If you’re looking for a place to invest your money, a rental property is a great option. You can earn a consistent income each month while enjoying the benefits of real estate ownership.
However, a successful rental property investment depends on several different factors, one of the most important being location. The location of the rental property will have an enormous impact on its ability to generate a consistent profit. With that in mind, the following guide will help you identify the best cities to invest in rental properties throughout the U.S.
Why Should You Invest In A Rental Property This Year
There are many different investing strategies you can follow when it comes to real estate. However, at this point in time, investing in rental properties may be the best way to go. There are many advantages to investing in rental properties in general, but it’s particularly beneficial to get into it right now.
The current rental market is strong across the country, with rental prices rising in most markets. The cost of homeownership is also rising considerably, which means that there will be a greater demand for rentals in the near future. Additionally, despite the rise in property costs, interest rates are low, which means it’s a great time for investors to purchase rental properties.
It’s also worth noting that there has been an influx in remote workers over the past few years. As a result, many people are moving away from massive cities like NYC and LA to smaller cities in other states, which is why many investors are putting their money into out-of-state rental properties.
10 Of The Best Places You Can Buy Rental Properties
There’s no doubt that you can find a great rental property investment in any part of the U.S. However, the following are ten states in particular where investors are experiencing significant success in the rental property market.
1. Idaho
Idaho has arguably been one of the biggest benefactors of the remote worker exodus from the country’s bigger cities. There’s a good reason for this: the state is one of the safest in the entire country.
Not to mention, they have a booming economy and job market. Their unemployment rate, cost of living, and housing costs are well below the national average as well, although it’s worth mentioning that housing costs are quickly rising.
- Hot City: Boise
If you’re looking at Idaho, then look no further than Boise. In 2020, home values rose an astounding 18.2% from the previous year. From 2021 to 2022, home values grew by an even more incredible 35.6%.
The average home value in Boise is around $533,538 at the moment, with the average rent in Boise being $1,574. The population of Boise has been trending upwards over the past decade as well, with a growth of 14.6% over that period.
2. Georgia
Georgia is a state that is known for its hot summers and appealingly mild winters. It’s incredibly scenic and home to countless state parks. It’s also home to some very underrated beaches that line the east coast.
The cost of living in this state is lower than the national average as well. However, the average sale price of housing in Georgia is $406,102, which represents an increase of 17% from the past year. Georgia also has a strong job market – the state is home to 18 Fortune 500 companies.
Hot City: Atlanta
Atlanta is the biggest city in Georgia, by a comfortable margin. The city proper has around half a million residents, however the metro area population of Atlanta is over six million. Not counting the metro area, the city has experienced an 18.7% population increase over the past decade.
The average home value in Atlanta is currently $398,528, which represents a 19.1% increase over the past year. More importantly, average rent is currently $1,820. Combined, this data makes Atlanta an incredibly favorable place to invest.
Along with the record low unemployment, the increasing population means that there will continue to be a steady stream of renters in this city.
3. Texas
Texas has the second highest population in the U.S. (right behind California), which means that there are plenty of potential tenants throughout the state. A lot of people have been moving to Texas in the past few years, outnumbering those that are leaving the state – in 2019, roughly 582,000 new residents moved to Texas, while only 471,000 left.
There are many reasons for this. Not only is the cost of living low and the economy strong, but there is no state income tax, which makes living in Texas even more affordable. This makes it possible to charge more for rent than you could in other states.
- Hot Cities: El Paso, Houston, and Arlington
There are numerous cities worth investing in throughout Texas. Houston has a population of 2.3 million people, which means there are plenty of potential tenants to attract. Housing is affordable in Houston as well, with the average price of a home clocking in at $266,964.
On top of that, average cost of rent increased by 8.5% over the past year, while single-family home rentals rose by 7.1%.
Arlington and El Paso are also worth checking out. In Arlington, home values sit at an average of $289,787, while median rent is at $1,993 – this reflects an 18% increase in rent growth over the past year.
Although the average cost of rent in El Paso is much lower at $950, it’s been skyrocketing over the past few years – it’s estimated that rent has risen by 15% every year. Keeping in mind that the average home value is $187,210, that makes rental properties in El Paso a strong investment opportunity.
4. Arizona
Although Arizona has traditionally been known as a state that retirees flock to, a lot of young professionals are now moving there. The state has a lot going for it due to its strong economy and low cost of living.
Arizona is business-friendly as well, which is why companies like Uber, Google, and Apple have all opened up headquarters there. On top of that, Arizona is incredibly scenic and boasts sunny weather year-round.
- Hot Cities: Phoenix and Tucson
Phoenix has a population of 1.6 million, making it the biggest city in the state. Known as the Valley of the Rising Sun, you should have no problem finding tenants here due to its thriving economy, business opportunities, attractions, and more.
