San Antonio, TX: 16.1% Return on Investment (2011)
San Antonio experienced value stabilization in 2009, coming off a 2007 value peak. With fundamentally sound economics for the city, and a strong business environment, San Antonio is expected to resume its long-term trend of modest, steady value appreciation once a bottom in values is reached. Our models anticipate that this bottom will occur in 2011, resulting in modest net appreciation for the year. Currently, approximately 19% of listings are from foreclosures.
The state of Texas has become a destination point for businesses looking to escape the heavy taxes and regulatory of California. San Antonio also benefits from a history of low market values relative to the national average. The ROI profile for San Antonio is relatively balanced with moderate positive cash flow forming the basis of income property returns. By building your income property portfolio around healthy cash flows, it affords you the freedom to wait out value fluctuations so that you are never forced to sell during a value trough. The thing to consider when thinking about leveraged appreciation is that it only exists on paper until the property is sold and the gains or losses are realized. This means that ‘staying power’ from cash flow creates incredible power for you as an income property owner.
With attractive cash flows forming the base of expected returns available to investors, San Antonio represents a favorable opportunity. There is also the possibility for a secondary benefit if market values in San Antonio regress toward the national average. The state of Texas is expected to attract a significant amount of in-migration over the coming years, because of the superior employment option and attractive business environment. This effect will manifest itself in one of two beneficial outcomes. One possibility is that the new residents will purchase property, which drives up market values and increases your leveraged appreciation. The other possibility is that the new residents want to rent their dwelling, which will strengthen market rents.