23 Apr Best US Cities to Buy Rental Income Properties 2017 to 2020
Here’s The Hottest Real Estate Investment Opportunities 2017, 2018 and Beyond
Which are the Best Cities to Buy Rental Income Property for Maximum Earnings?
It’s a rosy outlook for the housing markets in America, but where are the best cities to invest in 2017? Who will get rich in this new premium growth sector for investors? Which states offer the best employment outlook, lowest taxes, regulations, and a pro business climate? Florida, California, New York or is it Ohio and Michigan?
The most recent update on hot investment cities (average profit US-wide at $336,000) for sellers still has San Francisco as the tops. And San Francisco Sunnyvale San Jose might be tops due to high rental prices, lack of housing and land, silicon valley paychecks, and an improving economy means there’s no bubble and no crash possible. But the Bay Area isn’t the only city with potential.
In this era of investment, the best property investments may be in other cities. Even if you intend to stay close to home, knowing what’s going on in other states might provide a superior return on investment.
As you may have read in my very popular post on US Housing Predictions for 2017 to 2020, the US housing market is hot and some cities are hotter than others. No housing crash is forecasted. The list below of the top 80 cities to invest in real estate represent your best opportunities for high returns. Even normally depressed quiet markets are coming to life and beginning to catch investor’s eyes. It’s good news for Michigan, Florida, California, Texas, and New York and even better for real estate investors.
Record Demand for Home, Condo and Apartment Rentals
The difference in this latest real estate rebound is the number of Americans renting and still needing to rent a home or condo. That’s created the incredible income investment opportunity called rental income investment properties for passive income investments or self-managed property investments. 30% to 40% returns are not unheard of. It’s once in a lifetime wealth building. The kind of cap rates major investors can only dream of. Get some tips on how to do homes for sale searching better.
Scorching hot opportunity in the best cities! Will the hot markets of San Francisco, San Jose, Silicon Valley, Phoenix, and Los Angeles do as well as expected? Those cities with the highest home prices are not your only option. There’s plenty more towns and cities across the nation where you can buy rock bottom and sell high including this list of real estate by zip code. Cities you’ll read about below with lower home prices and rising employment rates may be your best bets for 2017 to 2020.
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During strong economic growth, rental income investment offers multiple ways to grow revenue, and your property may look even better to another investor when you sell. Lets see what the experts predict and what the stats say about the best cities and zip codes.
- Growth in rental demand was largest for people with incomes lower than $25,000; a group that accounted for four million new renters over the past decade.
- Growth for people with household incomes over $50,000 accounted for 3.3 million new renters.
- There was an increase of 1.6 million renters for those with incomes over $100,000 a year.
- The amount of rental stock also grew, and the single-family house share of the market increased from 34-40% of the total rental stock
- Vacancy rate was less than 5% in 75% of the United States largest cities by 2015.
Stats courtesy of go.homebay
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Skyrocketing Home and Rental Prices in California are a Continuing Allure for Investors
In major urban areas such as San Francisco, Los Angeles, Oakland, Boston and New York, the demand for rental properties is skyrocketing. Investors might see ROI of 30% or more on rental income property and that beats any stock market these days.
Foreign buyers too, are purchasing lower priced homes now, likely because of high prices on luxury homes along with the fact they can rent them out — passive income which is a hot topic for babyboomers in particular. Realtors are seeing a much different type of buyer today and they need to keep up on how competitive properties are in other cities in the US and Canada. Investors just want a great return.
Home prices are rising everywhere, but what makes San Francisco so hot is its lack of housing stock and a booming job market. Where there is little growth in new housing development together with a healthy job market and a good demographic (millennials who can’t buy) the demand for rental housing has to explode.
Experts try to explain away this demand by blaming speculators and high housing prices, yet the driver of rental demand in San Fran is too many employed people with nowhere to live. And wages are rising. Silicon Valley’s rental market is so tight, there’s an overflow to Sacramento and other inland cities. In-migration has been strong at a time when millennials are leaving home, contributing to rocketing apartment and home rental costs. This is fueling the tremendous demand for investment income properties. With no one building new homes and the government not acting to help, it’s up to private investors to take the helm.
With crazy high ROI, we’ll see rental income investors and developers race into these regions to build new properties. It’s a great investment situation for Americans, investors and realtors.
San Francisco is one area however that might not benefit. Its strong economy is driven by large tech corporations that add value to imported technology and products manufactured in China. Which is why Silicon Valley is hostile to Trump. California’s economic outlook is still very bright, but it’s low potential rental income outlook could send investors over to other US cities to invest in, such as those in green areas in the charts below.