The average price for a house in Phoenix is $433,660, representing an enormous 27.8% one-year change. However, rent prices are also increasing drastically, with the average rent in Phoenix currently sitting at $1,547, making Phoenix a great opportunity for rental property investors.
Tucson is another city in Arizona worth keeping your eye on. With a population of 542,629, Tucson is comfortably the second biggest city in the state. It’s also home to the University of Arizona and numerous governmental and contracting agencies, which means there is always employment (not to mention there are always students looking for rentals).
The average home price in Tucson has increased 24.6% over the past year to $323,969, and the average rental rate is $1,200.
5. North Carolina
There’s a lot going for North Carolina to make the state a good place to invest in rental properties. First of all, the state attracts a lot of residents due to its beautiful natural surroundings – residents can live anywhere from the beach to the mountains.
There are also many job opportunities due to the wide range of Fortune 500 companies that call North Carolina home, including Duke Energy, Bank of America, and Lowes.
Finally, the state is home to some of the best universities in the country, including NC State University, UNC, Duke University, and Wake Forest University to name a few. As such, there are plenty of students looking to rent throughout the state.
- Hot Cities: Greensboro and Charlotte
Two cities in particular worth looking into for investment opportunities include Greensboro and Charlotte. Greensboro has seen a population increase of around 11% over the past decade, with 30% of its population consisting of millennials.
The job market has grown 12% since 2010, making it one of the best cities in the state for jobs. Additionally, rent has increased 9% year-over-year.
Then there’s Charlotte, which is home to the second biggest financial industry in the country – right behind NYC. Charlotte is home to over 10 Fortune 500 companies, including Wachovia and Bank of America.
Home values sit at $343,760, representing a 25% increase over the past year. Median rent is high at $1,770 and represents an 11% increase over the year, making rental properties a great investment in Charlotte.
6. Florida
The weather in Florida is an enormous draw for people moving to the state – as is the lack of income tax. As such, it’s no surprise that the population is growing. Not to mention that the state has a robust job market as a result of being home to 19 Fortune 500 companies.
- Hot Cities: St. Petersburg, Tampa, and Orlando
First of all, the average home value in St. Petersburg is $335,021, which is a staggering increase of 26.9% over the past year. As such, now is the time to invest in this area if you’re going to as values are likely only going to go up. The average cost of renting an apartment is $1,861, which represents an astounding 29.8% increase over the past year.
Tampa has experienced similar growth. Median rent in Tampa is $2,325 – an increase of 30% over the past year. Its population has seen a massive increase of 14.7% over the past decade as well. Orlando isn’t quite as high – but it’s close with a median rent of $2,168 (a 24% increase).
However, its population has skyrocketed 29% over the past decade, meaning that there will be no shortage of potential tenants.
7. Minnesota
Minnesota has a population of 5.7 million, which is a 6.5% increase from 2010. There are countless reasons why people are moving to Minnesota, from the incredible natural scenery (it’s called the land of 10,000 lakes, after all) to the burgeoning job industry.
- Twin Cities: Minneapolis and St. Paul
Minnesota is the 12th biggest state in the country, but 60% of its population lives in Minneapolis and St. Paul, making the twin cities the best place in the state to invest in real estate.
Together, they represent one of the most concentrated areas in the world for Fortune 500 companies that include Target, General Mills, UnitedHealth Group, and more. As a result, the twin cities boast high employment rates, numerous universities, and an increasing demand for rentals.
The average rent in Minneapolis is $1,621, while the average rent in St. Paul is $1,379. The typical home value in Minneapolis is $338,040, and the average home value in St. Paul is $290,074.
8. New Mexico
New Mexico is the fifth-largest state in the country (by area) but only has a population of 2.1 million. However, the population is growing at a rapid pace as people are flocking to the state for its incredible natural beauty, 300 days per year of sunshine, and low cost of living.
New Mexico is also home to numerous national laboratories and military bases, which further boosts the local economy.
- Hot City: Albuquerque
Albuquerque is the biggest city in New Mexico and is home to over 560,000 people. In addition to the beautiful weather, outdoor enthusiasts will be overjoyed by the park system, which makes up 25% of the city.
The average home price in Albuquerque is $310,473, which represents a 19% increase from the previous year. It’s also almost double the average price from a decade ago.
Additionally, rent prices have been skyrocketing over the past few years. The average cost to rent a two-bedroom apartment in Albuquerque is $1,463, a whopping 21% increase from the past year.
9. Alabama
Alabama is one of the most affordable states in the country, which is a major draw for people looking to buy a home. Real estate prices, cost of living, and income tax are all comparatively low.
