lucrative in the short-term. We’re looking at what is sustainable.
For us, we want to be within a reasonable distance of each of our markets to increase ease-of-travel for our teams. We want consistent training to be possible, check-ins to be feasible, and for both hubs to be accessible to other markets.
For example, Mark Anderson, our VP of Renovations, oversees all renovations in each of our markets. He drives our standards, both for our teams and for our vendors. We have members of our teams that travel to our “satellite” markets for weeks at a time to observe and train — ensuring that our standards are not just upheld but exceeded in each city.
Maintaining the quality and integrity of our systems and the experience for vendors, residents, and investors is paramount. We ensure this by the careful and thoughtful selection of each market we invest in.
Invest with REI Nation and take advantage of hand-selected markets ideal for buy-and-hold investing. Talk to your advisor today!
