Are you looking for the best place to buy a rental property in the US? While many metropolitan coastal cities leave a lot to be desired when it comes to affordability and returns for rental properties, there are plenty of promising and growing real estate markets across the country.
Just a quick note: the cities and states here are not listed in any particular order. This is because there are so many different variables that can impact what makes an area attractive for investors, not to mention how an investor’s personal risk tolerance and goals factor into their decision.
There are a number of different demographic and economic metrics that you can use to determine whether a city or state is going to offer you the return and cash flow you’re looking for.
Let’s first take a look at some things to look for when analyzing a city you’re considering investing in, and then we’ll dive into the top cities and states in the country for purchasing a rental property.
Different investors are going to find that some cities and states are more amenable to their investment goals than others. There are several factors you’ll want to consider when identifying which locations in which you want to purchase rental properties.
Some key metrics you’ll want to keep an eye out for include:
You might find that simply looking for population growth, job growth, and affordability is a reasonable formula for finding appealing locations to purchase rental properties. Other investors might want to take a deeper dive into the available data and work to create a comprehensive picture of how the rental market will change over time in a specific area.
If you’re interested in investing in rental properties in the Northeast, it’s worth noting that there are a number of factors that make cities and states in this part of the country less attractive to investors than other US regions. Of course, that doesn’t mean you can’t find opportunities in the Northeast that could help you reach your investment goals. When you compare this region of the US to others, however, you’ll find that some of the best cities for rental properties are in the Midwest and the South.
Some of the factors that can make the Northeast less ideal for owning rental properties include:
With all that as a caveat, let’s look at some of the best cities in the Northeast for investing in rental properties.
Home prices in Portland, Maine saw an increase of nearly 20% in March of 2022 compared to the previous year. Job growth for the next decade in the city is predicted to be 39.3%, which indicates a higher rate of growth than the national average.
The average monthly cost of an apartment in Portland, according to Rent.com, is $1,850 for a one bedroom, $1,950 for a two bedroom, and $2,150 for a three-bedroom apartment.
Quincy is a part of the Boston Metropolitan Area and is located in the suburbs immediately south of the city. With a 5.1% year-over-year increase in home values and an average rent price ranging from $2,115 and $5,165 in 2022, Quincy could be a reasonable place to invest if you’re in the Boston area.
Buffalo is the second-largest city in the state of New York. With a high rate of appreciation, relatively low home values, and a healthy pool of renters, Buffalo could be a good option for rental property investors in New York State.
When you're searching for your next (or first) rental property, one essential metric you'll want to become familiar with is ROI. You can learn how to calculate ROI on a rental property in this article.
The top fifteen fastest-growing cities in the US are in either the South or the West. In the South, Texas and Florida had several cities ranking as some of the fastest-growing cities or towns according to the US Census Bureau. Texas, Florida, and Alabama were also amongst the ten states with the largest increase in jobs in 2022.
For this reason, a lot of rental property investors have been turning their attention toward warmer climates. Since many southern cities have remained affordable compared to east-coast and west-coast destinations, there is a lot of potential for healthy returns with rentals in certain southern cities. Let’s check out some of the top cities to buy rental properties in the South.
Birmingham is the most populous city in Alabama and is home to a number of colleges and universities. The economy there is strong and diversified, and the real estate is affordable. Median home prices are solidly below the national average, but it’s worth noting that the rents are too.
Ranked one of the best places to live in the U.S. by U.S. News & World Report, Charlotte might also be one of the places to invest in rental property. Emerging as a major U.S. financial center with the most banking assets in the country second only to NYC, Charlotte has seen a job increase in recent years.
Property in Charlotte has been fairly affordable for a long time, but the crazy housing market of the last several years has led to a home value increase of more than 20% between April 2021 and 2022. That being said, with a median home price of $393,000, it's still a lot cheaper than HCOL coastal cities.
The appreciation rate in Jacksonville is higher than average and the population is growing rapidly. This eastern Florida city has four Fortune 500 companies, a thriving bioscience community, and more than 20 hospitals. The cost of living here is below the national average, the climate is obviously incredible, and the environment is business-friendly.
