Today we are going to be going over the 8 best places to buy a rental property in America. So these are not necessarily the only good spots to invest in real estate and depending on your goals these places may or might not be a good spot to invest your money.
But we are simply going off the best markets to buy a rental property for cash flow and equity growth meaning on average they provide the highest cash flow on a monthly basis and the current prices leave a lot of room for growth in terms of equity and how much the property is actually going to go up in value over the next set over the next several years.
So there are several factors that go into sound rental property investment and several economic factors that were used to compile this list but the main the three main factors are:
- Job Growth
- Population Growth
So if you can find a market where all three of these factors are aligned then chances are you have a pretty solid market to invest your money in a property. So to break these factors down a little bit more we’re looking for cities that have a higher than average job growth rate over the last several years meaning that each year more and more jobs are becoming available in the city I mean if more jobs are available in the city next year.
Then are available this current year then you have a place that is growing. Population growth is pretty similar to job growth meaning that more people are moving into the city then out of the city on an annual basis and if job growth is healthy then chances are that that population growth is also very healthy and lastly affordability which is pretty self-explanatory it just means that home prices are affordable and are not going through the roof.
Like in some places such as San Francisco in New York we’re looking for places where you can buy very very affordable dwellings sometimes for as low as about a hundred thousand dollars or even cheaper than that.
So without further ado let’s just get into it here are the 8 best cities to buy an investment property here in 2020 number.
1. Cincinnati Ohio
the Midwest is currently a great spot to invest in real estate and there are actually nine Midwestern cities on the top 20 lists with a population of over 2.2 million people Cincinnati is the 24th largest metropolitan area in the country.
Cincinnati was ranked in the top 25 fastest developing areas in the country and it seems to be attracting a lot of Millennials which is great news because we want to find places that have a lot of young working people moving to them because that’s, of course, the future of our economy.
It also seems to be a popular place for large companies to move their headquarters to and is currently home to ten fortune 500 companies the average rent for a three-bedroom home is just under $1,300 and the current median price currently sits at around 150 thousand dollars in Cincinnati.
Now why this matters to you is that one thousand two hundred and seventy-two dollars in monthly rent is about point eight-five percent of the average of the one hundred and fifty thousand dollar average home value in Cincinnati where the national price to rent ratio average is around point seven four percent meaning that rents in Cincinnati are about 13 percent higher than the national average when you look at it from a pure numbers perspective.
So as an example in a city that has the national average for the price to rent ratio a home for one hundred and fifty thousand dollars would rent out for about one thousand one hundred and ten dollars per month.
Whereas in cents Nattie that same home would run out for about as we mentioned the 1272 dollars per month. So as an investor you’re making an extra one hundred and sixty-two dollars per month in Cincinnati than you would in the average city.
The unemployment rate is actually a few percentage points higher than the national average which I found kind of interesting but this could be due to the fact that because the city is attracting so many new people with its opportunities that certain individuals are getting pushed out of work even though it may be their hometown and they have no plans of leaving.
2. Cleveland Ohio
So we start this list off with two cities in the same state. So all investors in Ohio should be getting a little bit excited right now because you guys are in an awesome place for buying high cash flow properties at the moment.
Cleveland’s metro population is currently about 2.1 million people in the city’s downtown area is exploding with over 15,000 new residents moving to downtown Cleveland in just the last summer alone.
The reason for this is most likely because downtown Cleveland has experienced a massive transformation in the past few years with an estimated 19 billion dollars in development completed or planned in just the last decade. So for a city like Cleveland when you dump almost twenty billion dollars into an area in just a few short years it instantly ups its attraction.
Cleveland is also home to another ten fortune 500 companies including Goodyear Sherwin Williams and progressive insurance. So I guess that’s where Flo is spending most of her time probably watching the Cavs get their butts whooped. Cleveland’s average home price for a three-bedroom house is currently sitting at about a hundred and twenty-nine thousand dollars and the average rent per month is around one thousand one hundred and fifty-two dollars per month.
So if we do the same math that we did with Cincinnati this would give Cleveland an average price to rent ratio of about 0.89% so on the average city a hundred and twenty-nine thousand dollar property would have an average rent of about nine hundred fifty-five dollars per month if we go by the at the national average for price to rent ratio.
But in Cleveland, as I mentioned you’re getting 1152 dollars per month on an average investment of 129 thousand dollars so if you invest your money in Cleveland versus the average city you’re getting almost $200 more per month in rental income for that same one hundred and twenty-nine thousand dollar invested if you would have invested in the national you know.
3. Houston Texas
Houston is home to forty-nine fortune 1000 companies and has a metro population of almost seven million people making it the fourth largest city in America.
The city has one of the highest job growth rates in the country and surprisingly enough home values are still very affordable with the average home price sitting right around one hundred and fifty-nine thousand dollars.
Because of this job growth and other factors such as a booming downtown for young people and lots of sports teams to cheer for the city was ranked number two on the best places to live in America list by Business Insider and it was also ranked number ten for young entrepreneurs to live.
So Houston’s got a lot going on the average rent in the city is currently about one thousand four hundred and forty dollars per month which is quite a bit higher than the first two cities on this list especially when you consider the average home value is only nine thousand dollars more than the number one on this list which was Cincinnati.
