Best Cities to Invest in Rental Property

Best Cities to Invest in Rental Property

As the Covid 19 pandemic recedes, home buyers and renters are on the move. More people are quitting their jobs, some moving to new cities and towns.

Theyre hunting for a better life, lower cost of living, and perhaps a better job. Work from home continues, although a good majority of workers are expected to be back at their employers workplace by fall, which is only 2 months away now.

Exodus from Urban Housing Markets

The trend of buyers and renters moving to the suburbs and beyond has created a surplus of apartment buildings and units on the urban markets.

There is sufficient evidence to suggest that a reverse migration back to the inner cities likely will not happen as some are hoping for. The work-at-home trend is coloring the market into 2021 and beyond. First-time homebuyers will be competing with rental property investors are looking to a whole new set of the best cities to buy rental houses and low-density units.

And houses for rent is still the biggest trend going however were seeing apartment rent prices beginning to rise as the pandemic begins to die away. And eager home buyers are heating up property prices from California, to Texas and Hawaii, to Australia to the UK.

What is the one decision that will change results for California property managers? Its the first word youll see on This Page.

Demand For Rental Property

While attention has been on the new construction market and finding houses in cities in the midwest and south, th ere are thousands of small cities and towns that have the characteristics which todays home buyers want.

What Supports Rental Housing Prices in 2021 and 2022?

Were not out of the pandemic crisis of course, so some of the buyer market is immobilized, which could be a short term break for you if youre ready to buy.

  • unemployment continues to improve with wages rising
  • a huge portion of the renter market doesnt have a hope of buying a home, particularly in California and Texas, and perhaps South Florida.
  • more sellers are beginning to list their homes due to uncertainty
  • banks are shying away from lending to builders and multifamily developers
  • the economy is recovering gradually in some cities/states are tainting the picture for investors and hopeful renters as it will discourage investment and construction.

Check the multifamily housing markets in Colorado, California, Florida, Arizona, Nevada, Utah, North Carolina, and Florida and youll find certain high yield cities are best for investors. Its a matter of hunting down properties in the ideal neighborhoods. We have a big list of the best cities to buy in below.

Typically, cities such as Austin, Raleigh Durham, Nashville, Charlotte, Boston, Dallas-Fort Worth, Orlando, Phoenix, Denver, Atlanta, and even Los Angeles get the nod as best cities buy property in.

Wallethub created an extensive of the cities with the best real estate markets, where buyer demand is brisk. Theyve ranked them on a scale:

ApartmentGuide published their own list of cities with the highest rent growth over the last year:

  • Las Vegas, NV (+42.1% )
  • Jacksonville, FL (+35.5%)
  • Tucson, AZ (+32.5%)
  • Santa Ana, CA (+27.3%)
  • Houston, TX (+24.3%)
  • Henderson, NV (+24.1%)
  • Winston-Salem, NC (+23.3%)
  • Irvine, CA (+23.3%
  • Reno, NV (+20.4%)
  • Aurora, CO (+19.8%)

Apartmentlist has ranked cities based on rising rents. Where rising rents occur, we know there is significant demand and in working neighborhoods.

Screenshot courtesy of

The Search for Better Assets

The fact that so many people want or must rent a house, condo or apartment generates strong profit potential for rental income investors. For investors, its all about finding the best cities to invest in and perhaps avoiding the worst.

For newbies investigating rental income real estate, its an investment asset which actually pays you for owning it. Build profit, reduce taxes, and gain long term security through sustainable passive income using rental property.

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Enjoy this epic report on the state of residential rental property investment for 2022 and the best cities to buy rental property in the US. Australian investors, please see the reports on the Australia housing market and the Sydney rental housing market in particular. You have some particularly good long term prospects.

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Which Housing Data Reveals the Best Cities?

There is no oracle regarding which rental properties are best. Youll be assessing more than cap rates, price to rent ratios, employment data, house price trends, etc. Take your time to sift through and assess regional economic conditions, demographic trends, tax conditions, residential bylaws, unit types and sizes, local business districts, employment rates and other important data to identify the best city and neighborhood for you.

There are city ratings related to lifestyle and livability that may weigh on your final decision. The economic outlook of each city will give you further support for buying.

Below, youll find a breakdown and detailed statistics from top data providers showing cities with the best potential. From there, you can break it down into specific high quality neighborhoods to weigh the profit odds in your favor.

Rent Growth by City. Screenshot courtesy of Apartmentlist.

Single Family Rental Price Asked

The single family housing space still warrants a good look, however with house prices rising so quickly, it will be more difficult to find a rent to price ratio that makes sense.

Screenshot courtesy of John Burns Real Estate Consulting

New Apartment Stock Arriving

The US needs millions of new apartments by 2030. New construction has risen but is expected to slow given material costs and labor shortages.

Renter Statistics:

  1. growth in rental demand was largest for people with incomes lower than $25,000.
  2. younger renters in the US account for 4 million new renters over the past decade.
  3. rental grew fastest for household incomes over $50,000 (3.3 million new renters).
  4. 1.6 million more renters now with incomes over $100,000 a year.
  5. the amount of rental stock also grew (including single-family houses which are now 40% of the total rental stock)
  6. rental vacancy rate was less than 5% in 75% of the United States largest cities
  7. 89% of the biggest cities saw rents grow in January
  8. smaller cities are seeing the biggest increases

Counter to the overall trend, renting is more affordable than buying a home in the nation’s 14 most populated counties and in 30 of 39 counties with a population of 1 million or more (76 percent) — including Los Angeles County, California; Cook County (Chicago), Illinois; Harris County (Houston), Texas; Maricopa County (Phoenix), Arizona; and San Diego County, California, including cities of Miami, New York City, Seattle, Las Vegas, San Jose, San Francisco and Boston. — from Attomdata report.

Trending in 2021

Property investors are getting more technical in how they search for and buy rental properties. Big city markets price to rent ratios are out of whack and capital appreciation is negative. Now theyre looking into smaller secondary markets.

Secondary markets still heating up:

What Factors Rank Highest in Rental Investment Property Potential?

6 key factors to examine:

  1. Local economy
  2. Employment growth
  3. Wage growth
  4. Population growth
  5. Increase in home values
  6. Rental yield

Atomdata cited 874 cities with rental property net positive cash flow of above $5000 and 48 cities with net cash flows above $10000. Their net cash flow projection methodology subtracted mortgage payments, property taxes, insurance and 20% for property management from the gross rent.

That means that with good property management practices you can earn considerably more.

At the top of that $10,000 annual cash flow list based on highest percent cash-on-cash return were area codes 74126 in Tulsa, Oklahoma ($10,064 potential annual net cash flow); 63115 in St. Louis ($10,012); 19103 in Chester, Pennsylvania in the Philadelphia metro area ($10,237); 48234 in Detroit, Michigan ($10,292); and 08104 in Camden, New Jersey, also in the Philadelphia metro area ($11,388). — AtomData report.

How have you been doing your own cash flow analysis? You can download a cash flow analysis spreadsheet online, or you might use online property management software to help. Try out ManageCasa. Its FREE!

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Which Size of Rental Unit Should you Be Investing In?

The standard 2 bedroom apartment appears to have the best ROI going forward to 2020. (chart data courtesy of Rentcafe). Renters and buyers are looking for more spacious homes with yards in secondary markets.

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