Best Places to Buy Rental Property

For real estate investors, identifying the best places to own rental property is a fundamental component of growth and expansion. Not all cities are created equally when it comes to rental properties. If your city’s cost-of-living or home prices are too high, it can be challenging to break into the rental market. 

Factors to Consider

To maximize your profitability as a real estate investor it is sometimes necessary to explore opportunities in cities that are geographically, culturally, and economically distinct from your own. But how do you know as property investors which cities host the best rental market and are among the best places for a rental property?

Though there is no single formula for determining the best places for rental property, there are some key factors you should take into account when investing in real estate. Broadly speaking, rental properties in cities with a high degree of economic vibrancy tend to do well. Factors that indicate a vibrant economy include:

  • Year-over-year growth
  • Low unemployment rate
  • Diverse resident demographics
  • Population growth
  • Job rate growth

Comparing these to national averages can provide insight into cities with strong growth potential.

There are of course many other factors that must be taken into consideration when making a real estate investment. For real estate investors, mortgage rates remain at near all-time lows, making further investments in vibrant economic cities even more attractive. Nationwide, the real estate market continues to expand. With a current home value index of $245,193, home values grew 3.8% over the previous year. Projected growth over 2020 is expected to top 4%.

With these factors in mind, we’ve compiled a list of states and the best cities to own rental property in them.

Texas

Texas as a whole remains a good investment for economic growth in the United States. Growth in Texas is centered around the vibrant metropolitan areas, which are adding jobs and attracting workers from higher cost of living areas. However, property investors should keep in mind economic growth isn’t evenly distributed across Texas. Cities like Corpus Christie have experienced slow population and employment growth, and a cool housing market.

Texas continues to see a huge influx of out-of-state residents. Domestic migration accounted for total population growth of over 563,000 new residents throughout the state. The largest portion of domestic immigration came from California, followed by Florida, Louisiana, Oklahoma, and New York. Most of these residents tend to be relocating to the bigger cities boasting strong job markets, including Dallas-Fort Worth-Arlington and the greater Houston metropolitan area.

Arlington

Arlington, Texas is sandwiched between Fort Worth and Dallas. The greater Dallas-Fort Worth-Arlington area boasted the top employment growth in the country in 2019 by adding over 120,000 new jobs. Though influenced by its proximity to Dallas and Fort Worth, Arlington is an economic powerhouse on its own. The 7th largest city by population in Texas, Arlington has grown quickly in recent years, and its growth isn’t expected to stagnate.

By the numbers, Arlington is an excellent candidate for one of the best cities for property owners to own rental property. Year-over-year growth in Arlington topped 3.5%, and job growth neared 2%. Homes remain affordable, with an average home value index of around $219,000, as reported in February 2020. This is great for a city with a median age of 33 years, indicating growth which will continue for years to come. With an unemployment rate of 2.8%, lower than the national average of 3.6%, Arlington’s economy shows no signs of cooling down in the near future.

San Antonio

San Antonio was one of the fastest-growing cities in the country towards the last half of the decade. At over 1.5 million residents, the second-largest city by population in Texas remains a vibrant economic powerhouse.  

Home values in San Antonio remain low, with a home value index of roughly $185,000, as reported in February 2020. Other indicators, such as a lower-than-average unemployment rate of 2.6%, median resident age of 33 years old, and a job growth rate of 1.8% are all strong indicators San Antonio will continue to experience economic growth in the coming years. These factors make this city popular for investors, with the demand for real estate and property management in San Antonio continuing to rise.

North Carolina

North Carolina remains one of the hottest states for real estate investors. North Carolina experienced economic growth in 2019 which shows few signs of slowing in 2020. However, growth wasn’t evenly distributed across the state. The most economically vibrant areas in the state tend to be in metropolitan areas like Charlotte and Raleigh-Durham, which experienced the highest rates of non-farm job growth during 2019 and continued population growth. 

Charlotte

Charlotte remains one of the top places to buy rental property in 2020. With a low median resident age around 33 years old and a job growth rate of 3.10%, Charlotte added both jobs and new residents over the past year. This continues a trend of strong growth in the city, which has seen its population rise nearly 20% over the preceding decade. 

Home values remain affordable in Charlotte, easing entry into the housing market for real estate investors. With a home value index reported in February 2020 of roughly $249,000 and a rent index of $1,538, Charlotte is a top area to invest in. For property investors looking for a good return on investment, consider investing in real estate and a great partner for property management in Charlotte, NC.

Raleigh-Durham

The cities of Raleigh and Durham are economic powerhouses in the state of North Carolina, and should not be overlooked as some of the best places to buy rental property in the United States. Home values in the area rose nearly 5% last year and are projected to rise another 4.2% this year in Durham. They rose 3.4% the previous year with projected increases of 3.3% in the coming year in Raleigh.