So if we do the same math that we did with the first two markets the rents in Houston are currently commanding a little over two hundred and sixty dollars extra per month than if you were to buy in a city that had been at the national average for the price to rent ratio in which case the rents for one hundred and fifty-nine thousand dollar house would only be about one thousand one hundred and seventy-seven dollars per month but in Houston as I mentioned it’s currently at one thousand four hundred forty dollars per month which is a lot better.
4. Huntsville Alabama
Ah good old Alabama, so I personally have a very large connection with the state of Alabama. This is cool because Money Magazine actually ranked Huntsville as one of the nation’s most affordable cities and USA Today named it one of the top communities in the nation that is leading the economic recovery.
One of the most well-known cities in the south Huntsville is rich in industry with a large part of the population working in the technology defense and space industries and this is actually something that I was not aware of but much of the space exploration that occurred back in the 1960s can be credited to rockets being built in the city of Huntsville that later made it possible for Neil Armstrong and his crew to land on the moon at the end of the decade.
Now the population is quite a bit smaller than the others on this list with currently only about 450,000 people residing in Huntsville but the job growth is through the roof in Huntsville currently in the population is also growing at a very very steady pace.
The average home value in Huntsville is currently about a hundred and fifty-one thousand dollars with the average rental cost coming out to about 1121 dollars per month the city also has a very high population of college students being home to Alabama A&M the University of Alabama Huntsville, as well as Oakwood University and you, know that student rentals tend to yield a little bit higher returns than the averaged out dwelling.
So it would be very easy to get that number up if you had a rental property that was close to one of these campuses.
5. Pittsburgh Pennsylvania
Another Midwestern city makes the list that Steel City comes in at number five. Pittsburgh has a population of around 2.3 million people and although the steel industry is no longer the commanding force behind its economy the financial services industry has grown tremendously with homes to some of the largest financial firms in the country.
Such as PNC Financial Services as well as BNY Mellon Bank which on which was actually Mark Cuban’s first job out of college if you weren’t aware of that these companies keep the city stable and probably will for years to come which makes Pittsburgh Pennsylvania a great city to plant your investment capital.
The median home price in Pittsburgh is currently around 141 thousand dollars with some neighborhoods offering deals as low as seventy-five thousand dollars for a three-bedroom house. The perfect place to buy a little fixer-upper and turn it into high cash flowing rental property.
Business Times ranked at the number one city to relocate to and although the city has not experienced quite as much job growth as some of these other cities there are enough new industries popping up in the city that make up for it such as the growth of the healthcare industry throughout the area.
6. Jacksonville Florida
the Jacksonville Jaguars have still yet to win a Super Bowl but this city has become a fantastic place to invest in a rental property as pretty much every other city in Florida has as well in the past seven years alone the metro area has grown by almost 12% giving the area a total population of around 1.5 million people.
It’s actually grown by about 25 percent population since just the year 2000. The city is home to four fortune 500 companies and has a massively growing healthcare industry as well as a bioscience community.
The average home value in Jacksonville is currently around 171 thousand dollars and has an unemployment rate of only 3.4 percent which is well below the national average. Rental properties in the city can typically run out for about 15 percent higher than the national average which is what makes Jacksonville.
7. Tampa Florida
So we have yet another Sunshine State market-topping our list today and in for good reason, Tampa is the second-largest city in the state falling behind only Miami and has currently had a population of around 3 million people.
Tampa also has quite a few hot spots that are just in the metro area alone including cities like Clearwater Largo and in st. Petersburg with strong industries in both financial services and healthcare the city has created approximately 30,000 new jobs in just the last 12 months alone.
Which is 18 percent higher than the national average and the average home price is right around 193 thousand dollars which are very affordable considering the mammoth and industry that Tampa has become and this makes it a fantastic place to buy a rental property. We can expect major growth to continue in Tampa over the next several years.
8. Orlando Florida
That’s right the best place to buy a rental property is all in the Sunshine in the state of Florida even though home prices are still ridiculously low.
More people than ever in Florida are choosing to rent instead of buying this is great news for investors because it means more deals and higher rents. Rents have increased by 7 percent across the entire state in just the last 12 months alone.
When you consider all of this along with the low property taxes and the lack of income tax in the state of Florida and of course the warm weather and the fun amusement parks we will find that Florida will always be an attractive destination for residents.
With an average home value of just over $200,000 Orlando tops our list for the best place to buy a rental property in 2020 as I mentioned the city is known for its warm beaches and fun amusement parks and sources suggest that home prices could increase by 35% by 2021.
That means that a home that you buy today for $200,000 could be worth over two hundred and seventy thousand dollars just 24 months from now I mean that’s a $70,000 profit in two years for literally doing nothing but deciding to buy a property today.
The average rent in Orlando is currently just under 1,400 dollars per month which aren’t great on the rent to price ratio scale which is obviously not ideal if you are trying to maximize monthly cash flow when you compare it to other cities on this list but I think the experts who compiled this lists are mainly highlighting just how much they think that Orlando is going to explode over the next few years which is why our land o tops the list as the best place to buy a rental property in 2020.