Choosing the right location is one of the most important factors in rental property investing. The best places to buy rental property offer strong rental demand, affordable home prices, job growth, and appreciation potential.
Investors should look for markets with low vacancy rates, high rent-to-price ratios, and landlord-friendly laws. Popular choices include fast-growing cities, college towns, and metro areas with diverse economies.
In this guide, we’ll explore the top cities for rental property investment, helping you find the most profitable markets for long-term success.
7 Best Places to Buy Rental Property
The best places to buy rental property can change as population trends change. These seven cities are the current best places to buy investment properties.
Birmingham, Alabama
Birmingham continues to be one of the most populated cities in the country, with affordable property prices, a rising population, and rising rental prices. Over the past few years, the booming job market has led to steady rental demand.
- Population: 1.1 million.
- Median home sold price: $95,000
- Gross rental yield: 13.07% in the city center and 10.98% outside the city center.
- Housing price index 5-year growth: 50.61
- Vacancy rate: 6.4%
Charlotte, North Carolina
Charlotte, North Carolina, has a booming job market and is a major metropolitan area. Its lower-than-average rental prices have caused a huge spike in renters. Plus, it’s a hub of art and culture, attracting residents for years. Residents are looking for various rentals, from apartment complexes to single-family homes.
- Population: 2.8 million
- Median home sold price: $525,500
- Gross rental yield: 10.6% in the city center and 12.84% outside the city center.
- Housing price index 5-year growth: 72.77
- Vacancy rate: 5.2%
Cincinnati, Ohio
The Cincinnati real estate market has historically produced steady growth, without the standard dramatic fluctuations in value. It's a growing city with low unemployment rates and affordable home prices. Plus, about 60% of its population is renting rather than owning homes leading to a large demand for quality rentals. Its median monthly rent is about $1,100 and the median sale price is up 6.5% year-over-year.
- Population: 1.7 million
- Median home sold price: $270,500
- Gross rental yield: 8.55% in the city center and 7.18% outside the city center.
- Housing price index 5-year growth: 61.57
- Vacancy rate: 3.6%
Dallas, Texas
Dallas in Texas is one of the country’s fastest-growing cities with a rich culture, ample job opportunities, and a high quality of life. It is home to several Fortune 500 companies and an economy full of diverse industries, leading to strong job growth.
- Population: 6.6 million
- Median home sold price: $499,900
- Gross rental yield: 11.16% in the city center and 15.15% outside the city center.
- Housing price index 5-year growth: 56.24
- Vacancy rate: 8.1%
Jacksonville, Florida
Jacksonville’s low home price paired with high rent prices makes the city very attractive for many landlords looking to purchase rental properties. Since the 1980s, Jacksonville’s home values have been rising about 4.6% on average yearly. This steady growth indicates that home prices will continue to increase. Plus, the population has been increasing by about 1% every year, which could lead to higher rental demands. About 44% of the population rents, with a median rent of $1,819 per month.
- Population: 990,931
- Median home sold price: $319,000
- Gross rental yield: 7.15% in the city center and 11.39% outside the city center.
- Housing price index 5-year growth: 68.84
- Vacancy rate: 6.6%
San Diego, California
San Diego has been a desirable place to live for years, and there is no sign of that changing any time soon. Between warm weather, ample recreation and culture, and a heavy presence of major industries such as military, bioengineering, and technology, San Diego has much to offer its growing population. The median home sold price is a bit steeper than many other cities on this list, but its steady home value appreciation can offer investors a good opportunity for growth. An average rent of $2,300 also provides good potential for a steady income. All in all, it’s a stable market with strong growth potential.
- Population: 1.3 million
- Median home sold price: $980,000
- Gross rental yield: 7.13% in the city center and 7.81% outside the city center.
- Housing price index 5-year growth: 60.74
- Vacancy rate: 3.8%
Savannah, Georgia
Savannah, GA, is a beautiful city with a deep history and a growing population. Its booming economy stems from its seaport, tourism, and growing technology industry. The median rent is about $2,250, but low property prices can yield a good return on investment.
- Population: 148,000
- Median home sold price: $322,667
- Gross rental yield: 11.34% in the city center and 11.88% outside the city center.
- Housing price index 5-year growth: 83.18
- Vacancy rate: 7.1%
How to Choose
Before choosing the best place to buy a rental property, there are several factors you need to consider. Low property prices and high rents aren’t the only indicators of potential success for your real estate investment. You’ll also need to consider several other trends to determine the future of the rental market, including:
- Population Growth: If the population is growing, then the demand for housing may also increase. This can lead to less vacancy and higher rents and home prices.
- Gross Rental Yield: The gross rental yield shows the rent collected from the property over the property value or purchasing price. This shows the potential profit properties in the area can produce.
- Vacancy Rate: The vacancy rate is the number of properties without tenants. A higher vacancy rate can indicate more supply than demand for rental properties.
- Housing Price Index 5-Year Growth: This data set shows the average change in the price of homes over the past five years.
- Median Home Sold Price: This shows what the average home is selling for. It might be helpful to compare it to the average listing price and see if the home sold price has changed. This can indicate how much you might spend on a property.
Expand Your Rental Portfolio
Whether you're purchasing your first rental property or looking to add property to your portfolio, choosing the right location is essential. The real estate market varies from city to city, so you’ll want to check location-specific data before making a purchase.
You’ll also need to consider your own goals and budget to determine where it is feasible to buy a property based on home-sold prices and average rents. Contact local real estate agents for a more detailed insight into the current market and to look at potential properties that may work for you.
Frequently Asked Questions
What is the 50% rule in rental property?
The 50% rule in rental property investing is a quick way to estimate expenses. It suggests that 50% of rental income will go toward operating expenses (excluding the mortgage).
What is the 2% rule for rental investments?
The 2% rule in rental investing states that a property’s monthly rent should be at least 2% of its purchase price for it to be a strong cash-flowing investment.
What type of property is best for rental income?
About Savannah Munholland
Savannah Munholland is a dynamic author and communications professional known for her captivating storytelling and expertise in public relations. With a passion for YA fiction, Savannah explores themes of sexuality and acceptance in her writing, resonating with diverse audiences worldwide. Alongside her literary pursuits, she excels in verbal and written communications, social media management, and customer service, showcasing her multifaceted talents. As a dedicated advocate for the LGBTQ+ community, Savannah’s work reflects her commitment to promoting inclusivity and representation. Whether crafting compelling narratives or spearheading PR campaigns, Savannah’s creativity and determination leave an indelible mark on every project she undertakes.