The median home value in Baltimore is $352,000, which is fairly affordable compared to other metro areas despite the fact that it’s slightly higher than the national average. With median rents of $1,774, this city offers a 0.50% price-to-rent ratio.
The population of Baltimore has also been increasing in the last decade, though its rate of growth has been slower than the US average. If you are considering investing in Baltimore rentals from afar, it’s a good idea to become familiar with the different neighborhoods and their specific metrics when it comes to rent, housing, job growth, and more.
Atlanta has an affordable housing market, with the average home price coming in at $330,218, a growing population, and rapid job growth. With the population growing 122% faster than the rest of the US, Atlanta is the fourth fastest-growing metro area in the country. The median rent in the Georgian capital city is $1,875, the unemployment rate is below the national average, and the cities recovery post-pandemic is expected to be strong.
For three years in a row, Forbes has listed Orlando as the #1 Best Place to Buy a House. In the last year alone, home values appreciated by more than 22%, and the Orlando metro area is the second-fastest-growing metro area in the US.
Rental property investors will likely be attracted to the low insurance and property taxes in Orlando, and investors who are considering relocating to Florida will be happy to know that there aren’t any state income taxes in the state.
With a rapidly growing population and diverse job market, Houston is another strong contender for one of the best places to buy a rental property in the US. Despite the fact that everyone seems to want to move to Houston, the real estate remains affordable here. With the average home in the area costing $275,000 and the median rent coming in at $1,517, you can see why rental property investors might be interested in Space City.
Huntsville, Alabama has a rapidly growing population and is one of the most affordable investment markets in the country. With a steady job market and major employers like the Redstone Arsenal, NASA Marshall Space Flight Center, and a number of Fortune 500 companies, Huntsville is potentially one of the best places to buy rentals in the US.
San Antonio has an exceptionally low unemployment rate as well as strong job and population growth in recent years. Many of the jobs that have been created in recent years are in high-paying fields such as bioscience, cybersecurity, and renewable energy.
All that being said, San Antonio is still quite affordable. With home values more than 22% lower than the national average, you might find the Alamo city is the perfect spot for your next rental.
Despite the fact that property values have been increasing in Kansas City in recent years, home values in the city are still nearly 15% lower than the national average. The economy in Kansas City is robust and diverse, with auto, manufacturing, health care, and IT sectors.
On top of that, the population growth has been higher than average while the unemployment rate is lower than average.
Are you wondering how to calculate property value based on rental income? Take a look at this guide to learn everything you need to know.
If you’re looking for an affordable place to buy rental properties, a Midwestern city might be just what the doctor ordered. The four largest cities in the Midwest are Cleveland, Chicago, Detroit, and Columbus, but there are many other smaller cities that show a lot of promise in the region.
Compared to major urban areas in other parts of the country, home prices in the Midwest are still fairly affordable. There is certainly a phenomenon of people moving to the Midwest from the high cost of living areas in order to enjoy a lower cost of living and a higher quality of life. For this reason, there have been double-digit rent increases in a number of Midwestern markets.
Interested in investing in the Midwest? You might consider Cleveland, the Ohio city that has been experiencing an increase in Gen Z and Millennial populations because of the healthy job market, lively downtown community, and low cost of living.
Rental property investors might perk their ears up when they hear about the movement of young populations to Cleveland– after all, this demographic of people typically prefers to rent or simply can’t afford to buy yet.
The average rent in Cleveland is $1,278 and the median home price in the metro area is a little under $200k. That being said, people that dive deep into the different neighborhoods of Cleveland might find that they can spend significantly less than that on a property while charging an even higher amount for rent.
Dayton is situated in between Columbus and Cincinnati. With a median home price of only $175,148, this is an affordable place to invest in rental property. The average rent in the city is $1,159.
Another thriving Midwestern real estate market is Indianapolis. Growing at a faster rate than the United States average and quite affordable, Indianapolis is also experiencing an increase in jobs and a cost of living well under the national average.
The last decade has been kind to Columbus, with impressive population growth nearly doubling the national average. While this city was once considered a sleepy-Midwestern haunt, Columbus has drawn a particularly large number of young professionals in recent years.
One of the fastest-growing and most populous cities in Ohio, many transplants and remote workers have headed to more-affordable Columbus from the high cost of living cities.
