Buying rental property is a great way to get your foot in the door to becoming a property investor.
Rentals are great because they aren’t a huge amount of work and, in the right markets, the bring in loads of cash on a regular basis. That’s the key, though, the “right” markets. It can be difficult to figure out which cities to buy in because rental prices are always fluctuating.
Today, we’re going to discuss why buying a rental property is a good investment, what factors you need to consider when looking at a new city, and the 8 best rental markets in the country.
Choosing the right rental market can be the difference between a property making you a fortune or costing you just as much. Find and purchase homes that generate income with Zumbly — and maybe start with one of the cities below. Let this guide serve as your inspiration of the best places to buy rental property.
Why Buy Rental Property?
Rental property is a special type of property investment because it pays off both immediately and in the long-term. Although there’s a bit of extra work involved with the continual upkeep of the property while you’ve got tenants, the regular payments allow you to cover the mortgage payment and then some (in booming rental markets).
There are also a lot of tax deductions to consider as a landlord. You can write off the interest on your mortgage, insurance, the interest on your credit card (when used to make house-related purchases), property taxes, and maintenance costs. If you were flipping the house, for instance, these would all be extra costs.
It’s not all sunshine and roses with rental properties, though. If you’re not in the right market, they can end up being a huge money pit. That’s why it’s all-important to find the right places to buy a rental property.
What Factors Should You Consider?
The best places to buy rentals will have lots of affordable housing, positive wage growth, low unemployment rates, steady population growth, and an increase in average property value and rental yield. These cities have the best combination of these factors in the country.
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1. Orlando, FL
Orlando is centered around a booming tourism industry. With beaches, malls, and theme parks, it’s become home to many retirees and a growing workforce for young people. The job growth, population growth, and rent growth all look ideal and it’s been called one of the best places in America to buy a second home.
2. Charlotte, NC
Charlotte, according to CNBC, is in the top 5 cities in the country to start a business. As a business-heavy city, it’s seeing unprecedented job growth and population growth, as a result.
Home prices have risen somewhat in the last two years, making it slightly less appealing for some rental investors. However, the employment boom will keep pushing the population growth along, which is always good for rental numbers.
3. Tampa, FL
If we head back to central Florida, we’ll see another hastily growing city in the greater-Tampa area. Tampa is home to a huge university and several major sports teams that make it both a tourist destination and a viable place to live.
What makes Tampa particularly attractive are the home appreciation rates and rising rental rates. It’s still cheap to buy, but it won’t be in a few years’ time and rent is going up as well.
4. Oklahoma City, OK
OKC has grown a lot in the last decade. What makes this population growth exciting for property investors is that it’s mostly millennials.
It’s truly become one of the economic hubs of the south, as a prominent player in petroleum production, natural gas, scientific, technical, and administrative services. Millennials with good jobs mean great things for rental prices.
5. Houston, TX
It’s hard to believe that Houston could possibly still be one of the best places to buy rental properties; it is. There are currently 7 million people living there, but it’s still almost doubling the nation’s population growth rate.
There are 53 Fortune 1000 companies in Houston, fueling its economic growth. Despite the size, growth, and wealth, the average home price remains under the national average. These things are what makes Houston such a desirable spot for a rental property buyer.
6. Atlanta, GA
Atlanta being the fifth-largest metro city in the United States alone should be a fact keeping it off the best rental market list. The housing market is more expensive than the national average and the industry has been firmly ingrained for a long, long time.
However, the numbers don’t lie. Atlanta has one of the lowest unemployment rates in the country and unprecedented population growth. Houses might be a bit more expensive, but the median rental rate is $1,800 per month, so you know people are ready and willing to pay high rental rates.
7. Cincinnati, OH
The Cincinnati-Dayton area is an interesting case because both cities are growing steadily. Situated across the river (and state line) from one another, both Cincinnati and Dayton’s housing prices are a whopping 25% below the national average.
Despite the low unemployment rates and decent job growth, the actual population growth remains pretty stagnant. However, the low housing costs and rising rental rates still make Cincinnati-Dayton a promising market to invest in.
8. Colorado Springs, CO
Colorado Springs wouldn’t have dreamed of being on this list a decade ago. However, with rapidly dropping crime rates and a lot of younger people being priced out of Denver, it’s become one of the up and coming cities in middle America.
Although housing prices have already come up significantly in the last year, we’re expecting Colorado Springs to go the way of Fort Collins or Denver. People love the natural beauty in Colorado, so buy now and watch your rental investment grow in value over the next 10 years.
The Best Places to Buy Rental Property
The best places to buy rental property are often right under your nose. Take a look at the numbers and you’ll see all you need to know. Job growth leads to population growth, and population growth leads to higher rental demand.
Find the places that are poised to boom rather than markets that have already boomed. It’s always better to buy cheap and have to wait for the rental market to grow than to buy high in a market that can’t grow much more.