Trending Cities and Opportunities in Rental Housing Investment
A discussion of investing in rental housing is still an important one today. Investing in real property has rarely been a bad idea.
Knowledgeble about trending factors in demographics, local economies, wages and employment stats, you’re ready to choose properties in the cities and towns you like best. Enjoy the list of top 14 cities below, to get your new search underway.
As you might know, new housing is not being built at a rate that will fulfill the demand for home to buy or houses/condos/apartments to rent. Too much demand competes for too little supply. That fact amid expected strong economic growth will push up home prices and rent prices in the years to come.
Realtor.com economists expect home prices will rise throughout 2025 at a rate of 3.7%. Prices will be boosted by a combination of marginally lower mortgage rates and an 11.7% jump in existing for-sale inventory compared with last year.
According to Redfin’s reports, the median U.S. asking rent fell 0.3% year over year in December to $1,594—the lowest level since March 2022. It was down 0.1% from a month earlier, and down 6.2% from its August 2022 record high of $1,700. Redfin’s report shows a usual January dip, but the prices look supported (chart below). As the US economy heats up, increasing inflation, rent prices will surely climb.
Advantages of Rental Housing Investment
Investors have options in choosing the stock market, currencies, cryptocurrency, or even in the commodities markets. However, real estate has the advantage of being a better hedge against market crashes, economic downturns, or trade disputes. Your rental, if it’s the right type and in trending cities can still produce right through turbulent times.
Rental investors have an advantage of sorts given homes are still too expensive for most homebuyers who don’t have the financial leverage or business model to compete with investors. Rental housing’s value proposition is outstanding, featuring:
- Writing off the purchase as an investment
- Deducting insurance and maintenance costs (e.g., property management company)
- Rental income pays for the mortgage
- Shared ownership by multiple investors creates more profitable on volume
- Rising demand in hot markets means the picture will improve in those cities/markets
- Property appreciation with Gen Z’s and Millennials finally being able to buy when mortgage rates ease and their own savings increase
- affordable/reliable property management services aided by property management software
If you believe the housing market will enjoy this growth and will be moving forward on an investment, you’ll want to review the recent trends and identify those cities and communities that will produce the best returns.
Rental Industry Trends to Investigate
Let’s begin with the hottest trending factors in rental housing.
- Rental supply: The number of rental properties is increasing, but it’s not keeping up with demand.
- Rent growth: Rent growth is slowing, but affordability is still a challenge.
- Vacancy rate: The vacancy rate is increasing, but it’s still low.
- Immigration: Immigration still supports demand in major cities.
- Employment: Employment and earnings growth is supporting rental demand.
- Homeownership affordability: Low homeownership affordability is supporting demand.
- Demographic markers: Age and other demographic factors (GenZ, immigrants, Millennials families) impact preferences for space and amenities.
Investing in rental properties across various U.S. cities requires a nuanced understanding of each market’s dynamics. A few large cities stand out as attractive locations with strong migration, employment and quality of life advantages that might make them the best rental housing investment choices.
Major Hot Cities for Rental Property Investors.
San Francisco, Boston, and San Diego have high price-to-rent ratios (31, 30, and 28 respectively), which may indicate lower potential for rental income relative to property values. The question then becomes whether economic growth will lift those markets and whether the tax burden in California and Massachusetts is too much to bear.
Here’s a quick comparison chart for each of the cities, Denver, San Diego, Phoenix, Tampa, San Francisco, Los Angeles, Charlotte, Atlanta, Austin, Dallas, Las Vegas, Boston and Philadelphia.
| City | Cash-on-Cash Return (CoC) | Price-to-Rent Ratio | Typical Rent (1BR) | Market Rating (1-5) |
|---|---|---|---|---|
| San Francisco | 1.0% | 31 | $2,895 | ⭐⭐ |
| Los Angeles | 1.0% | 28 | $2,095 | ⭐⭐ |
| San Diego | 1.0% | 28 | $2,190 | ⭐⭐ |
| Boston | 1.2% | 30 | $2,600 | ⭐⭐⭐ |
| Denver | 1.5% | 25 | $1,485 | ⭐⭐⭐ |
| Phoenix | 1.4% | 22 | $1,200 | ⭐⭐⭐ |
| Dallas | 0.5% | 20 | $1,300 | ⭐⭐ |
| Austin | -7.3% YoY rent decline | 23 | $1,300 | ⭐⭐ |
| Charlotte | 1.6% | 24 | $1,545 | ⭐⭐⭐ |
| Atlanta | 1.6% | 26 | $1,960 | ⭐⭐⭐ |
| Tampa | 1.5% | 24 | $1,720 | ⭐⭐⭐ |
| Las Vegas | 1.2% | 22 | $1,360 | ⭐⭐⭐ |
| Philadelphia | N/A | N/A | $1,334 | ⭐⭐⭐ |
Explanation of Metrics:
- Cash-on-Cash Return (CoC): Indicates the annual return on investment relative to the cash invested.
- Price-to-Rent Ratio: Higher ratios suggest less favorable conditions for rental income relative to property prices.
- Typical Rent (1BR): Median monthly rent for a one-bedroom apartment.
- Market Rating: Based on affordability, ROI potential, and economic growth prospects.