Additionally, the state is in the midst of a booming job market. Alabama also offers variety in regards to its environment – residents can live in the mountains, on the beach, or in a bustling city. There is something for everyone in Alabama.
- Hot City: Birmingham
Birmingham is the biggest city in Alabama with a population of 212,000. It was recently ranked by U.S. News as one of the top 100 cities to live in. The unemployment rate is incredibly low at just 2.3% and there are countless job sectors attracting employees from all over the country. Despite this, real estate is still incredibly affordable.
The average home value in Birmingham is only $107,571, although this still represents a 23.5%increase over the past year. Compared to the average home prices, rental costs in Birmingham are comparatively high at $1,226, making the city an appealing place for investors to consider.
10. Pennsylvania
Pennsylvania is a great state for people looking to invest in real estate. Not only are home prices relatively low, but there is also a lot of diversity in the types of housing available. From rural farmhouses to apartments in bustling cities, Pennsylvania has it all. Additionally, the cost of living is lower than the national average and there are plenty of job opportunities.
- Hot City: Allentown
Despite Pennsylvania being home to popular cities such as Philadelphia and Pittsburgh, Allentown is the city that deserves the most attention.
Allentown has seen rapid financial growth along with a growing job market over the past few years while still retaining a low cost of living. It’s also known for its top-quality education, making it a big draw for families, while its location (90 minutes from both Philadelphia and NYC) makes it appealing for young professionals.
The population is slightly over 121,000 and the unemployment rate is just 4.5%. The average home value in Allentown is $246,819, which represents an 18.6% increase over the year. The average rent in Allentown is $1,450 which has been steadily trending upwards over the past few years.
How To Find Investment Properties
Once you’ve settled on a location to focus on, there are several steps that you should take to identify rental properties that are worth investing in. The following are a few tips on how to find investment properties, especially if you’re looking to buy properties from out of state:
Work With A Realtor
There’s a lot of information you need to know before determining if a property is worth buying or not. A local real estate agent will likely have a lot of knowledge about the area and the local housing market, which is especially useful if you’re investing from out of state. As such, finding a local realtor should be the first thing you do once you’ve identified an area you want to invest in.
Realtors can provide valuable insights into the neighborhoods that you’re interested in and can give you a realistic idea of what rental prices are like in those areas. They should have local networks that provide them with access to other agents, making it easier for them to find properties you might be interested in.
Talk To Wholesalers
Wholesalers are people who buy property with the intention of selling it to someone else. They’re a great resource for finding good rental properties because they’re always on the lookout for deals and they have a lot of knowledge of the market.
Essentially, wholesalers do most of the heavy lifting for you. They’re doing all the research into properties that offer value – and they wouldn’t be buying them with the intent to sell them unless they were certain of the investment.
You can find wholesalers by doing a simple Google search or by networking with other real estate investors.
Check For Properties On MLS And Other Websites
Most rental properties are going to be listed on MLS (Multiple Listing Service), which is a website that real estate agents use to list properties. However, there are also a lot of rental properties that aren’t listed on MLS. You can find these by searching rental listings websites like Zillow and Trulia.
These websites have a lot of data that you can use to your advantage, such as rental prices and the occupancy rate of a particular area. They also have maps that show you where the rental properties are located.
Explore Search Engine Results
Google is a great resource for finding rental properties. You can do a simple search for “rental properties in [city name]” and it will return a list of websites that have rental listings. You can also look for normal properties for sale in various neighborhoods that can be rented out.
Tips For Finding The Best Rental Property Investments
Although the previous tips will be very useful for finding properties that you can buy and rent out, the following are a few tips on how to identify whether those properties will be worth the money needed to invest:
- Research thoroughly: This cannot be stressed enough. You need to be absolutely certain that the property you’re interested in is a good investment. This means doing your due diligence and researching things like rental prices, occupancy rates, and the average rental yield in the area.You should also research the neighborhood. Factors like the crime rate, schools, and nearby amenities will all affect your ability to find tenants.
- Explore financing options: If you’re buying a rental property out of state, chances are that you’ll need to take out a loan. This can be a difficult process, but it’s definitely doable. Talk to various lenders and get quotes so that you have a good idea of what you’re working with.
- Monitor your expenses: When you’re renting out a property, there will be certain expenses that you’ll need to cover. These can include expenses like repairs, property management fees, and taxes. Make sure you have a cushion in your budget to cover these costs.
- Don’t forget to account for homeowners insurance: This is another important expense to factor in when you’re renting out a property. You will need to purchase insurance that will cover your rental properties.
What To Consider When Buying A Rental Property
When doing research in an area, there are a number of things you should look into. The following are some important figures and data that can have a big impact on whether rental property in that area promises to be a good investment or not.
