Investor Real Estate Accounts

For real estate investors to keep track of their properties rental performance and tax information in one place.

This blog covers the general topic of real estate markets.

Posh Grocery Store Affordability Index

first posted: 2018-05-19 07:53:43.214870

As an out of state investor, the issue of comparing rental property nationwide is key.

A naive approach comparison of median rental yield leads means that deeply blighted cities get compared with dynamic and affluent ones.

Such an approach makes blighted cities more attractive. Another common ranking method is to factor appreciation over 1 year (which is a ridiculously short period). Even looking for consistent year over year appreciation can lead to unaffordable housing. The point is that distressed areas have such prices because it is difficult to invest there, and areas that appreciated the most rapidly may well have peaked to unaffordable levels.

I saw a podcast recently where it was claimed that high-end grocery stores like Whole Foods Market and Trader Joe's are a good indicator of a high-end neighborhood. The presence of such retailers ensures we compare affluent neighborhood nationwide.


(img credit: wikicommon)

We can use census data here to determine the areas that are growing the fastest over the period 2000-2015 and then see for each MSA in which postcode those retailers are located.

Using Zillow home value data by postcode, it is then possible to retrieve the median price and rent per sqft and figure out the gross rental yield in those most attractive areas. Amongst the MSA with over 40% cumulative demographics growth over 2000-2015, these 2 retailers are present. It is then possible to compare across state boundaries.

Here are the affluent zip code gross yield, for the nation's most demographically dynamic MSA:

  • Indianapolis IN pop cum growth 30% , gross rental yield 10.6%
  • Houston TX pop cum growth 41% , gross rental yield 8.6%
  • Dallas Fort Worth pop cum growth 38%, gross rental yield 8.4%
  • Atlanta GA pop cum growth 34% , gross rental yield 7.8%
  • Orlando FL pop cum growth 45% , gross rental yield 7.7%
  • Des Moines IA pop cum growth 29% , gross rental yield 7.6%
  • Charlotte NC pop cum growth 40% , gross rental yield 7.4%
  • Jacksonville FL pop cum growth 29%, gross rental yield 7.4%
  • Phoenix AZ pop cum growth 41% , gross rental yield 7.0%
  • Raleigh Cary NC pop cum growth 60%, gross rental yield 6.7%
  • San Antonio TX pop cum growth 39%, gross rental yield
  • Nashville TN 40% 6.7%
  • Colorado Springs CO 30% 6.5%
  • Denver CO 29% 6.4%
  • Charleston SC 36%, 6.4%
  • Greenville SC 56% 6.4%
  • Provo Orem UT 55% 6.2%
  • Austin TX, 60% 5.6%

You should note that local tax and insurance is much higher in Florida than other states so that 3% to 5% more needs to be deducted from gross yield to compare to other states such as Georgia or North Carolina.

California growing population MSA are San Bernardino, Stockton, and Bakersfield. Those grow as a result of overflow and sprawl and none of these have a Whole Foods Market, so those are not included. Mc Allen TX on the Mexican border also does not have a WFM so it was not included.

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