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Cities with Affordable Homes

By Michele Lerner

What cities in the United States have properties or homes that are actually affordable? After the housing crisis, real estate prices have shot back up and made many cities actually quite expensive to live in, whether you're trying to buy property or even rent.

Real estate investors interested in building long-term cash flow need to put together three things to make a wise property investment: an affordably-priced property, inexpensive financing and a reliable renter.

Low mortgage rates have made financing less costly and experienced investors know they need to do their due diligence to find a renter who will pay on time and stick around for a few years. The property angle may be the hardest to work, but with home sales dropping around the country this year; sellers may be more willing than ever to bargain with buyers.

All real estate is local, so property investors should look at local prices and market trends, not national numbers. Forbes magazine recently looked at 224 metropolitan statistical areas where the National Association of Home Builders (NAHB) tracks home affordability to come up with a list of the most affordable places to buy a home. The NAHB compares the income of the local population with the median price of a home to determine what percent can afford to buy. For investors, this means these are places where the home prices are generally a bargain and could be a good investment to hold onto for a few years.

The Forbes list not only compares home prices can income, but it also looks at the local economy to be sure that residents have good enough incomes to buy a home (and, therefore will have the income to pay your rent if you are an investor), that taxes are low and that home prices are expected to rise. Perhaps the most important factor in the ranking of these cities is whether property values are rising or falling, since investors do not want to jump in when prices are still dropping.

Topping the list for places where buying a home could be a good investment are Pittsburgh, Pa.; Indianapolis, Ind.; and Chattanooga, Tenn. Louisville, Ky. placed fourth on the list. Oklahoma City, Okla. came in fifth.

The list is rounded out by Syracuse, N.Y.; Rochester, N.Y., Columbia, So. Carolina; Dayton, Ohio, and Cincinnati, Ohio.

While real estate investors should consider some of these locations for bargain buys, they also need to factor in their own location.

Remember that if you are investing in property that is more than an hour or two away from where you live, you may have to pay someone to function as a property manager. Sinking too much money into management services could quickly erode the benefit of that bargain home price.

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Michele Lerner, a real estate expert and freelance writer with 20 years of experience, is the author of “HOMEBUYING: Tough Times, First Time, Any Time”.
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