Market Overview: Denver’s rental market has experienced steady growth, driven by a strong economy and an influx of young professionals.
Investment Appeal: The city’s diverse economy, encompassing technology, healthcare, and energy sectors, supports a stable rental demand. Denver’s quality of life and outdoor amenities continue to attract residents, making it a promising market for rental investments.
Market Overview: San Diego’s rental market has seen a slight decline, with rents decreasing by 1.34% year-over-year as of 2024.
Investment Appeal: Despite the recent dip, San Diego’s limited housing supply and strong job market in sectors like defense, tourism, and biotechnology contribute to long-term rental demand. The city’s desirable dry, sunny climate and coastal location further enhance its attractiveness to renters.
- Phoenix, AZ
Market Overview: Phoenix has been a hotspot for rental growth, with significant population increases and a booming economy.
Investment Appeal: Affordable living costs and a favorable business environment have drawn both employers and residents to Phoenix. The city’s expanding tech and manufacturing sectors bolster employment opportunities, sustaining rental demand.
Market Overview: Tampa’s rental market has experienced fluctuations, with recent data indicating a decline in asking rents. Florida’s real estate market is
Investment Appeal: Tampa’s growing healthcare and financial services industries, along with its appeal as a retirement destination, support a diverse renter base. The city’s waterfront developments and cultural attractions add to its investment potential.
Market Overview: San Francisco remains one of the most expensive rental markets, with an average rent of $5,265 for a 3-bedroom house in 2024.
Investment Appeal: The city’s status as a global tech hub ensures a continuous influx of high-income renters. Despite high property prices, the potential for substantial rental income makes it attractive for investors.
Market Overview: Los Angeles has seen a surge in rental housing demand, partly due to recent events affecting housing availability.
Investment Appeal: A diverse economy, encompassing entertainment, technology, and manufacturing, coupled with a large population, sustains rental demand. The city’s cultural diversity and economic opportunities make it a compelling market for rental investments.
- Charlotte, NC
Market Overview: Charlotte’s rental market has benefited from rapid population growth and a strong financial sector presence.
Investment Appeal: As a major banking center, Charlotte attracts professionals seeking rental housing. The city’s affordable cost of living and expanding infrastructure further enhance its investment appeal.
Market Overview: Atlanta has experienced significant rental market activity, driven by its status as a transportation and business hub.
Investment Appeal: A diverse economy, including sectors like logistics, media, and technology, supports a robust rental market. Atlanta’s growing film industry and educational institutions also contribute to housing demand.
Market Overview: Austin’s rental market has seen a notable decline, with asking rents down 16% as of December 2024. These lower prices might signify a buying opportunity before the Texas economy and the Austion tech sectors gets heated up in 2026.
Investment Appeal: Despite recent rent decreases, Austin’s reputation as a tech hub continues to attract companies and talent. The city’s vibrant cultural scene and quality of life make it a long-term prospect for rental investments.
Market Overview: Dallas remains an affordable market for renters, with a median rent of $2,012.
Investment Appeal: A diverse economy, including finance, technology, and healthcare sectors, underpins rental demand. Dallas’s population growth and business-friendly environment make it attractive for investors.
- Las Vegas, NV
Market Overview: Las Vegas has seen fluctuations in its rental market, influenced by its tourism-dependent economy.
Investment Appeal: Beyond tourism, Las Vegas is diversifying into technology and healthcare, broadening its economic base. The city’s relatively low property prices and no state income tax enhance its investment appeal. However, UNLV’s Center for Business and Economic Research’s yearly economic outlook projects that Southern Nevada’s visitor traffic will decrease by 5.8% in 2025 and 6.9% in 2026. And for gross gaming revenue, decreases by 5.4% in 2025 and 4.6% in 2026 are anticipated. However, with the expected growth in US earnings, lower taxes, and growing repatriation of manufacturing to the US, it’s doubtful those projections are accurate.
Market Overview: Boston’s rental market remains strong, supported by its educational institutions and healthcare sector.
Investment Appeal: The presence of numerous universities and hospitals ensures a steady demand for rental housing. Boston’s historic charm and robust job market contribute to its attractiveness for investors.
Market Overview: Philadelphia offers a stable rental market with relatively affordable housing options.
Investment Appeal: A growing healthcare and education sector, along with its proximity to major metropolitan areas, supports rental demand. Philadelphia’s rich history and cultural offerings add to its investment potential.
- Rockford, IL
Market Overview: Rockford, Illinois, offers a stable and growing rental market with relatively affordable housing options. The average rent for all property types is $1,100 as of early 2025, which is 45%-50% lower than the national average, making it appealing for renters seeking affordability5. The city has also been recognized as the hottest housing market in the nation due to its high demand and low inventory.
Investment Appeal: Rockford’s economic revitalization, driven by growing healthcare, aerospace, and logistics sectors, supports strong rental demand. Its proximity to Chicago (70-90 miles) and Milwaukee enhances its appeal for commuters seeking affordable housing.
Overall, rental housing investment offers some strong benefits. Finding the right properties in the right neighborhoods in the best rental friendly cites and states is the quest. Review US migration trends, and real estate
See more on the US housing market forecast, and signals regarding a potential housing market crash before launching into rental investments.
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