What makes real estate investing in Springfield, Illinois special?
Real estate is a great area to invest your cash in, and Springfield Illinois demonstrates this nicely.
If you aren’t familiar with real estate investing yet, I would recommend our article on real estate investing across the USA here — because 80% of all real estate investing is the same, and this includes Springfield as well.
If you’re already familiar with real estate investing, you should know that Springfield isn’t like the average city in the USA. There are three very special features that make Springfield really stand out and shine as a real estate sector.
First, housing prices are extremely cheap ($100/sq ft).The cost of constructing a new house is about $100/square foot or more. This is important because it means that new supply of housing is not created. Lack of new supply tends to make real estate rise in price (supply and demand).
However, the low per-unit cost of housing in Springfield means that the overhead to owning a home is relatively high. For example, in Boston you could buy a $2 million house and rent it out to just one person. In Springfield, $2 million would get you 40 houses and you’d need to rent all 40 out to make any money. The amount of work you need to put in to rent 40 units out, especially in lower income neighborhoods, will be substantial!
Second, the rental yield (cap rate) in Springfield is very high. This is important because it means that your money will grow faster here than in other cities. In other cities, the yield is usually under 5%, but in Springfield it is closer to 10% (or higher).This is because Springfield is a relatively lower income part of the United States. Many tenants don’t have savings to buy houses, which means that 1) housing prices are low because they aren’t being bought by residents and 2) housing rents are high because residents have to rent. The math works out to generate the amazingly high yield rates of above 10% in Springfield.
Third, it hasn’t experienced much price fluctuation over the last couple of decades. This is important because it means that the yield rates listed above are unlikely to change drastically anytime soon. If you are going to invest in real estate, you want some assurance that what you are doing will be profitable 5-10 years from now.
Springfield is an amazing place to invest in real estate. If you are going to buy real estate in the USA, you should strongly consider Springfield.