Home prices in both metropolitan areas remain accessible for real estate investors. As reported in February 2020, the average home price in Durham sits around $250,000, while the average home price Raleigh is a bit higher at $284,000. Both cities boast a low unemployment rate hovering slightly over 3%, while Durham boasted a population growth of 4.2% and an employment growth rate of 1.4%. These numbers indicate an economically vibrant metropolitan area and no signs of slowing. If you consider making an investment in SFR here, be sure to do your homework for property management in Raleigh, NC. A good property investment means nothing if it isn’t managed well. You’ll need to know how to be a good landlord and manage your investment well. 

Florida

Florida continues to be a strong market for real estate investors looking to capitalize on regional economic growth. Year after year, the metropolitan powerhouses of Orlando and Tampa have experienced strong population and job growth, while still boasting home values that make these cities accessible for investors. 

Orlando

Over the previous decade, Orlando’s population has grown by nearly 20%. What’s the draw to this Sun Belt city? Besides the great weather and beaches, the greater Orlando area has affordable home prices, a strong tourism industry, and an attractive job market for young professionals. The median age for residents is 33 years old, belying the idea that Florida remains solely the province of retirees. 

Looking at the numbers, Orlando continues to project economic strength into the coming years. With a very low unemployment rate of 2.7% and a job growth rate of 3.4%, there are plenty of jobs for young professionals moving to the city. While not the city with the nation’s top population growth any longer, Orlando still experienced a staggering 4.8% growth in population last year, demonstrating that the longstanding trend of population growth over the last 60 years will only continue. The attractiveness of this city as a place for investment has even been seen with the demand for Orlando property management.

Tampa

With low unemployment rates, strong job growth, and blistering population growth, the greater Tampa area remains a top market for real estate investors. Also located in Florida’s Sun Belt along the Gulf coast, Tampa has the beaches, a strong economy, and affordable housing that attracts both young professionals and recent retirees. This is reflected in the median age of 35.6 years old, which is slightly higher than many of the other cities we have touched on.

Tampa’s job growth rate neared 1.8% over the previous year and saw its population grow 4.6%. Housing remains affordable in the area, according to Zillow in February of 2020, with a home value index of $245,000 and projected growth of 4.4% over the next year. The rent index is right around $1,550, making this an excellent choice for real estate investors to consider as a place to invest in. Once property owners find a rental property to invest in, finding a partner for property management in Tampa will help increase the value of that investment.

Final Thoughts

The hottest states for real estate investors to look toward are Texas, North Carolina, and Florida at the moment. Economic growth isn’t spread evenly in these three states, so real estate investors would be wise to stay focused on the major metropolitan areas which have demonstrated sustained economic vibrancy as a place to invest in.

In Texas, Arlington and San Antonio are both economic focal points in the state. Arlington has grown alongside the adjacent cities of Dallas and Fort Worth to become the 7th largest city in the state by population. Boasting strong job growth, great population growth, and affordable home prices, Arlington and San Antonio are both worth consideration.

The North Carolina regions of Raleigh-Durham and Charlotte are booming as well. Both locations feature strong population growth, unemployment lower than both the national and state average, and housing prices which make entry into the real estate market feasible. Growth in all three cities is projected to continue, even as growth in non-metro areas across North Carolina has slowed.

Located in Florida’s Sun Belt, the cities of Orlando and Tampa should remain top areas to consider for real estate investors. Both cities feature excellent population growth, low unemployment, a diverse employment sector, and a strong tourism industry. 

If you are a real estate investor looking to expand into these hot markets, working with Great Jones’ property management services can help you realize your property’s potential. We’ve established the resources and expertise you need to succeed in each of these markets. From our multi-platform marketing used to drive down vacancy rates to our industry-leading property management technology platforms, which give you and your tenants the tools they need in today’s rental market, Great Jones is ready to help you achieve your financial goals and stay on top of the current property management trends. To learn more about how Great Jones can help, please contact us today.

Sources

  1. https://www.moneycrashers.com/best-cities-buy-rental-property-investment/
  2. https://www.fool.com/millionacres/real-estate-investing/rental-properties/10-best-places-buy-rental-property-2020/
  3. https://finance.yahoo.com/news/best-worst-cities-own-investment-090000378.html
  4. https://www.dallasnews.com/business/real-estate/2020/01/23/california-moves-to-texas-up-36-in-latest-count/
  5. https://www.zillow.com/research/2020-hot-markets-south-26293/
  6. https://cals.ncsu.edu/agricultural-and-resource-economics/wp-content/uploads/sites/12/2020/02/Economist_2020_Economic_Outlook.pdf
  7. https://therivardreport.com/san-antonio-ranked-again-among-fastest-growing-cities-in-u-s/

Noah Jeong

Noah works on the Growth Team at Great Jones. He's just as frustrated as you are with the status quo in the property management industry and is passionate about making contributions towards raising the bar for property management.

Suggested: Hiring a Property Manager Property Maintenance Rental Income