Thinking of buying a new investment property? Before you seal the deal, it’s crucial to take note of important stats to help you identify the best and worst markets to invest in real estate.
The COVID-19 pandemic has resulted in a dramatic shift within the United States real estate market. The global outbreak has changed tenant preferences, pushing people out of the big city and into the suburbs. The result? A surplus of rental units in urban markets.
However, with the pandemic dying down, numbers are steadily rising again. People are migrating back to the cities, but are still searching for that “work-life balance” as they continue to work from home.
If you’re looking to buy a rental property here are the best and worst markets to do so.
What makes a market the “best” place to invest?
#1 Demand
Areas with population growth see increased housing demand, leading to higher rental prices and occupancy rates. Strong job markets attract people seeking work and housing, boosting rental demand. Low unemployment rates indicate economic stability, further enhancing rental demand. Gentrification affects property management by increasing property values and attracting higher-income tenants, which can lead to a more lucrative rental market.
#2 Appreciation or Increase in Property Value
A residential rental property, as an asset, is beneficial in many ways. Aside from generating rental income, it also has the potential to appreciate over time. In a couple of years, your property may be worth twice what you paid for. Ask a real estate agent to help you determine the projected appreciation rate for properties you’re planning on buying.
#3 Rental Yield
The rental yield is the amount of rental income that a property will make within a year when compared to its market value. Naturally, the higher the rental yield, the more attractive the investment property is going to be.
Keep in mind that there are other factors to consider when deciding whether an area is the ‘“best place” to invest in real estate. Each market presents unique opportunities for property investors. Before buying a rental property, make sure to consult with property investors who can gauge which markets will best support your financial goals.
What are the best places to buy a rental property?
#1 Orlando, Florida
Orlando, Florida has been a favorite among real estate investors for years. Known for its tourism, it presents investors the opportunity to market their residences to tenants who are looking for short-term vacation rental services. Additionally, Orlando has seen a stable economy thanks to its growing population, which can be attributed to the influx of employment opportunities.
- Orlando, Florida is the fourth-largest city in the state.
- It has a population of 4.8%.
- The median home listing price is $275,000.
- Employment growth was at 3.5% in 2020.
- Home values increased by 10.7% in the past year.
#2 Tampa, Florida
Tampa, Florida is another frequently visited destination. Aside from its appeal to tourists, Tampa boasts an impressive demand for single-family homes. Housing prices are relatively low, and properties have a great chance of appreciating in the coming years due to rapid developments in the area. What’s more, is that Tampa is home to four Fortune 500 companies, making it highly attractive for young professionals.
- Its population growth in the past year was at 3.7%.
- Tampa finished the year with employment growth of 2.7%.
- Home values increased by approximately 11.9% in the past year.
- The estimated rental yield is 5.5%.
#3 Boise, Idaho
Boise has a track record of having one of the most attractive real estate markets in the United States. In fact, Realtor.com expects that Boise will continue to rank #1 on home appreciation this year. While its housing prices are higher than the national average, the area’s low unemployment rate, population growth, and projected appreciation make it one of the best markets to buy a rental property in 2021.
- Its medium home price is estimated to be $391,754.
- Its medical rental rate is currently at $1,402.
- Boise ended the year with an unemployment rate of 6.7%.
- Its population growth is at 2.6%.
- The projected rental yield is at 5.2%.
- In 2020, home values increased by 13.3%.
What are the worst places to buy a rental property?
#1 Portland, Oregon
Portland is one of the worst cities to buy an investment property. Properties are expensive — single-family residences have a median listing price of $469,000. Considering that the median rent is around $1,800, it would take years for any investor to recoup their expenses through rental income alone.
- Portland’s population growth is at a mere 2.9%.
- Employment growth is at 2.3%.
- Home values increased by only 1.1% in the past year.
- The rental yield is expected to be at 4.7%.
#2 Corpus Christi, Texas
A handful of cities in Texas are considered good places to buy an investment property, such as Austin and Arlington. Unfortunately, for Corpus Christi, the same cannot be said. This coastal city is one of the worst cities to invest in property, primarily due to its static home values and declining employment.
- Its population growth is at 0.8%.
- Employment growth is at a staggering -0.9%.
- Home values increased by 3.4%.
- The expected rental yield is at 7.6%.
#3 San Francisco
The city’s median listing price is in the millions — $1.25 million, to be exact. Even if its median rent is at $4,219, it would still take you decades to pay it off. Unless you have the time, it would be best to steer clear of any rental property investments in this area.
- Home values increased by 9.8%.
- Employment growth is at 1.8%.
- The expected rental yield is at 4.1%.
- Population growth is at a mere 2.0%.
Conclusion
At Luxury Property Care, we understand that picking the ideal location is everything for your investment property. As a full-service property management company, we have years of experience across several real estate markets, allowing us to gauge whether or not investing in a certain property can produce the best returns. Get in touch with our team today, and we’ll help you make an informed decision regarding your next investment property.
Call (561) 944 – 2992 or message us by completing our contact form today.