The good news is that with long-distance real estate investing, you can find plenty of places to buy rental property where prices are low and cash flow is strong. Most of these places have the same things in common, including good job markets, rising rents, and increasing property values.
In this article, we’ll look at 30 places where rental property could be a great investment, and give you some important tips on long distance real estate investing.
What Makes a Place Good for Rental Property?
Here are some of the key criteria that can make a place good for rental property:
- Home value and median price indexes published by the National Association of Realtors (NAR) and Zillow because higher housing prices can indicate a strong demand for rental property
- Growth in housing prices year-over-year and projected future price increases indicate how much property could appreciate.
- Historical annual growth in rents is a source used to help predict future increases or decreases.
- Rent index indicates whether rent increases are faster or slower than the rate of inflation, and also shows the supply and demand conditions for rental housing.
- Unemployment, job growth, and population growth rates indicate how strong the local economy is and the potential demand for housing.
- Median age of residents, with markets having a large percentage of Millennials and Generation Z (people born after 1997) residents often being the best places to own rental property.
- Cap rate (also known as rental yield) measures the rate of return you receive from income property in different markets, although markets with high returns may not always be the best if economic conditions are declining
- Gross rent multiplier (GRM) compares gross rental income to property price, and the lower the GRM the quicker you will be able to pre-pay the mortgage own the property free and clear.
30 Places to Consider Buying Rental Property
- Home value: $216,000
- Price growth: 7%
- Median rent: $1,324
- Job growth: 2.4%
- Population: 560,200
- Population growth: 0.3%
- Home value: $221,000
- Price growth: 4.6%
- Median rent: $1,649
- Job growth: 7.6%
- Population: 398,100
- Population growth: 0.4%
- Home value: $299,300
- Price growth: 3.4%
- Median rent: $1,728
- Job growth: 1.2%
- Population: 498,000
- Population growth: 2.4%
- Home value: $64,800
- Price growth: 10.6%
- Median rent: $817
- Job growth: 2.1%
- Population: 212,300
- Population growth: 0%
- Home value: $252,400
- Price growth: 5.3%
- Median rent: $1,538
- Job growth: 1.8%
- Population: 872,500
- Population growth: 1.6%
- Home value: $249,200
- Price growth: 0.6%
- Median rent: $1,741
- Job growth: 1.3%
- Population: 2,710,000
- Home value: $165,600
- Price growth: 4.9%
- Median rent: $1,338
- Job growth: -2.4%
- Population: 302,600
- Population growth: 0.4%
- Home value: $68,800
- Price growth: 8.8%
- Median rent: $909
- Job growth: 1.2%
- Population: 383,800
- Population growth: -0.5%
- Home value: $323,200
- Price growth: 7.6%
- Median rent: $1,697
- Job growth: 6.1%
- Population: 472,700
- Population growth: 1.8%
- Home value: $147,100
- Price growth: 4.5%
- Median rent: $1,235
- Job growth: 2.8%
- Population: 132,200
- Population growth: -0.2%
- Home value: $174,100
- Price growth: 8.4%
- Median rent: $1,265
- Job growth: 2.5%
- Population: 895,900
- Population growth: 1.6%
- Home value: $226,100
- Price growth: 1.9%
- Median rent: $1,587
- Job growth: 0.2%
- Population: 1,350,000
- Population growth: 0.3%
Des Moines, Iowa
- Home value: $149,800
- Price growth: 2.5%
- Median rent: $1,181
- Job growth: 2.5%
- Population: 214,800
- Population growth: 0.9%
- Home value: $36,300
- Price growth: 7.7%
- Median rent: $796
- Job growth: 6.6%
- Population: 672,700
- Population growth: -0.1%
Fort Wayne, Indiana
- Home value: $147,800
- Price growth: 7.8%
- Median rent: $1,212
- Job growth: 5.5%
- Population: 264,200
- Population growth: 3.7%
Grand Rapids, Michigan
- Home value: $186,900
- Price growth: 7.1%
- Median rent: $1,422
- Job growth: 3.4%
- Population: 195,400
- Population growth: 0.8%
Gulfport, Mississippi
- Home value: $129,200
- Price growth: 6.0%
- Median rent: $1,123
- Job growth: 0.1%
- Population: 71,300
- Population growth: 0.1%
- Home value: $191,900
- Price growth: 2.9%
- Median rent: $1,538
- Job growth: 3.7%
- Population: 2,330,000
- Population growth: 0.6%
- Home value: $183,400
- Price growth: 10.4%
- Median rent: $1,261
- Job growth: 0.6%