Census Figures
The census is a survey conducted every ten years by the U.S. Census Bureau that takes account of every person living in the United States. It also collects data on various aspects of their lives, including their employment status, income, and race.
This information can be helpful for gauging the rental market in a particular area. The following are some of the specific census figures you should pay attention to:
- Age of the population: The younger the population of an area is, the more potential tenants you’ll have. Older people are more likely to be homeowners, and young people are more likely to rent. If an area is full of older people, it probably won’t attract a lot of young people and therefore renters.
- Socioeconomic status of residents: The socioeconomic status of an area can tell you a lot about the rental market there. If the area is full of high-income earners, rental prices will be high. If the area is full of low-income earners, rental prices will be low.
- Jobs and employment: The availability of jobs in an area is a good indicator of the rental market. If there are a lot of jobs, people will be more likely to move to the area. This means that there will be more competition for rental properties and rental rates will be higher.
- Industries: The types of industries located in an area can also have an impact on the rental market. If there are a lot of industries that require people to move to the area, rental prices will be high. If there are a lot of industries that don’t require people to move to the area, rental prices will be low.
- Growth rate: The growth rate of an area can be a good indicator of how strong the rental market is. If the area is growing rapidly, it’s a good sign that the rental market is healthy. If the area is shrinking, it could be a bad sign for the rental market.
Real Estate Figures
Along with census data, you should also look at real estate figures when researching an area. Doing so will give you a better idea of the shape the local real estate market is in. The following are some of the most important figures to pay attention to:
- Rent as a percentage of income: This figure tells you how much of a person’s income is going towards rent. A low percentage is ideal because it indicates that the average tenant will be able to afford rent. If it’s too high, the demand for rentals is likely going down because people in the area can’t afford most of the rentals there.
- Vacancy rate or demand for rentals: This figure tells you how much competition there is for rental properties. If the vacancy rate is high, it means that there are a lot of rental properties available. You may struggle to attract tenants if this is the case. If the vacancy rate is low, it means there is a high demand for rentals, making it easier to find tenants and to charge more rent.
- Home prices: The home prices in an area can give you a good idea of how much cash you will need to purchase a rental property. Not to mention, home costs may also price a lot of people out of being homeowners, which means they’ll be more likely to rent.
- Rental yield: This figure tells you how much rental income you can expect to receive based on the median home price in the area. It’s a good indicator of how profitable rental properties will be in that area.
- Gross rent multiplier: This figure tells you how much rental income you can expect to receive based on the price of the property. It’s a good indicator of how profitable a specific rental property will be.
Other Data
In addition to the data mentioned above, there are a few other things you should consider when researching rental markets:
- Weather and climate: Milder climates are more likely to attract new residents than places with extreme climates. Not to mention that sunny areas will be more attractive than areas where it’s constantly raining. Pay attention to the local weather and climate to determine how appealing the area will be to potential tenants.
- Attractions: If an area has a lot of attractions, it’s a sign that people want to move there. Attractions like galleries, outdoor adventures, or markets provide residents with more things to do where they live, thereby increasing quality of life.
- Crime rate: The crime rate in an area can have a big impact on the rental market. People are less likely to want to live in an area that is dangerous – this is especially true for families. Therefore, the rental market won’t be strong in places where the crime rate is high.
- Neighborhood ratings: Online ratings websites are a great way to get an idea of what people think of the neighborhoods in a particular area. If there are a lot of negative reviews, it may be a sign to stay away from that area.
Websites like Walk Score, Neighborhood Scout, and realtor.com all provide neighborhood rankings to give you an idea of how attractive a place is. - School rankings: Tenants with children will look at the school districts in an area before deciding to move there. After all, they want their kids to have the best possible education. As such, check out the school rankings of each area you’re researching by looking them up on sites like GreatSchools or SchoolDigger.
- Business-friendly local government: If the area you’re researching is business-friendly, that is a good sign for rental property investors. Businesses are more likely to relocate to an area that has a good business climate, which will in turn attract more people to the area.
- Landlord-tenant laws: The landlord-tenant laws in an area will dictate what rights you have as the landlord and what rights the tenant has. For example, the legal recourse you have if you have problems with your tenant, how much notice you need to give tenants before raising the rent, and more can all vary from one place to another.
Knowing these laws in advance can save you a lot of headaches down the road. - Property tax rates: The property tax rates in an area can impact your rental income. If the rates are high, you may have to charge more rent to make up for it. Charging more rent can make it more difficult to attract new tenants.
Expand Your Real Estate Investment Opportunities
There are many great rental investment opportunities in neighborhoods throughout the country. By doing your research and understanding the data, you can make an informed decision about where to invest your money.
Regardless of whether you’re investing in a rental property for the first time or you’re a seasoned investor, rental properties are a great way to expand your real estate investment opportunities.