Located in the Rust Belt, Youngstown has a very low median listing price of $115,000. According to reports from Forbes, investors have been buying properties to rent out for between $60,000 and $80,000 in the city.
Another appealing thing about Youngstown is its location. About an hour away from both Cleveland and Pittsburgh, this is one Rust Belt city you might want to keep an eye on.
Chicago is a densely populated American city with relatively affordable prices and a huge job market. The median rent in Chicago is $2,080 while the average home costs $318,690. Considering that Chicago is such a geographically large city with a lot of different neighborhoods, savvy investors can definitely find pockets where the rents are just as high but the home prices are lower.
Chicago doesn't boast job and population growth that's nearly as impressive as some of the other cities on our list. In fact, by both metrics, the city performs worse than average. However, considering it's the third-largest city in the U.S. after NYC and Los Angeles, the real estate market is comparatively a bargain.
When you're searching for potential rental properties, you might find some intriguing options that are a part of a homeowners association. There are pros and cons to investing in HOA houses, which you can read more about in this article.
Detroit is one of those areas that has a big question mark hanging over it. Was the decline of the domestic auto industry and the effects of 2008 a death knell for the Motor City, or is it still poised to make a comeback?
Some real estate investors seem to be signaling that they believe the latter is the answer. As evidence that they might be on to something, tech companies like Google, Microsoft, and Pinterest have opened offices in Detroit and high-end retailers such as Whole Foods have been moving into town.
There has been something of a renaissance in the city in recent years, but, like many other US cities, there are vast differences between specific neighborhoods. For this reason, it's always a good idea to become very familiar with the ins and outs of cities that you want to invest in, especially if you're purchasing properties from afar.
The population of the Queen City has been increasing steadily for the last ten years. The metro area of Cincinnati actually spans three states: Ohio, Kentucky, and Indiana. With a job market that is expected to out-perform other cities including Cleveland, Pittsburgh, and St. Louis between now and 2028, Cincinnati is a potentially good place to invest in rental properties.
According to Forbes, Cincinnati is one of the three hottest markets in the state of Ohio, while the city is also considered one of the best cities for renters. With a low cost of living and offering a high quality of life, it's no wonder that people have been migrating to Cincinnati from high-cost coastal areas.
A lot of western states have seen a tremendous amount of growth in the last ten years, and the pandemic only seemed to exacerbate that reality. While Californians have been moving to states like Arizona, Texas, Oregon, Washington, and Nevada, places like Idaho, New Mexico, and Utah have also gained a notable number of new residents from other states since the pandemic began.
A number of cities in California top the lists of highest median home prices and as well as the highest rent prices in the nation, making it a difficult market for even deep-pocketed investors. That being said, there are still a number of potentially appealing options out west for rental property investors.
If you’ve gotten priced out of Santa Fe, you might want to drive about an hour southwest and check out Albuquerque. The population is growing steadily here, job growth is solid, and housing is still affordable.
The price-to-rent ratio in Albuquerque is 0.5%, with the median rent coming in at $1,385 and the median home price at $277,530.
While the Seattle market is prohibitively expensive for many investors (not to mention homebuyers and renters,) you might find the eastern Washington city of Spokane to be a good option for buying your next rental property. In Seattle, the average home price is $915,340 and the median rent for a two-bedroom apartment is $2,097.
Spokane, on the other hand, has a much more affordable average home price of $402,687 and average rents coming in at $1,351. The year-over-year price change was 27%.
Phoenix has experienced a lot of growth over the last decade. One of the fastest-growing cities in the nation between 2010 and 2020, Maricopa County had a population increase of 15.8% during that time and the city proper added more than 163,000 residents.
While Phoenix is appealing in some regards for rental property investors, it’s worth noting that the pandemic has driven home prices up quickly, as it’s one of the hottest real estate markets in the entire country. On the one hand, that might be appealing to a long-term investor who is looking for appreciation over time with their purchase.
On the other hand, though, there is also a lot of discussion about both Arizona as a whole and Phoenix specifically being some of the most overvalued housing markets in the country. For that reason, it’s probably a good idea to be very thoughtful and cautious when investing in the hottest US markets in 2022. If you assume that housing prices only go up and aren’t considerate of the many factors that could impact home values in the area, you could end up realizing that you bought at the top.