- Population: 190,500
- Population growth: 0.8%
- Home value: $153,200
- Price growth: 5.4%
- Median rent: $1,185
- Job growth: 2.1%
- Population: 864,100
- Population growth: 0.8%
- Home value: $195,700
- Price growth: 6.2%
- Median rent: $1,366
- Job growth: 2.0%
- Population: 903,900
- Population growth: 1.3%
- Home value: $162,500
- Price growth: 4.3%
- Median rent: $1,173
- Population: 491,800
- Job growth: 0.6%
- Population growth: 0.6%
- Home value: $95,600
- Price growth: 7.8%
- Median rent: $914
- Job growth: 2.0%
- Population: 903,900
- Population growth: 1.3%
- Home value: $135,600
- Price growth: 6.8%
- Median rent: $1,138
- Job growth: 1.8%
- Population: 592,000
- Population growth: -0.6%
- Home value: $260,900
- Price growth: 3.4%
- Median rent: $1,651
- Job growth: 5.7%
- Population: 285,700
- Population growth: 1.9%
- Home value: $180,000
- Price growth: 5.5%
- Median rent: $1,255
- Job growth: 0%
- Population: 301,000
- Population growth: -0.5%
- Home value: $187,800
- Price growth: 3.8%
- Median rent: $1,384
- Job growth: 1.4%
- Population: 1,530,000
- Population growth: 1.3%
- Home value: $131,400
- Price growth: 3.8%
- Median rent: $1,048
- Job growth: 0.9%
- Population: 302,800
- Population growth: -1.9%
St. Petersburg, Florida
- Home value: $232,800
- Price growth: 7.3%
- Median rent: $1,562
- Job growth: 3.9%
- Population: 265,100
- Population growth: 0.7%
Tampa, Florida
- Home value: $251,400
- Price growth: 5.3%
- Median rent: $1,579
- Job growth: -0.7%
- Population: 392,900
- Population growth: 1.9%
Why Do Rents Keep Rising?
Even during a recession, rent in many real estate markets across the U.S. keeps rising, although sometimes at a slower pace over the short-term.
According to Rentonomics, since 1960 rents have consistently increased in the U.S., even during periods when real median household incomes have declined. During the 60 year period between 1960 and today, there have been eight recessions. Yet, throughout those troubled times, rents still continued to rise.
Here are some of the reasons why residential rents keep going up year after year:
- Demand from tenants at lower rent prices and income segments, such as workforce housing rented to teachers, police, and service workers.
- Housing prices have become increasingly unaffordable, creating more demand for rental property.
- Recent multifamily construction over the past few years has focused on luxury living for high-income earners, instead of building badly needed rental property for the middle market.
But perhaps the biggest reason why rents in the U.S. keep rising is because of Millennials. Millennials (currently between 26 – 40 years old) make up the largest percentage of renters across the U.S.
Even though this demographic is nearing their prime earning years, many are “planning to rent forever” due to the flexibility that renting offers and the hidden costs of homeownership.
Biggest Challenges of Owning Rental Property
Although the demand for rental property keeps growing – right along with rents – owning rental property as an investor isn’t always easy. While there are plenty of benefits to investing in income property, including cash flow and preferential tax treatment, there are some challenges to be aware of as well:
- Finding good rental property at affordable prices
- Hiring a great local property management company
- Maintaining positive cash flow with cost-effective repairs
- Increasing ROI through strategic value add work that increases income
- Knowing which real estate markets offer the highest potential returns
- Locating turnkey single-family houses that are cash flow positive the day escrow closes
Final Thoughts
There are a lot of factors that go into making a place great to buy rental property in. Instead of focusing on only one or two metrics, it’s a good idea to compare and contrast different real estate markets to one another.
Other metrics to use when deciding which rental property markets to invest in include neighborhood ratings, school rankings, crime rates, vacancy rates, business-friendly government, and if landlord-tenant laws favor you or the renter.
Jeff has over 25 years of experience in all segments of the real estate industry including investing, brokerage, residential, commercial, and property management. While his real estate business runs on autopilot, he writes articles to help other investors grow and manage their real estate portfolios.
