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The Best Cities to Buy Rental Property
Are you thinking about buying a rental property to invest in? With mortgage rates as low as they are, this is a great time to get started. Still, there could be some hurdles if you don’t do your research.
Figuring out the best places to buy rental property can be tricky. There are tons of factors to consider, like the area you want to invest in and the potential return on your investment. You also need to know what you can afford to spend on a rental property. The lending requirements are also more strict, so you’ll need to take that into account, too.
Once you have a budget and an idea of what kind of property you want to invest in, you can start considering parts of the country that will work best for you. If you need help narrowing it down, you may want to start with one of the best places to own rental property below. Here’s what you need to know.
Why do people buy rental properties?
When it comes to why people buy rental properties, the reasons vary wildly from one person to the next. One of the primary reasons you might buy rental property is to make some extra money — and that’s a driving force for most buyers. Investing in a rental property in a high value and high return area can bring in a pretty decent chunk of change if you play your cards right.
Buying rental property also diversifies your portfolio, which, in turn, increases your assets. As your property appreciates over time, your investments will grow. This is important for building your overall wealth — which can benefit you greatly now and in the future.
Rental properties can also be a relatively safe investment compared to other types of investments. The beauty of the real estate market is that it’s not only more stable of an investment than, say, the stock market, but you also have the freedom to make an informed decision on the location you invest in. By doing your research and selecting a city to invest in that has a positive historical population and job growth, you can feel secure with your investment.
Rental property can also help reduce your tax burden. As a landlord, you can figure repairs, interest, insurance and rental-related costs into your taxes. The goal is to get some of the costs written off to give you a break on your investment.
You may also buy rental property in an area that interests you so that you have a base in that location. While this is not usually the primary reason that most people buy rental property, some buyers take comfort in knowing that they have a rental home in a city they like and want to spend time in.
Best cities to buy rental properties in
Orlando remains a top destination in the country due to having many vacation attractions. Even better? Those theme parks and attractions require a lot of employees, which means there are plenty of renters in this area. That’s part of the reason Orlando is one of the best places to buy rental property.
The Central Florida area is home to Walt Disney World and Universal Studios, as well as plenty of other spots that tourists flock to. The average home price in Orlando is about $270,000, with home prices steadily trending upward, which means that purchasing a home there now is not a bad idea. If you wait, you could be priced out.
The average rental price on a home in that price point in Orlando can come with a price tag of $1,600 a month. Plus, the cost of living in Orlando is also pretty low, which means you can probably maintain your rental property for a decent price.
Home values in Cleveland have been rapidly rising in recent years. The median sales price in Cleveland surged to $149,000 in 2019, up from $139,900 in 2018, and up sharply from $109,000 in 2012. That was a 6% increase in value over the year prior — but it’s still very affordable overall when compared to the national average.
If you bought on the high end of the spectrum in Cleveland with no money down, your monthly payment would be about $650 per month, give or take. Considering that the rental prices in Cleveland range, on average, from $800 to $1,300, you could see a fantastic yield on your investment property — especially if you buy low and land in the right area.
Detroit has grown significantly in popularity over the last handful of years thanks to significant revitalization and business-focused efforts, but it’s still a fairly inexpensive place to invest and to live. The average home price is only about $43,000, but the rental yield is anywhere from 12% to almost 24%. With property taxes also on the fairly low end, you’re looking at a pretty solid place to invest in a nice property that can bring in quite a bit of profit.
And, when you add in the fact that many big companies — including Accenture, Ford Motor Co., Google, Microsoft and Tata Technologies — have invested in Detroit in recent years, you can almost guarantee that you’ll keep your property occupied.
Charlotte, North Carolina
Though the home prices in Charlotte aren’t incredibly low, they’re still pretty affordable for an investment. A home will run, on average, about $267,000 in Charlotte, but it’s #7 on Forbes’ list of the Best Places For Businesses and Careers in 2020. That makes it desirable to buyers and renters alike.
With its promising growth in industry, more people will inevitably be moving to the area for work, making now a good time to invest. Home prices continue to trend upward as well, so you may want to take a gamble on Charlotte before it’s too expensive to buy into.
St. Louis, Missouri
The home prices in St. Louis are pretty low right now but are continuing to climb year over year. The current average value is abouy $142,000 in St. Louis, but some experts expect a nearly 10% growth over the next year.
