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Rental property investments can be a promising way to diversify your portfolio and create generational wealth. But with rental markets fluctuating in different parts of the country, where should you invest?
This blog will overview the best places to buy a rental property in the USA for 2023. We’ll discuss rental market trends, job growth, population increases, rental prices, and rental yields in each of the 11 locations.
We’ll also include information about the advantages of rental property investments, such as tax benefits and potential long-term returns. But, before diving into the best places to buy rental property in USA, let’s understand the rental market in the USA.
Table of Contents
Overview of the Rental Housing Market in the USA
The US rental market has been strong recently, with the National Multifamily Housing Council reporting that nearly 44 million American households are renters.
Furthermore, job growth and population increase in many areas of the USA have helped to create a positive outlook for real estate investors.
- In 2022, median rent prices increased by 18%, and rental yields (the income a landlord receives in return for their investment) increased by 7.51%.
- The median rent across the USA is currently $1,191 monthly – up from $1,104 in 2020. Rents have been rising faster than inflation in many cities, with 17 of the 30 largest cities reporting double-digit rent growth.
- Investing in rental property can benefit from potential monthly cash flow and tax benefits from depreciation deductions.
- Finally, job growth in many US cities has been strong over the past year, with job openings increasing by 4.26 million between November 2020 and December 2022.
Additionally, rental properties are supported to acquire more rental units and more significant returns over time. Investors must research rental markets, prices, rental yields, job growth, and population increases before investing in a rental property.
What are the Advantages and Benefits for Real Estate Investors?
Rental property investments provide many potential benefits and advantages, such as:
- Monthly rental income
- Potential long-term capital appreciation
- Tax benefits from deductions for depreciation
- Ability to acquire more rental units by leveraging
- Possible cash flow, even during market downturns
- Easy Cash Flow Mortgage for rental property
Investing in rental properties can also provide an additional source of retirement income, and rental yields can be higher than other investments. Additionally, rental property investments can diversify your portfolio and have the potential for long-term returns.
What is the Reason for Rising Rents?
Rent continues to rise for a variety of reasons. However, there are three main reasons for the rising rents in the USA:
- Job growth and population increases (0.38% growth in 2022) have bolstered the rental market in many areas of the USA. As more people move into a room, demand for rental properties also rises – leading to increased rent prices. The population growth in some areas of the USA has outpaced the supply of rental units.
- As job opportunities increase in certain areas, renters can pay higher rents. It creates a positive feedback loop for real estate investors, as job growth leads to increased rental demand, better rental yields, and higher rent prices.
- Finally, inflation and rising construction costs also contribute to rent increases in many areas of the USA. As inflation increases, so do the costs associated with renting – leading to high rental demand.
Now that we’ve established the job growth and population increases influencing rent prices, let’s look at the 11 best places to buy a rental property in the USA.
Top 11 Places to Invest in Rental Property (2023)
Investing in rental property can be an excellent way to generate steady income and build long-term wealth. But where should you invest?
The US real estate market is constantly transforming – job rise, population growth, and rental rates vary significantly from place to place.
To help investors make the best decisions for their investment portfolios, we’ve compiled a list of the top 11 rental property locations in the USA for 2023. So let us look at them now.
11. Detroit, MI
Detroit, MI, is a bustling city in the Midwest that offers a one-bedroom apartments with competitive prices and rent. The town also boasts fewer business regulations, making it attractive for entrepreneurs.
The metro area serves over 4 million people and continues to grow. The diversity of attractions and amenities makes Detroit an excellent place to live and work. Let us go through the pros and cons of living in Detroit.
Pros:
- A diverse and welcoming community.
- Unique culture, art, and music scenes to explore.
- Affordable housing costs relative to other cities.
- Abundant public transit options are available.
- A growing job market with numerous opportunities.
Cons:
- The high crime rate in some areas of the city.
- Icy winters that last for months at a time.
- Areas with higher poverty levels than national norms.
- Limited parking options in certain parts of the city.
- Numerous traffic congestion issues during rush hour periods
| Median Home Price | $71,285 |
| Average Rental Prices | $1,100 per month |
| Average Rental Yields | 5.3% |
| Job Growth | 6.7% |
| Appreciation in last year | 6.61% |
| Property Tax Rate | 1.62% |
| Median Household Income | $34,769 (2021) |
10. Salt Lake City, UT
Salt Lake City is ideal for real estate investing and rental real estate opportunities. In addition, it offers affordable housing prices compared to the national average, making it an excellent option for investment.
Many property options are available, from single-family homes to multi-unit complexes. In addition, the economy in Salt Lake City is booming, with plenty of job opportunities that ensure your investment will pay off in the long run.
Whether you’re looking for a commercial or residential estate, Salt Lake City has everything you need for success. But first, let us examine the pros and cons of investing in Salt Lake City.
