Zip codes lauded for their popularity with young professionals and families are ripe for real estate investment
If you’re in search of a locale to launch a new business or invest in real estate, a recent analysis by the real estate website, RealtyTrac.com may shed some light on some regions that may have been off your radar.
In its analysis of 83 zip codes nationwide, RealtyTrac narrowed the list to the top 25 “hipster” zip codes when it comes to scoring returns on your real estate investment.
Real estate experts in highly rated hipster zip codes in Minneapolis, Seattle and Alexandria, Va., agree that densely populated urban areas with high walk scores –commonly inhabited by young professionals and families – make good locations for real estate investment. And, because they are hot spots to live in, small businesses in these locations thrive, too.
To understand why, it’s helpful to first understand how RealtyTrac defined hipster areas for its analysis. (Hint: It has nothing to do with fixed gear bikes or mustaches.)
RealtyTrac analyzed markets with large populations in the 25 to 34 age range, zip codes with a minimum of 50 percent rental occupancy, and areas where at least 20 percent of the population commutes by foot or public transportation.
For purposes of the analysis, “hipsters” are simply young professionals that value easy access to a city, its conveniences and public transportation.
It’s hardly a surprise, then, that investments in "hipster-preferred zip codes carry high rates of return.
In RealtyTrac’s fifth-ranked Alexandria, renters enjoy proximity and access to the Washington’s Metro rail system and the city’s beltway, which means easy commuting to Maryland or Washington.
“From an investor’s point of view, a zip code like that, which would have great access to the city but it would also have good access to other places people need to go, is going to be very desirable,” says Suzanne Granoski, a real estate agent in the Alexandria and Arlington, Va., areas.
In Alexandria, investors see the area as a safe place for their money because people new to the metropolitan D.C. area are more likely to rent than buy property, Granoski says.
Popular areas translate into higher rents, lower rates of vacancy and fewer foreclosures – all favorable aspects for a real estate investor.
But investors aren’t the only parties that can benefit from such popular zip codes. These areas also present unique opportunities for small businesses to thrive, supported by the local community.
Residents in the community feel a sense of duty and responsibility for small businesses, says Mary Bayat, president of the Northern Virginia Association of Realtors and a resident of Alexandria. “We support them because we all have to do it… I feel we don’t want to lose the quality of life and those small businesses are part of the quality of life.”
The same is true for the Twin Cities, says Pat Paulson, a real estate agent with Exit Realty Metro in Minneapolis. “It’s kind of a self-reinforcing cycle; the businesses are looking for highly populated areas where there’s population density, and where there’s disposable income.” He says that in turn, neighborhoods that have a diverse collection of local restaurants, bars, stores and coffee shops are attractive to new residents and businesses.
In Minneapolis, the trend for young people is to bike to work or a friend’s house, or take the bus, says Dave Doran, who is also an agent with Exit Realty. Three Minneapolis zip codes that made RealtyTrac’s top-25 list all boast proximity to its downtown area with city conveniences within walking distance.
Doran, a property owner in one of Minneapolis’s hottest zip codes for more than a decade, says vacancy is not even a “remote concern.” Investment in popular areas holds promise for rising property value, and little worry for finding tenants to fill openings.
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