Starting a new business can be an exciting time despite the challenges it presents. Today’s economic climate is presenting difficulties for many businesses, but there are still plenty of entrepreneurs willing to take a chance.
Each year, about 305 million startups are created. But, most fail. Businesses commonly fail due to a lack of cash. Poor budgeting, lack of sales, or debt, can drag a business under.
Failure to carry out market research is another reason for business failures. Location and demand are vitally important for establishing a successful new venture.
What Is A ‘We Buy Houses For Cash’ Business?
You have likely seen TV or internet adverts for cash house-buying businesses. A business such as house buyers Texas USA looks for investment properties to purchase and renovate.
These businesses often fix and flip homes for resale, or to rent. Because these investors deal in cash, they can purchase houses quickly which is beneficial for sellers who want to move quickly.
Fixing and flipping is a feasible way to enter the real estate industry. But, if you want to start a cash house-buying business, you must research and compare different markets.
How Do You Choose A Location For A Cash House-Buying Business?
Creating a successful startup takes some work. A business plan needs to be put together, and financing arranged. The many tips for starting a business include marketing strategies. But, this article is only concerned with finding investment locations for your venture.
There are a number of ways to evaluate which housing market to enter. Factors include demand and housing inventory for instance.
Considerations For Choosing A Housing Market Include:
- The competition
- Tax considerations
- Local regulations
- Foreclosures
- Sales times
- Migration patterns
- Cost of living
- Up-and-coming areas
- Undervalued/overvalued markets
- Rent yield
Market research is vital. You should look for areas with a healthy demand for housing. Domestic migration patterns help to identify housing markets where demand may increase. The higher the demand, the more property rises in value generally speaking.
Before looking at the best US states to begin your new venture, it is worth looking at some of these factors in slightly more detail.
Local Taxes
Research state taxes for property, business, and income. There may be tax breaks or incentives for new businesses to consider as well.
State Regulations
Landlord-tenant regulations may be of concern if you are considering renting property. Renting is a realistic way of generating income when the property mark is sluggish. Instead of flipping a home for a lower ROI, the property can generate rent until the sales market picks up.
Cost of Living
Places that are expensive to live generally have higher-priced real estate. Potentially, these states could represent higher returns on your investments. Conversely, states with affordable housing are more competitive. Research the cost of living in each state to determine the most appropriate markets for you.
Up-and-Coming Areas
Once you have established potential US states to invest in, start looking at specific areas. Any up-and-coming area is worth investigating further. Investment in infrastructure and developments will help to boost property prices. Getting in early will maximize profits.
Markets That Are Undervalued and Overvalued
It’s a risk to put too much stock in housing market valuations. With a little luck though, an undervalued market could provide a handsome profit. Conversely, you could lose a significant amount in an overvalued market.
Cleveland, Ohio, is ranked as one of the most undervalued housing markets currently. Buying homes for cash here could be a potential goldmine. But, there is the risk that house prices don’t shoot up as expected.
At the other end of the scale are overvalued markets. Investing in one of those could see your property’s value tumble if the bubble bursts, so to speak.
What Are The Best States For Buying Houses This Way?
Putting the work into researching different housing markets will help to identify which states are most promising. Finding genuine real estate properties takes time, but the rewards can be substantial.
Housing markets fluctuate and are subject to change for several reasons. In recent times, house sales have been hit by the pandemic and soaring interest rates. Global events affect financial markets which also have an impact on real estate.
Therefore, these recommendations for the best US states for cash house buying are suggestions based on current information and are subject to change.
Most Undervalued States In The US
Potentially, these states could see property price increases shortly. Ohio, New York, and California are undervalued, but only in certain areas. These areas could represent real estate opportunities if prices rise.
The further north you go in New York, the more affordable the housing. The average home in the US is $436,800 according to The Motley Fool. But, houses are selling for under $200,000 in Rochester.
Undervalued markets represent the possibility for appreciation. And properties may be rented out until the home’s value grows.
Best States For Rental Properties
The Zillow Housing Value Index is one way to measure how profitable a property will be for rent purposes. According to this metric, Louisiana and Alabama are excellent states for anyone looking at long-term investment and rental opportunities.
Property in some parts of Southern Alabama sells for around $166,000. The monthly rent is around $1,550. This equates to 0.93% of the property value.
Best States For Flipping Homes
Most cash for homes businesses will look for distressed properties to renovate and sell at a higher value. Some states in the US are far more profitable than others for this kind of investment.
The Best States For House Flipping Include:
- New Jersey
- Delaware
- Maryland
- Pennsylvania
ATTOM Research concluded that the average gross ROI on a Delaware house-flipping project was a whopping 96.1%. And the average gross profit in Maryland in 2022 was $143,900. This is well above the US average return seen from flipping houses.
Which Areas Should You Avoid?
Areas with higher-value properties are easier to make bigger returns on but they require higher levels of investment, and therefore more risk. Nevertheless, if you reinvest your profits for growth, your house-buying business can move into higher-end housing markets.
In the meantime, there are some US states worth avoiding. For instance, Idaho is highly appealing but may not represent great investment opportunities. Idaho has a low crime rate and a booming economy. Yet, the average gross ROI on an Idaho house flip is just 6.4% according to one Nasdaq report.
Some Of The Worst US States For Property Investment:
- Hawaii
- Illinois
- South Dakota
Hawaii is a beautiful state but, the cost of living is outstripping the average household income. And job opportunities are slim.
Illinois and South Dakota both have issues with high property taxes. Plus, employment is an issue. Rent prices have fallen in South Dakota. And Illinois has experienced record declines in population.
Summary
Many states offer great investment opportunities for cash house buyers. But, different criteria must be considered. Florida for instance has a less competitive housing market now. This increases the potential for striking a deal that results in a healthy ROI.
Other markets are undervalued such as San Francisco, California. But, there is no guarantee house prices will rise. Identifying housing market trends will help you to choose which areas to invest in.
But, don’t forget personal preference. Starting a business may require you to live in that state too. If you’re happy living in your chosen US state, there’s a good chance other house buyers will be too.