While Colorado Springs once had a reputation for being a high-crime city, the general tone of the area has changed drastically as people have moved to Colorado Springs from high-priced cities like Denver.
With the influx of a population with higher income levels and education levels, home prices have surged. However, rents haven’t increased at the same pace as home values, so you definitely won’t want to skip your due diligence if you choose to invest here.
There is definitely the potential for Colorado Springs to become the next Fort Collins or Denver, but you’ll want to analyze cash flows carefully before investing.
It’s also important to look at key statistics at the state level before you invest in rental properties. While there are municipal taxes and laws to be concerned with when investing in a city, it’s a good idea to take a bird’s eye view of the potential to achieve a good return at the state level.
The state of Indiana has low tax rates, reasonable rental rates, and inexpensive housing. On top of that, it favors landlords when it comes to security deposit regulations and also has a zero-tolerance policy when it comes to non-paying renters.
Investors are flocking to North Carolina. There are a number of reasons for this:
As you can see, North Carolina is both friendly to landlords and one of the more affordable states to own property while also having a healthy economy.
Idaho is another state that has experienced staggering property appreciation in the last year. In some ways, this makes it an appealing state for investing in property, while in other ways, it could make some investors wary of inflated market values that are unsustainable.
That being said, Idaho has been experiencing rapid population growth, a job growth rate of 2.2%, and a cost of living that is 2% cheaper than the national average.
Does it feel like everyone’s moving to Florida these days? The numbers seem to back up that feeling, with a population growth rate of 14.2%. Property values have appreciated 18% in the last year and real estate remains relatively affordable when compared to other hot markets in the US.
Florida is also considered one of the most landlord-friendly states in the US, which is definitely meaningful to anyone looking to purchase a rental property. Since there’s no state income tax in Florida, however, the property taxes aren’t as low as places like Colorado, but they also aren’t nearly as steep as states like Connecticut, Illinois, or New Jersey.
Whether you’re interested in buying a rental property amidst the tremendous sprawl of Atlanta or you’re looking for something further from the hustle and bustle of things, there are some things about the state of Georgia that make it particularly appealing for landlords.
With a fairly low property tax rate and no limits on late payment fees and security deposits, Georgia is much more friendly to landlords than some other US states. There are also highly flexible eviction rules there, meaning that you can act much more swiftly when a tenant breaches their contract or doesn’t pay rent.
The laws in Colorado are also quite favorable to landlords. When it comes to eviction regulations, it’s hard to beat Colorado from the standpoint of the landlord. Other factors that make the state appealing from the perspective of a rental property investor are affordable property prices (at least in some parts of the state) and high employment rates.
Texas is definitely one of the most popular states for rental property owners. The Lone Star State has plenty of affordable markets, desirable rent prices, and increasing rental demand.
On top of that, though, the state of Texas puts a huge emphasis on preserving the rights of landlords when it comes to violations of lease agreements. This makes it one of the best states for landlords in the country.
With the median home value at $190,984, positive job growth, and 34% of the population in renter-occupied housing, Ohio has a number of mid-sized cities that offer great opportunities to rental property investors. Cleveland, Cincinnati, Dayton, and other cities have more affordable housing than other American cities and certainly have a lot of potential when it comes to growth over the next few decades.
Relatively landlord-friendly, Ohio is a reasonable state to consider when you’re zeroing in on the best state for you to purchase a rental property.
Alabama is another one of the best states to buy a rental property in the US in 2022. If you’re looking for a state with a low effective property tax rate, not to mention low-income tax, this might be the place to buy your next property. After all, the property tax in the state is the second-lowest in the US, coming in at 0.48%.
The laws in Alabama are also favorable to landlords. You’re allowed to charge late fees when tenants don’t pay rent on time, and you can also start eviction proceedings as early as seven days after rent isn’t paid or fourteen days for breach of contract.
Some rental property investors choose to only buy properties in their local area, while others might buy rentals and operate them remotely. Regardless of the tactic you choose, you’re going to need the numbers to add up in your favor.
That’s why we’ve created the most advanced rental property calculator on the internet. If you’re wondering whether a prospective rental property is a good buy, use our calculator to instantly visualize every single aspect of its investment prospects.
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