Rental Income Property Investment Opportunities
With or without Trump, the US economic outlook is good. The outlook for rental income property is exceptional. Realtors and investment advisors should be looking hard at this market. Even babyboomer investors are looking at the potential of retirement income. Many babyboomers are a little nervous about how they’ll fund their “stay put” retirement plans.
They’ll need extra income to stay put and revamp their home over the next 30 years, and they may look to rental income to get that money. A percentage may just sell their home and leave it to a developer/investor to turn it into the multi-family unit. That investor might be you.
Here’s Realty Trac’s outlook on the best US cities to invest for rental property income
Complicating your investment decision is another set of statistics from Realty Trac that shows the west still has the highest returns currently but the green zones are predicted to perform better.
How about a 32% Yield on a Single Family Home?
(Screenshot above courtesy of RealtyTrac single family rental market reports: http://www.realtytrac.com/news/real-estate-investing/realtytrac-q1-2016-single-family-rental-market-report/)
Top 80 Cities and their Potential for Passive Rental Income ROI
These converted stats in this chart from Smart Assets are very insightful. They used U.S. Census data, to calculate the price-to-rent ratio in every U.S. city with a population over 250,000. This is their list of 80 US cities below with the worst potential for rental property income investment appearing at the top (The ones at bottom such as Detroit have better potential, unless employment fails to recover in Michigan).
|US Cities with Population above 250k||Price-to-Rent Ratio||
(for a $1,000 Rental)
|1||San Francisco, California||45.9||551000|
|4||Los Angeles, California||38.0||456000|
|5||New York, New York||35.7||428000|
|7||San Jose, California||34.7||417000|
|8||Long Beach, California||34.6||415000|
|9||Washington, District of Columbia||32.0||384000|
|11||San Diego, California||30.3||363000|
|14||Jersey City, New Jersey||26.3||316000|
|16||Chula Vista, California||25.8||310000|
|17||Santa Ana, California||25.3||303000|
|22||Colorado Springs, Colorado||22.8||274000|
|24||Raleigh, North Carolina||22.4||269000|
|27||Albuquerque, New Mexico||21.9||263000|
|31||New Orleans, Louisiana||21.4||256000|
|32||Virginia Beach, Virginia||21.1||253000|
|34||Newark, New Jersey||21.0||251000|
|39||St. Paul, Minnesota||20.0||239000|
|42||Durham, North Carolina||19.5||233000|
|43||Las Vegas, Nevada||19.3||232000|
|45||Greensboro, North Carolina||19.1||229000|
|48||Oklahoma City, Oklahoma||19.1||229000|
|50||Charlotte, North Carolina||18.1||217000|
|53||Kansas City, Missouri||17.4||209000|
|56||St. Louis, Missouri||16.7||200000|
|64||St. Petersburg, Florida||15.8||189000|
|65||Fort Wayne, Indiana||15.5||186000|
|68||El Paso, Texas||15.4||185000|
|71||Fort Worth, Texas||14.8||177000|
|74||San Antonio, Texas||13.7||164000|
|76||Corpus Christi, Texas||13.1||158000|
|79||Buffalo, New York||10.7||128000|
What About the Local Economies?
Last year’s report from Millken research reveals the cities with the best performing economies in 2015. This was put out in December 2016. Florida cities are showing a marked rise. Recent reports focus on the apartment rental prices in San Francisco, Sacramento, and San Jose as offering outstanding returns for investors.
And this is Millken’s list of worst performing cities, likely the ones you might avoid.
Screenshot courtesy of Millken Institute. Read the detailed Millken 2015 Best-Performing Cities report with rankings by economic component. Excellent insight to help you fine tune your rental income property investment choices. http://assets1c.milkeninstitute.org/assets/Publication/ResearchReport/PDF/best-performing-cities-report-2015.pdf
Their interactive map of US cities with the best economies below is a very helpful tool to help you measure the investment prospects of one city versus another.
Lowest car insurance in these cities: LA car insurance, Boston auto insurance, Phoenix car insurance, San Francisco car insurance, San Diego car insurance, Seattle car insurance, New York car insurance, Indianapolis car insurance, Detroit car insurance, Philadelphia auto insurance, Toronto automobile insurance, or Chicago car insurance.
In this video below, Mike Hambright talks about apartment rental markets, and how to make money from cash flow and property value appreciation.
Are There any Warnings?
This graphic from Coreglogic warns about overheated city markets. Yet it also shows how markets like Silicon Valley, actually has lots of room for rent rate growth. And New York has the lowest rent rate to home price ratio.
There are so many real estate investment opportunities in the US and in Canada too. Hopefully, my amateur US housing forecasts, predictions and unguaranteed advice will help you find those opportunities for the best upside in cash flow, safety and equity appreciation. Be careful with any investment. Do your due diligence.
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