St. Robert, MO: 18.5% Return on Investment (2011)
St. Robert is the city just outside of Fort Leonard Wood in Missouri. By the standards of many investors, St. Robert seems like an extremely small market that is hardly worth consideration by income property investors. However, the intrinsic demographics do not incorporate the impact of its location directly adjacent to a major training base for the United States Army.
The cornerstone of value for income property investors in St. Robert is the large population of military tenants and support personnel from the nearby Army installation. The reason why this produces such superior performance for income property investors is that military tenants are frequently stationed on one to two year assignments, meaning that they typically prefer to rent instead of buy. In addition to this, military personnel have steady employment form the Government. This makes it considerably less likely that they will stop paying rent because of unemployment. These factors combine to generate attractive rents relative to values in St. Robert and lower tenant turnover than is experienced in many other market areas.
The ROI profile for St. Robert is heavily tilted toward cash flow, with leveraged appreciation taking a back seat in the value equation. Our models predict extremely small value movements for St. Robert during 2011. Even in the case of a market value contraction, income property investors can realize returns from cash flow that are more attractive than many other categories of investment. Over the long-term, it is most likely that St. Robert will regress to a trajectory of modest appreciation. This will make St. Robert less likely to produce large spurts of value escalation, but also less likely to generate large value disruptions that can collapse investment portfolios. Markets such as St. Robert are most appropriate for the portion of a portfolio that is tilted toward stable cash generation.