Cities that rank in Tier 1 have famously been the up and coming cities for any and all real estate investors. Now, with over fifty cities with a population of one million or higher, real estate investors should be looking to Tier 2 and Tier 3 cities as their next opportunity for quality investment markets. This article will discuss why Tier 2 and Tier 3 markets are becoming so attractive and how investors can get their chance of making it in these markets.
When Tier 1 cities are talked about, most of the time, the cities that are being referred to are New York, Los Angeles, San Francisco, and Washington D.C. These cities have been on the list for some time and have no means to shift to different tiers in the near future. Tier 2 cities are commonly referred to as cities that have not reached their peak in the real estate market. Tier 2 cities are particularly attractive to real estate investors because of their affordability in the market compared to Tier 1 cities. Tier 3 cities are identified as having an almost nonexistent real estate market, and the opportunity for growth is large, but the risk is much higher for investors.
Tier 2 Cities:
Boston
Philadelphia
Atlanta
Miami
Houston
Seattle
Tier 3 Cities:
Detroit
Cleveland
Baltimore
Tampa
Pittsburgh
Portland
Why are Tier 2 and Tier 3 Cities so Attractive?
For real estate investors, Tier 2 and Tier 3 cities pose a better gain for their investments than Tier 1 cities. Some real estate investors claim that Tier 1 cities could be in the midst of a real estate bubble and have a very high-risk chance. Tier 2 and Tier 3 cities can have investments purchased and sold more quickly with higher returns and potentially more stability. Tier 1 cities can be overrun by large hedge funds who will not budge on pricing for the real estate properties. Some Tier 2 cities have not been touched by large companies and have fewer competitors because of it.
If you are a real estate investor, it is important to do your research on many of these upcoming cities. Be careful not to put cities in a broad spectrum or category, because you may miss out on opportunities in these rising cities!