I'm considering buying an investment property (SFH) wherever Amazon HQ2 (second headquarters) goes. Amazon is supposed to announce the location before year end.
In general, I wouldn't invest at this stage of the RE market, as it seem to approach it's peak, at least in the well-developed cities. But could Amazon HQ2 monster investments compensate potential market downturn?
Most likely Amazon will go to expensive places (e.g. Northern Virginia or Washington DC) where prices has already skyrocketed and cap rates are miserable. These properties will hardly cash flow, most likely go cash flow negative if I take a mortgage (which I'm going take).
If anyone thought about it, please share your opinions. Thanks!
Looks like it's going to be Washington DC, Northern Virginia. I'm sure there will be a boost and a man and property prices as a result. This is a structural step up on the demand curve. Obviously, it will be tricky to buy after the announcement. The people who get in the most are those who already on over there. Darn, I wish we didn't sell our townhouse in 2000 for only $300,000 in McLean, VA!
While the NoVA suburbs are a far cry from Silicon Valley, it's never been "affordable". Real estate prices are fairly commensurate with the relatively high salaries. Homes in many areas aren't worth much more than they were in 2008, maybe 20% more max. Homes where Amazon middle management types would be living are $500-900k. Desirable, close-in suburbs such as Arlington already skyrocketed years ago. (as an example, look at North Hudson Street in the Clarendon section.....this is a very desirable part of Arlington with tons of bars and restaurants close to DC). McLean, Vienna, Great Falls, etc have been expensive for a very long time.
Here you can see where an Amazon exec might want to live:
Also, rents in NoVA are around 0.5% of purchase price, without factoring in Fairfax or Loudoun County property taxes that are close to 1% of the home's value. We'll see if that changes should Amazon locate HQ2 here.