Choosing the Right Location When Investing: Why Colorado and Texas?

10.01.22 7:48 AM By Michael Euperio

        While it may seem like a simple concept, location makes all the difference when it comes to real estate. It’s one of the key elements that attract investors and determine how appealing an investment opportunity is to them.


There are so many things to consider when choosing the location. Things such as accessibility, centrality, neighborhood, or developments whether present or future, may also affect your decision to invest. 


At Redeem Investments, we chose Colorado and Texas, specifically Dallas-Fort Worth and Central Texas as our focus markets. 


Keep reading to understand our rationale. 

COLORADO

There are 3 reasons why Colorado is one of the best real estate markets to explore: 


  • It has a business-friendly environment. 
  • A good tech ecosystem; and 
  • High quality of life


Additionally, with people making the shift to working from home, Colorado has seen an influx in the number of people moving into the state, making the demand for rental properties soar. The real estate market in Colorado is showing no signs of slowing down. This can also be attributed to the state's growing economy and its vibrant community.


Colorado has the 17th-best employment recovery from the recession experienced during the pandemic. Its employment also grew to 3.9% in October 2021 (12th fastest nationally). 


The Colorado multifamily market is also bouncing back after getting blows from the effects of the pandemic. According to reports, around 78% of the workforce has already returned. Colorado Business Economic Outlook projects a 2.7% employment growth next year, reaching a new record employment level in the state.


Population growth in Colorado from 2010-2020 ranked 6th-highest in the US with a growth rate percentage of 14.8%. 


The growth rate between 2019 and 2020 slowed because of the pandemic. The same is true with net migration after it slowed to 27,300. 


With the country mitigating the effects of the pandemic, Colorado Business Economic Outlook reports that international migration will start to return in late 2021. 


Even with the population growth and net migration slowing down during the pandemic, Multifamily construction dramatically increased in 2020. This comes after concerns about the pandemic's impact on the multifamily market has been relieved. At the end of 2021, up to 19,200 multifamily units are expected to be permitted. That is a 38.8% increase compared to 2020. 


Let's take a look at Denver. 


Denver is now entering the recovery phase with the implementation of RISE Denver (Rebuilding for an Inclusive and Sustainable Economy Plan). With this, comes improving numbers within the multifamily market. Rents increased to 0.5% which amounts to $1,578, above the national average of $1,417. 


In 2020, Denver's population grew 0.8 percent after gaining 23,992 residents. This is double the national rate of 0.4% 


The employment rate is also springing back after the easing of pandemic restrictions. This allowed workers in the leisure and hospitality industry to recover 56,200 jobs. Moreover, Denver's largest sector- trade, transportation, and utilities- expanded to 9.7% or 31,600 jobs. More jobs are expected to be created with Amazon announcing its plan to hire 3,000 people in Denver. United Airlines is also set to hire more people after ordering 270 new aircraft. 


The Colorado multifamily market is definitely not showing any signs of slowing down. Although it is still recovering from the effects of the pandemic, the state has shown great resilience and is expected to continue growing in 2022 and beyond. 

TEXAS

        Texas offers outstanding multifamily real estate opportunities. The key factors are its thriving economy and the state's steady population growth which contribute to the high demand for rental properties, most especially apartments. 


The number of people moving to Texas has spiked in the past decade. The state of Texas is popular because it has a high population and enjoys a positive economy. This is because there are several Fortune 500 companies that are located in the state, creating jobs for its large population.


According to the Texas Quarterly Apartment Report for the third quarter of 2021, Texas is expected to have improved economic growth after the reopening of the economy. The report also shows that apartment demand is strong and occupancy rates are up over last year while rent rates are expected to increase as well.

Why our focus markets are centered in Dallas-Fort Worth and Central Texas?

        Dallas-Fort Worth has been forecasted to be a top property market in 2022. The demand for rental properties in DFW is primarily driven by the lucrative jobs available in the city, the heavy concentration of industries, low interest rates, and outstanding infrastructure. 

        Although faced with a huge drop in employment growth in 2020, DFW bounced back in 2021 with a 4.1% year-over-year change. Population growth is at 1.5% while income growth year-over-year change increased to 2.2% after a negative YOY change of -1.6% in 2020 - proof that the market is recovering well from the pandemic. 


According to Robert Kramp, Director of research and analysis for CBRE’s Texas-Oklahoma division, DFW attracts different types of investors, "from entrepreneurial buyers to private capital up to the large public (real estate investment trusts), pension funds, and other institutional investors."


Meanwhile, in Central Texas, the strong demand for rental properties remains strong. The key factors, just like the rest of the Texas area, are primarily its growing population, healthy job market, and thriving economy. 


Austin is considered a hot market with the employment rate gaining momentum at 4.3% YOY change compared to 2020’s -4.8%. Population growth is at 2.2% while the income rate increased to 1.9%. In sum, the multifamily market is regaining steam making it a smart choice for investors. 


Despite recording so many losses in 2020 during the height of the pandemic, the multifamily market bounced back and is expected to break records in the following years. 


We’re bullish on San Antonio as well. It’s known for being more affordable than its sister city just to the north yet still has diverse employment, rising incomes, and high quality of life with tons to do in the area. Zillow has rated it in the Top 4 of its hot housing markets for 2022.

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