Which are the Best Cities to Buy Real Estate?

Prices in the housing markets in America have flattened out this winter. That’s good news for buyers. In fact, for rental property investors, some believe you can’t lose with rental property, no matter which way the economy goes. 

When you add the Fed’s new dovish interest rate intent, lower inflation, banks wanting to lend, and trade talks going well, 2019 might be the best time to buy a house, condo, or invest in income rental properties. Best to choose soon, before prices rise. 

And choosing the right city is still very important if capital appreciation, cash flow, and ROI are what you’re hoping for.

Are prices too high in your Florida, Seattle New York, or California community?  Then find hundreds of other high potential cities enjoying excellent growth right here.

Stressed out renters in Los Angeles, San Jose, and San Francisco are migrating inland in search of homes or apartment rentals.

You’ll find the cities with the best price to rent ratios below, but there’s much more to consider. Use a spreadsheet to review each of the factors.

The Wealth Network says the ideal cities that offer the best cash flow and equity growth often have three things in common: job growth, population growth and affordability.

What to Look for in the Best City to Buy Income Real Estate:

1. lowest vacancy rate
2. rising working age population
3. rising developments
4. lowest price to rent ratios
5. rising number of millennials or baby boomer retirees
6. growing economy
7. good metro GDP
8. lots of US based companies
9. local restrictions on new construction
10. located in the heartland or south region
11. lower purchase prices
12. lower property taxes
13. lower state taxes

Which cities and states offer the best employment outlook, lowest taxes, fewest regulations, large millennial population, and a pro business climate? Florida, California, Michigan, Colorado, Miami Florida, Boston, Bay Area, New York , Massachusetts, or is it Ohio and Michigan? See Landlordology’s list of state regulations before buying a home or multifamily portfolio.

Your first thought on income properties is California, yet migration is outward into Arizona, Texas, Nevada, Colorado and even Oregon.  The lower cost of doing business, lower taxes, and lower residential property price savings in other states is substantial. A growing number of sellers in the Bay Area are selling while prices are good.

Dallas, Houston, Austin, San Antonio and Fort Worth are getting special attention these days. Texas is growing and Austin has become a tech hub. Michigan has huge potential. Businesses are relocating to these cities for a lot of reasons.

Danger Signals for Buyers

The US trade situation is foremost to consider.  A global recession would impact the US short term which is why President Trump is talking with China. If he protects US business, then heartland cities will continue their growth and the overheated markets may cool.

High oil prices, rising interest rates, stock market crashes, can all dry up jobs and create rental vacancies.

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.

2017: Record Demand for Home, Condo and Apartment Rentals

And while 30% to 40% returns aren’t the norm anymore, the stock market and economy could return to their heights of 1 year ago. The demand for rentals is still intense as the housing supply problem hasn’t been solved. And there are few signs of booming construction to ease the problem in many regions.

 

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Make sure others learn about the once in a lifetime opportunity in real estate investment with rental properties.

Where Are the Renters?

As mentioned, they’re in California, New York, Florida, Texas, Arizona, and California. Small cities are gaining mention. Here’s some small cities selected as excellent by Millken Institute:

And Milliken chooses their top 10 Big Cities:

Renter Statistics:

• 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. 

Houses for Sale – The Ultimate Home Search Source

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 baby boomer investors are looking at the potential of retirement income. Many baby boomers 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)

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	Home Price (for a $1,000 Rental)
1	San Francisco, California	45.9	551000
2	Honolulu, Hawaii	40.1	481000
3	Oakland, California	38.5	462000
4	Los Angeles, California	38.0	456000
5	New York, New York	35.7	428000
6	Seattle, Washington	35.1	421000
7	San Jose, California	34.7	417000
8	Long Beach, California	34.6	415000
9	Washington, District of Columbia	32.0	384000
10	Anaheim, California	31.3	375000
11	San Diego, California	30.3	363000
12	Portland, Oregon	29.3	351000
13	Boston, Massachusetts	28.7	344000
14	Jersey City, New Jersey	26.3	316000
15	Denver, Colorado	26.0	312000
16	Chula Vista, California	25.8	310000
17	Santa Ana, California	25.3	303000
18	Sacramento, California	24.3	291000
19	Miami, Florida	23.4	280000
20	Austin, Texas	23.4	280000
21	Atlanta, Georgia	23.0	276000
22	Colorado Springs, Colorado	22.8	274000
23	Bakersfield, California	22.5	270000
24	Raleigh, North Carolina	22.4	269000
25	Riverside, California	22.4	268000
26	Lexington, Kentucky	22.0	264000
27	Albuquerque, New Mexico	21.9	263000
28	Chicago, Illinois	21.6	259000
29	Henderson, Nevada	21.6	259000
30	Chandler, Arizona	21.5	257000
31	New Orleans, Louisiana	21.4	256000
32	Virginia Beach, Virginia	21.1	253000
33	Fresno, California	21.0	252000
34	Newark, New Jersey	21.0	251000
35	Minneapolis, Minnesota	21.0	252000
36	Anchorage, Alaska	20.9	251000
37	Phoenix, Arizona	20.3	244000
38	Louisville, Kentucky	20.1	241000
39	St. Paul, Minnesota	20.0	239000
40	Plano, Texas	19.9	239000
41	Stockton, California	19.5	234000
42	Durham, North Carolina	19.5	233000
43	Las Vegas, Nevada	19.3	232000
44	Nashville, Tennessee	19.1	230000
45	Greensboro, North Carolina	19.1	229000
46	Mesa, Arizona	19.1	229000
47	Lincoln, Nebraska	19.1	229000
48	Oklahoma City, Oklahoma	19.1	229000
49	Wichita, Kansas	18.4	221000
50	Charlotte, North Carolina	18.1	217000
51	Cincinnati, Ohio	18.0	216000
52	Aurora, Colorado	18.0	216000
53	Kansas City, Missouri	17.4	209000
54	Tulsa, Oklahoma	17.2	206000
55	Omaha, Nebraska	16.7	200000
56	St. Louis, Missouri	16.7	200000
57	Orlando, Florida	16.6	199000
58	Tampa, Florida	16.6	199000
59	Tucson, Arizona	16.3	196000
60	Philadelphia, Pennsylvania	16.3	196000
61	Dallas, Texas	16.2	194000
62	Laredo, Texas	15.9	191000
63	Columbus, Ohio	15.9	190000
64	St. Petersburg, Florida	15.8	189000
65	Fort Wayne, Indiana	15.5	186000
66	Baltimore, Maryland	15.5	186000
67	Arlington, Texas	15.5	186000
68	El Paso, Texas	15.4	185000
69	Indianapolis, Indiana	15.4	184000
70	Houston, Texas	15.3	183000
71	Fort Worth, Texas	14.8	177000
72	Jacksonville, Florida	14.3	172000
73	Milwaukee, Wisconsin	14.2	170000
74	San Antonio, Texas	13.7	164000
75	Toledo, Ohio	13.3	159000
76	Corpus Christi, Texas	13.1	158000
77	Memphis, Tennessee	12.3	147000
78	Pittsburgh, Pennsylvania	12.0	144000
79	Buffalo, New York	10.7	128000
80	Cleveland, Ohio	10.5	126000
81	Detroit, Michigan	6.3	75000

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 Milken’s list of worst performing cities, likely the ones you might avoid.

In this video below, Mike Hambright talks about apartment rental markets, and how to make money from cash flow and property value appreciation.

 

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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