St. Louis also has a great rental yield of over 11%, with the average rent at nearly $1,000 a month. St. Louis is also a city with a low cost of living, meaning that it won’t cost a ton to maintain a rental property in this city.
Despite being a large metro area, the home prices, on average, aren’t sky-high in Dallas. The average home value in Dallas is currently about $236,000. That number takes into account Dallas as a whole, though — and there are some areas where a home will cost you 10 times that amount.
Buying a rental property in downtown or central Dallas could be pricey, but you can also charge more for rent within the city since it comes with the convenience of the location. Dallas is also #2 on Forbes’ Best Places for Businesses and Careers list and has shown continued growth in people moving to the city for work. That means there will be plenty of people looking for rental properties in this city, making it a solid gamble.
Boise is a true investment. Home values are on the higher end of the spectrum at nearly $380,000, but it’s also one of the fastest-growing cities in the country. Boise has seen a huge growth in population over the past decade and shows no signs of slowing down.
Rather than wait for even more people to get to the city, you may want to invest now. Otherwise, prices could rise even more — making it tough to afford an investment property in this areaa.
Atlanta is a rapidly growing metro area with a wide range of areas and price points. If you buy in Atlanta, you’ll have the option to invest in lower- or higher-cost areas. The average home value in Atlanta is just under $300,000, and the city is expected to see another 5% increase in the next year.
However, that includes a lot of really high-value property in the wealthier areas. You may be able to easily find cheaper properties in some parts of the city. Atlanta, which is home to numerous large businesses, also made Forbes’ Best Places For Businesses and Careers list at #13.
Phoenix home prices have shown strong growth and are continuing to rise. Right now, the average home value is just shy of $290,000 in Phoenix and is expected to increase another 10% or so in the next year.
Phoenix has been known to attract new residents from all over the country thanks to its warm weather and bevy of places to work and things to do. The city landed at #26 on Forbes’ Best Places For Businesses and Careers list this year — so there should be plenty of renters looking for places to live now and in the future.
Columbus home values average about $182,000 right now, making it an affordable place to buy overall. The average rent in Columbus is also decent, and ranges fromo about $1,000 to $1,200 a month. Keep in mind, though, that the rental prices could be much higher with a larger home or a more centralized location.
Columbus is also a rapidly growing city, with plenty of places to work. It earned the 28th spot on Forbes’ Best Places For Businesses and Careers list.
Home values in Jacksonville are steadily rising, but currently clock in at about $206,000. Home prices for this metro area are below the national average, making it a good place to invest.
The population of Florida as a whole is also steadily rising, thanks to the popularity of it being a place to retire and an attractive place to escape for the weather. With more people moving to Jacksonville, more jobs have also been created, creating an upward trend of people and home values.
Chicago encompasses a large area, and there are homes to purchase as rental property with a wide range of prices. The average home value is about $255,000, but you could easily find something more budget-friendly in the cheaper areas or suburbs.
If you have a larger budget, you can invest in rental property in the wealthier areas or in downtown Chicago — where the prices are easily three or four times higher than the average. Chicago is a bustling city, which means that there are plenty of jobs and new residents to occupy rentals.
[ Read: Guide to Landlord Insurance ]
The current average home value in Indianapolis is about $166,000, but as with any metro area, you can find options both well below and above that amount. It will highly depend on what you’re looking for.
The population in Indianapolis has been steadily increasing in recent years as more people move to Indianapolis for work and play. Though it’s one of the smaller of the big cities in the country, it’s also one of the cheaper ones to buy and live in, making it more attractive for people who want city life without the huge price tag.
Las Vegas, Nevada
Las Vegas continues to be a hot destination for people to flock to. The average home value is currently about $299,000 in Las Vegas, though location will dictate a lot of the price for homes in this city.
There’s a good rental market in Las Vegas, in part due to the entertainment and hospitality industries. Median rent sits at about $1,100 a month, but location could bump that price up or down.
As one of the trendiest cities in the country, Austin is a great option for investment. Current home values average about $427,000 in Austin, though it will depend greatly on what part of the city you’re buying in.
The good news is that there are plenty of jobs in this city, and it’s also a college town, which means you’ll have your pick of tenants, from students to working professionals. There will also be professors and college staff looking for a place to rent.
Austin also made Forbes’ list of Best Places For Businesses and Careers at #8, proving it’s a bustling city that’s continuing to grow and thrive.
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