Investors continue to seek loans for rental properties in Iowa, building rental portfolios with cash flow and appreciation in mind. The Hawkeye State is a current favorite of real estate investors due to many factors. These include a strong and stable economy, low vacancy rates and steady demand for rental housing and some of the lowest Rent-To-Income Ratios in the country, indicating a large potential renter pool and room for rent growth! Easy Street Capital is proud to be a leading provider of investment property loans for real estate investors in Iowa!
Types of Loans for Iowa Real Estate Investors
When it comes to real estate investing in Iowa, there are many markets and types of investment property loans to choose from. For investors that like to get their hands dirty, rehabbing run down properties, hard money renovation loans are a perfect choice! These loans allow you to buy a property quickly and finance your rehab costs as well! Once you are done, you can either “flip” the property for a quick profit or pursue the BRRRR Strategy by renting it out and then refinancing into a long-term, low-rate DSCR loan!
Long-term DSCR loans offer excellent investment opportunities for individuals seeking to invest in turnkey rental properties. “Turnkey” properties are those that are ready for immediate occupancy and require no renovations. They are typically single-family homes that are fully furnished for either short-term or medium-term rentals, and are ideal for generating cash flow and potential price appreciation.
DSCR Loans for rental properties are typically offered at fixed interest rates for thirty years, which provides long-term stability to investors. Given the steady increase in rental income and property appreciation over time, this fixed interest rate is beneficial in keeping the cost of debt constant while the cash flow increases over time. This makes it an attractive investment strategy for those seeking long-term financial stability.
One of the favorite metrics of real estate investors to spot profitable markets is the Rent-To-Income Ratio. The Rent-To-Income ratio measures a city’s average market rent against its median household income. The higher the Rent-To-Income ratio, the harder it is for renters to afford the prevailing rents in the city. Conversely, if the Rent-To-Income ratio of a market is lower than average, it means there is a large pool of potential renters for investment properties. Additionally, if the city is growing, it means that rents have room to increase significantly, meaning more cash flow and profits for landlords that lock in their debt payment costs for long-term periods by using DSCR Loans. Iowa may be the nation’s number one state for lowest Rent-To-Income Ratios!
Where To Invest In Real Estate In Iowa
Iowa is an overlooked market for real estate investors because of its smaller, lesser known markets. However, the state offers great potential for each type of real estate investor, and generally has less competition than larger, coastal states! Des Moines is the state capital and the most populous city and a major center of the US insurance industry. Cedar Rapids is the state’s second largest city and a blossoming center of arts, culture and museums in Iowa. Davenport, Iowa is the third largest city in the state and part of the “Quad Cities” metropolitan statistical area, which also includes Bettendorf, and the Illinois cities of Rock Island and Moline. Additionally, the college towns of Iowa City (University of Iowa) and Ames (Iowa State) offer sizable populations of renters.
Des Moines
Des Moines is the capital of Iowa and the largest city in the state. With a metropolitan statistical area population of roughly 700,000, Des Moines is one of the largest urban centers in the Midwest. The city boasts a thriving economy with a strong focus on insurance, finance, and government. Due to its favorable legislation regarding insurance, the city has been dubbed the “Insurance Capital.” Insurance companies such as Principal Financial Group, Fidelity & Guaranty Life, and Allied Insurance are headquartered in Des Moines, providing a solid employment base for renters. The city and surrounding area is also home to many universities and colleges, including Drake University and Des Moines Area Community College. These institutions attract a large number of students and young professionals who need rental properties.
Des Moines’ strong economy and diverse population make it an attractive market for real estate investors. The city’s growing job market and population growth create a steady demand for rental properties, with opportunities for long-term leases, medium-term rentals, and short-term rentals. The city also offers a variety of attractions, such as the Pappajohn Sculpture Park, the Greater Des Moines Botanical Garden, and the Iowa State Fairgrounds. These amenities provide a robust market for short-term rentals.
Overall, Des Moines’ strong economy and diverse attractions make it a great market for real estate investors looking to invest in single-family and multifamily properties.
