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That's how Ingo Winzer, president and founder of Local Market Monitor, sees the future of rental markets for investors, but "investing in rental properties will be an attractive proposition for many years because of the increasing numbers of people who can't afford to be homeowners."

Undervalued Investment Markets Won’t Last Long

That’s how Ingo Winzer, president and founder of Local Market Monitor, sees the future of rental markets for investors, but “investing in rental properties will be an attractive proposition for many years because of the increasing numbers of people who can’t afford to be homeowners.”

LMM’s third quarter ranking of best 300 rental markets, co-sponsored by HomeVestors, also known as the “We Buy Ugly Houses®” company, found that the best opportunities are in the South, where five markets made the ranking’s top ten: n the Top 10, including Atlanta (number three), Fort Worth, Texas (number five), Little Rock (number six), Orlando (number eight), Jacksonville, Florida (number nine) and Baton Rouge (number 10).

Other top 10 markets are Las Vegas (number one), Columbus, Ohio (number two), Indianapolis (number four), and Stockton, California (number seven).

“The markets in the Top 10 listing all had strong job growth during the past year, and in many cases, strong home price appreciation, too, but are still undervalued by at least 15 percent,” said Winzer. “Even Las Vegas, where prices jumped as high as18 percent, remains 31 percent undervalued.”

David Hicks, HomeVestors co-president, noted that risk of investing in all markets across the country has decreased sharply. “Only six of the markets in the top 100 list are ranked as “speculative,” down from 13 during the last quarter. The others are ranked as either “low risk” or “medium risk.”

The “speculative” markets include Los Angles, Gary, Providence, Buffalo, Toledo and Cleveland. “Most of these markets have higher than average unemployment rates, but have other factors such as undervalued home prices that make them attractive, albeit more risky, investments,” Hicks said.

“Even though most local real estate markets have rounded the corner, opportunities for investment remain plentiful because home values in many markets are well below the level that local incomes can support,” Winzer added. “In these undervalued markets, both rents and home values will be increasing rapidly as the local economy improves and demand for housing runs up against the fact that there has been very little new construction in recent years.”

Hicks said that the pace of growth the company is experiencing reflects the strong housing market. “Our housing purchases have steadily increased over the past eight months and are on track to grow 60 percent over 2012. The interest in the housing market is also reflected in franchise sales – where we’re on track to add more new franchises than any year in our history.”

Since 2011, HomeVestors and Local Market Monitor (LMM) have been providing quarterly rankings based on the level of risk each market presents to real estate investors. The ratings concentrate on factors that affect the demand for housing and therefore affect home prices. The potential for price increases is the investment opportunity, and the potential for price decreases or stagnation is the investment risk.

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