Emerging Trends In Real Estate Investing

better Editor’s Note: Dennis Fassett is a former corporate finance executive turned real estate investing “Cash Flow Mercenary.” Dennis specializes in single-family and multi-family cash flow properties and thoroughly enjoys assisting his fellow investors with their own strategies, including how to buy your first apartment building.

As an ongoing contributor to Mogul’s “Market News Updates,” Mr. Fassett provides us with his own unique, lively, and thought-provoking commentary on the timely industry news and events of today that are impacting our industry. And be sure to check out his other super-helpful Market News Updates. For now, enjoy...

From Dennis Fassett, Cash Flow Mercenary...

A crashing Chinese economy, crashing oil and other commodity prices, and other factors have made the 2016 economic outlook seem dark at best.

Real estate is not without its risks either. With more interest rate increases likely, more difficult-to-get mortgages, an apparent slow down in the market, and the yet unknown impact of the oil market – there is definitely cause for concern and vigilance.

On a positive note, though, according to the 2016 Emerging Trends in Real Estate, which was recently released by the Urban Land Institute, the outlook for the next 12 months is rosy, with one analyst going so far as to call it "doggone good."

What trends are contributing to their rosy analysis? Well, here are five trends that they identified that we, as investors, can use in our businesses this year.

1. Target “Second Tier” Cities

It's no shocker that cities such as Austin are taking off. These 18-hour cities (as compared to high-profile, 24-hour cities such as New York and San Francisco), are expected to perform incredibly well this year.

The report suggests that, in addition to having a hipness factor, cities such as Nashville, San Jose, Portland, Austin and Raleigh-Durham, benefit from lower costs of living, the increasing ease of staying connected far from main hubs, more upside from affordable and available investment opportunities, and increasing sophistication from Realtors and investors.

2. Millennial Parents Move to the 'Burbs

suburbs Millennials have traditionally been painted as a generation obsessed with urban living, but just like their parents and grandparents, they want homes and good schools for their kids.

While this demographic has put off having kids longer than previous generations, studies suggest a larger number will soon become parents, and quickly fuel a suburban boom, especially in areas surrounding markets such as Hartford, Milwaukee and Pittsburgh, which have seen post-recession job growth in the core.

One survey shows that 6 out of 10 Gen-Y respondents expect to live in a detached single-family home five years from now. Of course, this doesn't mean they'll be living in the suburbs of yesterday. Suburbs (and developers) that replicate more Main Street living, including transit-oriented development and offer transportation options connected to big urban centers will see continued growth.

3. New Housing Options and Ideas

The concept of homeownership may be experiencing a significant and serious shift. Rates of homeownership have dropped from roughly 70% before the Great Recession, to 63.5% in the second quarter of 2015.

What's striking is that the shift is seen across the board in all age groups. That's led to an increased demand for rental housing and a willingness to experiment with concepts such as micro-housing. Affordability is an issue, and the report is blunt about the need for better options.

4. Urban Agriculture Is On the Rise

While conceding that we're not likely to see silos dot the skyline anytime soon, the report suggests that an increasing number of viable urban farms and rooftop gardens including Brooklyn Grange in New York, large urban farm operations in Detroit, and a forthcoming vertical farm in Newark, New Jersey. Heck, I know a bunch of people in Detroit who consider themselves “urban farmers.” This is definitely a trend to watch.

5. Where Does All the Foreign Cash Go?

Capital flow into the U.S. real estate market isn't slowing down. Foreign investment in the U.S. was $497.4 billion in the 12 months ending June 2015, up 24.6% year-over-year. The volume for 2016 is expected to be equal or greater.

This pool of investment will go far in shaping the real estate landscape. The report suggests the likely places this capital will flow include the 18-hour cities, alternate real estate investments and renovation projects. You should be focusing on getting your share of that pie.

So while there’s risk in real estate investing, there of course is opportunity. A ton of it. Being successful and profitable is all about sniffing out these opportunities and taking advantage of them.

What’s Your Plan?

Will you be looking into investing in 18-hour cities, alternate real estate investments and renovation projects? Or will risk keep you where you are? Share below.