Real estate has always been a path to wealth, but it’s not always a smooth ride. The riskiest markets are also some of the most lucrative—where fortunes can be made or lost with a single swing in the economy. However, brave investors who take calculated risks in these volatile areas are finding themselves on the millionaire fast track.
Let’s take a look at housing markets where the risks are high, but the potential rewards are even higher.
Boom-and-Bust Cities
Speculative investors often flock to cities that undergo rapid economic growth. Consider Austin, Texas, where the tech giants have moved in and driven housing prices through the roof. The market is unpredictable, but investors who have timed their entries and exits here have made small fortunes.
Coastal Luxury Hotspots
The real estate markets of places like Miami and Malibu are notoriously unstable, but are playgrounds for the wealthy. These areas are risky bets because of factors such as hurricanes, rising sea levels, and market saturation. However, those who invested at the right time have seen property values double, or even triple.
International Markets Emerging
There are tantalizing opportunities in developing countries with growing economies, like parts of Mexico and Southeast Asia. It has low cost of entry and massive potential returns. However, political instability and changing regulations introduce a lot of risk. Still, savvy investors are making these markets goldmines.
Tech Boom Towns
Legendary are Silicon Valley’s high housing prices, but secondary tech hubs such as Nashville and Raleigh are the wild cards. As tech companies move into these areas, the prices skyrocket, but the market is too dependent on one industry for stability. The payoff can be huge for those investors willing to ride the wave.
Vacation Rental Hotbeds
Big profits are available in the short term rental markets of tourist heavy areas such as Aspen or the Florida Keys during peak seasons, but they’re susceptible to travel downturns. Those who understand seasonal trends and local regulations are cashing in big while those who don’t are left with empty bookings and high maintenance costs.
Urban Redevelopment Zones
Investors are attracted to inner city areas undergoing redevelopment. Property values can soar, but gentrification can encounter fierce backlash at the local level or be turned on its ear by economic shifts. Investors who are looking for emerging neighborhoods in cities like Detroit or New Orleans are seeing big returns.
Oil and Resource Towns
Take oil or mining dependent communities, like parts of North Dakota, where the market is hot, and you have explosive growth. When commodity prices fall, so do housing values. While making millions during booms, some investors have also been left holding properties no one wants.
College Towns
College towns seem like a safe bet to invest in—students always need housing, don’t they? But markets like Boulder, Colorado, have become expensive and competitive. While the market is risky, rising property taxes and changing rental laws, investors who bought early saw huge gains.
Post-Disaster Rebuilds
Housing markets in places like New Orleans after Katrina or parts of California after wildfires are high risk, high reward after natural disasters. The risk of future disasters is large, but those who invest in rebuilding can reap enormous returns.
High-Growth Suburbs
Rapid growth is occurring in the outskirts of major cities, such as the suburbs around Phoenix. It’s true that new developments and infrastructure projects can cause property values to skyrocket. Those gains could be quickly reversed, though, by overdevelopment or a cooling economy. Those with a knack for timing are cashing in while others watch values rise and fall.
Disclaimer: This list is solely the author’s opinion based on research and publicly available information.
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