Asset Based Lending is committed to helping our borrowers reach their financial goals through smart real estate investments, so our expert team has decided to highlight markets with lots of money-making potential. Each month we will do a deep dive into a real estate market that can benefit an investor looking to fix and flip, start new construction, or embark on some other form of real estate investing. This month’s market is Virginia Beach, Virginia – an area that has experienced steady growth for the last few years with a surge of new construction coupled with a strong rental market. Also known as the Tidewater Area and part of Virginia’s “Seven Cities” southeastern sector, Virginia Beach has become a favorite location for east coast real estate investors. With massive inventory shortage driving up home sale prices and one of the few rental markets to thrive during the pandemic, each part of the Virginia Beach real estate market is hot and favoring seller’s or landlords. We’ll touch on the major investment opportunities in the area based on current data averages from sources such as Redfin and Long & Foster.
An Explosion Of Investor Opportunities
Each real estate market is unique and caters to different investors: choosing an area to invest your cash is dependent on whether you want a stable and predictable market or if you’d rather risk a more volatile market for larger potential gains. Virginia Beach has been in the steady and dependable category for a few years now, with fix and flip investments bringing in profits that are well above average. Compared to the national average for fix and flip revenue, which as of 2019 was just over $60,000, the Virginia Beach fix and flips are seeing an average revenue of $78,800! The other numbers for the current real estate market help explain why the area is seeing such a rise of investments- for example, as of February 2021 the average home sale price reached $285,000 which is an 8% increase from the previous year. This initial purchase price is significantly lower than other popular east coast investment areas but has still seen strong enough gains year-over-year to make significant profit after flipping.
Even better than the high average revenue and low average purchase cost is the time that these homes are spending on market, with inventory lasting an average of only 25 days- a whopping 43% decrease from the year before! This highlights how quickly flips can occur in Virginia Beach, which means savvy investors could potentially chain together several lucrative deals back-to-back and walk away with a hefty profit. With a lower barrier to entry cost for property purchases than many other popular investment areas and a higher average ROI, Virginia Beach is an excellent choice for fix and flip investors. Of course, with record low inventory and a highly competitive market, investors must put in some extra work and form a strong network to find properties before they’re already snatched up. While the competition is tight, borrowers can make the most of this hot seller’s market by working with fast-moving lenders like Asset Based Lending to secure any opportunity they can find.
Filling Inventory Gaps in Virginia Beach with New Construction
Real estate markets across the country are constantly reporting the same issue: inventory shortage. Virginia Beach is no different, with a staggering 65% less inventory in February 2021 compared to the previous year. This is where experienced builders and contractors can take advantage of market conditions: having the ability to fill inventory gaps while designing the build to meet buyer price points, style preferences, etc. is unique to their investment position. New construction also has the benefit of sizing the build, and with homes in the area currently selling at $172 per square foot, a 12% increase from the year before, builders can more accurately estimate what their project will sell for. Given how hot the market is and the small amount of time inventory is remaining available, the chance of pre-selling the new construction is high and could lead to funding another new construction even faster.
As we mentioned, a major benefit that experienced builders and contractors have over fix and flip investors is their ability to design builds around the exact style preferences for the area. For example, three of the most popular home features in the Virginia Beach area are large walk-in closets, large kitchens, and recreation rooms. Homes equipped with these features are receiving more attention for their online listings and are being offered above asking price more often than homes that lack these features. While fix and flip investors can spend a little more to renovate around specifications like this, the new construction projects that include these features from the start are more cost effective and therefore result in a higher ROI for the investor. With the market already being largely competitive and homes typically receiving multiple offers, ensuring your home stands out by meeting the market’s desires head-on is the best way to get a leg up on the competition.
The Growing Rental Market In Virginia Beach
The global pandemic caused a large shift in living styles, with many people wanting to escape cramped city spaces and home sales shooting through the roof as people began spending more time at home. This caused most rental markets to take a hit, especially major metropolitan areas along the east coast like New York City or Jersey City, but Virginia Beach is a different story. In fact, the area’s rental market grew by 6% over the last year, with the average rent price increasing to $1,296. Over 85% of the rental market is charging more than $1,000 per month for rent, making it a lucrative option for income-producing assets.
It’s important to research the inner workings of a city so you can understand the local market and make an informed investment. Our regional manager for Virginia, Scott Davis, has keen insight into why the rental market in Virginia Beach continues to grow despite all nearby rental markets sinking: the area’s military population. “You’ve got military personnel that are buying houses and have to relocate, so they turn around and rent them out, so this market is always turning over. When you have 80,000 people on the naval Norfolk base, when you’ve got 30,000 DOD personnel, countless other family members…you’re always going to get very good rent rolls from a buy-and-hold standpoint.” Having a constant stream of tenants and rental property turnover makes the city an excellent idea for BRRRR investors that want to begin or grow their Virginia rental portfolio.
Final Thoughts For Virginia Beach Real Estate Investors
The Virginia Beach area has been a blossoming investment opportunity for the last few years, but the secret is out with investors starting to carve out their niche in the area. Not only is the market ripe for fix and flip investors and residential new construction, but it’s one of the few rental markets that has grown over the last year rather than remain flat or decline. While the market is currently a highly competitive environment, experienced investors who know how to find the right opportunities can benefit from this hot seller’s market. If you’re a real estate investor in Virginia Beach looking for hard money loans for fix and flips, new construction, or long-term rental property, then contact us today.