Cedar Rapids
Cedar Rapids, located in the eastern part of the state, has a population of over 133,000. This makes it the second-largest city in Iowa. The city has a diversified economy, with industries such as healthcare, manufacturing, and education playing key roles.
Real estate investors can find affordable investment opportunities in Cedar Rapids, with the median sales price for a single-family home in January 2024 at $177,750, according to Redfin. Notably, this reflects a 7% year-over-year increase, signaling robust growth and potential returns. With its affordable housing market and a population boasting strong incomes, Cedar Rapids emerges as an enticing market for long-term rental properties.
Cedar Rapids also has several cultural attractions, such as the Cedar Rapids Museum of Art and the Paramount Theatre. The city’s location in eastern Iowa also makes it a desirable destination for tourists throughout the year. Top attractions include the Cedar Rapids Freedom Festival and the NewBo City Market. This provides a robust market for short-term rentals, especially during peak tourism seasons.
Davenport
Davenport, Iowa is a growing city in eastern Iowa with a population of over 102,000. The city has a diverse economy, with industries such as healthcare, education, and manufacturing playing key roles. Davenport is also home to many cultural attractions, including the Figge Art Museum and the Putnam Museum and Science Center. Its vibrant downtown area has many shops and restaurants that attract both residents and visitors.
Davenport is also one of the top markets in the country for investors seeking low Rent-to-Income ratios. According to the Zillow Observed Rental Market February 2024, the average market rent in Davenport is $950 per month. Per the World Population Review, the 2024 median household income in the city was $59,890. This results in an ultra-low average Rent-To-Income ratio of 21%. Investors in Davenport can likely expect low vacancy and delinquency and a well-qualified pool of tenants.
Real estate investors can take advantage of both long-term and short-term rental demand in Davenport. The city hosts big events such as the Quad City Airshow and the Bix 7 Road Race. These bring in visitors and provide a great opportunity for short-term rental income. With its location near major metropolitan areas such as Chicago and St. Louis, Davenport offers a prime opportunity for investors looking to get in on a growing market.
Iowa City
Iowa City is home to the University of Iowa, the flagship university in the state. But it’s not just a college town. Iowa City has a population of over 77,000, making it the fifth-largest city in the state. Its also home to the University of Iowa Museum of Art.
Iowa City is a great market for real estate investors who specialize in niche strategies, such as short-term rentals or student housing. The University of Iowa, home of the “Hawkeyes,” boasts an enrollment of over 33,000 students. While investment properties aimed at students can be a risky strategy, if done right, they can provide very lucrative returns. Savvy investors select properties well-located near campus and that rent to reliable students. Student housing rentals can earn returns well beyond normal long-term rentals.
Iowa City is also an underrated favorite among short-term rental investors looking to capitalize on specific events that draw in visitors. The University of Iowa Hawkeyes are typically a very strong team in football, basketball, and wrestling, and attract lots of visitors for games over the course of their respective seasons. In addition, the city hosts a variety of events such as the Iowa City Jazz Festival, the Iowa City Book Festival, and the Iowa City Arts Festival. This provides year-round demand drivers outside of sports.
Overall, Iowa City’s diverse attractions and growing population make it an attractive market for real estate investors. Especially those looking to specialize in student housing or short-term rentals.
Ames
Ames, Iowa is a college town located in central Iowa with a population of over 67,000. It is home to Iowa State University, which has an enrollment of over 27,000 students. The city is also known for its vibrant arts and culture scene, including the Octagon Center for the Arts and the Brunnier Art Museum. Iowa State also provides major college sports, with the Cyclones a member of the Big 12 conference. Real estate investors can target the student housing market or long-term rentals.
Ames has been growing steadily, with Redfin reporting a whopping 15.4% increase in median sales price ($257,000) year-over-year as of January 2024. With the university and several federal government-backed agricultural labs, Ames has maintained extremely low unemployment rates in recent years. As of December last year, it’s unemployment rate is reported at just 1.8%! With a long-term average of 2.87%, Ames is a potential goldmine for investors of long-term rentals, considering the excellent employment numbers and track record.
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Ready to invest in real estate in Iowa? Easy Street Capital is Iowa’s best provider of investment property loans for both hard money rehabs and long-term rental properties.
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