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Top 25 Hipster Zips for Returns on Rental Properties

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While the precise definition of hipsters is elusive — which is likely just how they want it — there’s no doubt the culture surrounding the hipster lifestyle has a major impact on local real estate markets, and mostly in a positive way.

Thanks to an influx of trendy restaurants, bars, coffee shops and other amenities, a neighborhood branded as hipster is likely to see property values and rental rates rise while vacancies and foreclosures decline. As a nascent hipster market emerges, it can be an extremely appealing target for real estate investors looking to make some quick fix-and-flip profits or to purchase rental properties that provide a steady cash flow and the promise of strong appreciation going forward.

RealtyTrac recently analyzed zip code-level data to identify established and emergent hyper-local hipster markets where investors can realize solid returns on rental properties while also enjoying low vacancy rates that ensure they won’t have much down time between renters. (We’ll look at top hipster zips for fix-and-flip profits in a later analysis).

To select the top markets we started with zip codes with a disproportionately large population in the prime hipster age range — between 25 and 34. Nationally that segment accounts for 13 percent of the total population. We focused on zip codes with more than 20 percent of the population  in that age range.

Additionally we narrowed the list to zip codes where at least 20 percent of the population either walked to work or used public  transportation to get to work given that easily walkable, densely populated neighborhoods are another hallmark of hipster culture.

On the real estate side we narrowed the focus to zip codes where renters accounted for occupancy in at least 50 percent of all housing  units, and where the vacancy rate on rental properties was 5 percent or less. All of these filters left us with only 83 zip codes nationwide, and we sorted  those 83 zip codes by gross yields based on fair market rents and median home prices to come up with the top 25 list, all of which had gross yields above 4.5 percent.


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Comments

Thanks for your insightful comments, Sequim. Certainly looking only at the data has limitations that only on-the-ground intelligence like that you provide in your comments can overcome. However, I would argue that sometimes it's valuable to look at the data in a vacuum can be a valuable first step to avoid allowing emotions and pre-conceived notions or a neighborhood (or property for that matter) to bias one's decisions about real estate. Maybe this particular zip code is not a classical hipster neighborhood, but it certainly could be a great place to buy rental properties that we may not have found if we only limited our list to places that were already identified hipster meccas. As for the lack of inclusion of zip codes in Portland or the East Bay, there were several zip codes in both of those places lower on our list. While they matched the demographic requirements of the analysis, they fell short on the real estate requirements primarily because of extremely low rental yields. I would venture to guess that these markets have already been branded as "hot hipster" markets and therefore home prices have shot up so high that it no longer makes sense to buy properties as rentals there unless possibly one is buying distressed properties or some other below-market property. Posted: December 6, 2013 by: darenb
This is a perfect example of incomplete data leading to an entirely incorrect conclusion. I am very familiar with the zip code area in Bellevue, Washington. Yes, it has all of those attributes. But there are no hipsters there nor likely to be any in the near future. The Millennial age cohort is the result of the nearby MIcrosoft company agressively hiring young workers from China and India on a temporary basis for training. Since they are in this country only for a few years and are at entry level salaries, they rent. The area has always had a great number of apartments in the moderate price range. Since they live close to where they work, they take the bus. But not what you might think. Its shuttle buses operated by Microsoft. Because the area has a limited number of apartments and is boxed in by stable single family neighborhoods, the vacancy rate is low. Finally the apartments are interspersed with box box retailers, supermarkets, and strip malls, which can be walked to, albeit 5-10 blocks. But people do walk to them, as they tend not to own cars. This single, massively erroneous (and locally laughable) conclusion should lead you to realize that you might need to dig a bit deeper into the other areas you cite. The mere absence of Portland, Oregon and the East Bay area further indicates a misreading of the data. Sorry, folks, you need to work a bit harder than this. Posted: December 5, 2013 by: Sequim

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