Food for Thought: Grocery Stores are Great for Investment Properties
There’s a relationship between investment properties and grocery stores. Research shows that properties near grocery stores can yield a greater ROI.
In many ways, home desirability goes beyond internal features and curb appeal. This requires investors to zoom out and consider the area as a whole.
Neighborhood amenities influence demand for homes, which in turn drives value.When selecting an investment opportunity, it’s important to research existing amenities as well as future community plans. Taking these factors into consideration can lead to a higher return on your investment.
One amenity in particular stood out as a driving factor: proximity to a grocery store. When considering your next investment opportunity, here’s what you need to know.
Related: More Space, Higher Prices: Home Sales After COVID-19
Do certain grocery store brands impact ROI?
When it comes to ROI, not all grocery stores are created equal. ATTOM Data Solutions, a company that collects multi-source property data to drive innovation across industries, shed light on this topic.
Their Data shows which popular grocery store chains have the greatest impact on home appreciation, home selling ROI, and gross flipping ROI for investors. To assess appreciation, ATTOM looked at average value increases between 2015 and 2020 for homes in zip codes with at least one Trader Joe’s, Whole Foods, or ALDI grocery store.
Investors earn more on properties near Trader Joe’s
In fact, the average home seller ROI for homes located near a Trader Joe’s store was a whopping 51%, ATTOM found. Comparatively speaking, this ranked above other grocery store competitors.
Properties near a Whole Foods had a home seller ROI of 43%, while homes near ALDI lagged slightly behind with an ROI of 41%. Nonetheless, all three provided better returns than the 35% average home seller ROI for the nation in 2020. The bottom line: it pays (literally) to invest in properties near grocery stores.
Gross flipping ROI is greatest on properties near ALDI
Properties located near ALDI grocery stores are ideal for investors looking to fix and flip. They have an average gross flipping ROI of 58% and an average home value of $250,850. Homes in close proximity to Whole Foods stores had a gross flipping ROI of 36%. Properties near Trader Joe’s had 30%. That’s lower than the national average gross flipping ROI, which was about 39% in 2019. If your strategy is to fix and flip, properties near ALDI could end up being a goldmine. But if you’re hoping to earn rental income, look for homes near Trader Joe’s stores.
Rent is higher near grocery stores
Investors looking to earn rental income may find that properties near grocery stores are more lucrative. Renters are more likely to rely on public transit and walking. With that in mind, being in close proximity to public transportation makes properties more appealing. It also makes grocery stores within walking distance a huge plus.
Think about it: no one wants to carry groceries on the train or lug their shopping bags across town. It’s the convenience factor. When high-end grocery stores are located in close proximity, rent prices rise for multifamily housing properties. Initial rents are 5.8% higher for buildings with one of these stores located at street level.
Related: Selling a Tenant-Occupied Property
Other amenities that impact your ROI
Grocery stores are just one of the neighborhood amenities that attract homebuyers and renters. When comparing investment opportunities, you should also consider the following neighborhood amenities:
- Public transportation and walkability: Walkability is important to homebuyers, and nearby public transit systems both drive higher median sales price increases (up to 24% higher) and higher rent prices due to demand.
- Restaurants and coffee shops: Proximity to a local Starbucks can lead to an especially lucrative ROI. Zillow data show that over a 17-year period, homes close to Starbucks coffee shops appreciated 96%, compared 65% for homes located further away.
- Public parks, dog parks, golf courses, and hiking trails: Analysis shows that homes adjacent to parks and open spaces are worth 8% to 20% more than similar properties located further away from green spaces.
- School Districts: The demand for highly-rated schools drives up home values in those districts. Data from the National Bureau of Economic Research shows that aggregate per pupil housing values increase $20 for every $1 of added state spend per pupil.
- Trees: Greenery around homes or on the street can add between 3% and 15% in value to houses throughout the neighborhood.
Related: Most Popular Home Features by State
It’s worth it to research local amenities
Of course, this is general advice to follow when conducting research. Depending on your strategy, a higher priority might be finding a great price or making the appropriate renovations. However, it’s worth considering the way existing amenities and future community plans impact your return on investment. You could beat the average ROI for a fix-and-flip or buy-and-hold investment with certain amenities nearby, so do your research!
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