Pros of Renting Property in Salt Lake City
- A thriving economy with job opportunities in multiple industries
- Affordable housing and rental options
- Variety of outdoor activities to enjoy, such as skiing and biking
Cons of Renting Property in Salt Lake City
- High cost of living compared to the national average
- Challenging winter weather conditions
- Limited public transit options
| Median Home Price | $526,172 |
| Average Rental Prices | $1,395 per month |
| Average Rental Yields | 5% |
| Job Growth | 3.6% |
| Population Growth | 0.92% |
| Appreciation in last year | 23.5% |
| Property Tax Rate | 0.67% |
| Median Household Income | $81,307 (2021) |
9. Portland, OR
Portland, OR, is an exciting city that continues to grow in popularity due to its beautiful landscape, trails, and rivers. The single-family rental market has been booming with locals and visitors alike as the demand for housing increases.
Businesses in or around the city benefit from lower taxes through Oregon’s state tax program, helping create a positive cash flow environment. Portland is also one of the best cities to invest in when buying a house under 500k.
Portland has pros and cons to consider when deciding to live or work in the area.
The Pros Include:
- Abundant natural beauty and outdoor activities
- Low Business-related Taxes which promote a positive cash flow
- Great shopping, dining, and entertainment options
The Cons of Living in Portland Include the Following:
- High housing prices make it difficult for the single-family rental market
- Congested traffic in some regions of the city
- Heavy rain during the winter months
| Median Home Price | $525,443 |
| Average Rental Prices | $1,507 per month |
| Average Rental Yields | 6.03% |
| Job Growth | 8.4% |
| Population Growth | 1.05% |
| Appreciation in last year | 12.7% |
| Property Tax Rate | 0.87% |
| Median Household Income | $70,084 (2021) |
8. Charlotte, NC
Have you ever considered the Charlotte real estate market? The third quarter saw a spike in interest in residential properties — specifically, an increase in median home prices and low available inventory.
This trend indicates the firm and growing economy this city is experiencing. Buyers should take advantage of current conditions before prices rise too high!
Let’s view the pros and cons of investing in Charlotte.
Pros:
- Low unemployment rate (3.8%)
- More affordable home prices compared to other cities in the US.
- Good job growth and population increase
- No income tax by the State for property owners.
Cons:
- Strict regulations for renting properties
- The high crime rate in some areas.
| Median Home Price | $368,845 |
| Average Rental Prices | $1,568 per month |
| Average Rental Yields | 11.2% |
| Job Growth | 11.9% |
| Population Growth | 2.86% |
| Appreciation in last year | 23.5% |
| Property Tax Rate | 0.78% |
| Median Household Income | $88,004 (2021) |
7. Orlando, FL
Orlando is an attractive location for investors because of the Orlando real estate market’s diverse economy, reasonably low unemployment rates, and the potential for long-term returns.
The area’s rapid growth has also led to higher rent prices and more opportunities for rental income. Let’s look at some pros and cons of investing in the Orlando real estate market.
Pros:
- Affordable home prices compared to other cities in the US.
- High job growth and population increase (3rd highest among the central metro area of USA)
- Reasonable unemployment rates.
- A diverse economy and a variety of job opportunities.
Cons:
- Strict regulations for renting properties.
- Higher insurance costs due to hurricane risk.
| Median Home Price | $357,876 |
| Average Rental Prices | $1,650 per month |
| Average Rental Yields | 11.68% |
| Job Growth | 4.0% |
| Population Growth | 1.62% |
| Appreciation in last year | 18.60% |
| Property Tax Rate | 0.97% |
| Median Household Income | $58,968 (2021) |
6. Austin, TX
The Austin real estate market is booming. With a rapidly growing metro area and steady cash flow, there’s no better time to jump in and invest. In addition, this thriving city offers diverse communities, abundant outdoor recreational activities, and a desirable family-friendly atmosphere.
Whether you’re knowledgeable in investing or just getting your feet wet in the market, now is the ideal time to take advantage of this vibrant real estate landscape. Let us view the pros and cons of investing in Austin.
Pros:
- Strong economy
- Low cost of living
- Tax incentives for investors
- Growing technology and innovation sector
- Many companies are relocating to the city
Cons:
- Competition among businesses
- High real estate prices
- Difficulty in finding qualified employees
- Traffic congestion increasing
- Taxes increasing
| Median Home Price | $557,910 |
| Average Rental Prices | $1,674 per month |
| Average Rental Yields | 4.99% |
| Job Growth | 6.0% |
| Population Growth | 2.39% |
| Appreciation in last year | 6.82% |
| Property Tax Rate | 1.81% |
| Median Household Income | $78,965 (2021) |
5. Chicago, IL
Chicago is a great place to call home for landowners. With no state income tax, the city offers residents plenty of amenities and activities. From a one-bedroom apartment in Lincoln Park to sprawling historic homes in Hyde Park, there’s something to suit every budget and lifestyle.
Let’s see the pros and cons of investing in Chicago.
Pros:
- No state income tax for property owners.
- More affordable housing prices than other cities in the US.
- Good job growth and population increase.
Cons:
- The high crime rate in some areas.
- Strict regulations for renting properties.
- Lower rental yields compared to other cities.
| Median Home Price | $276,299 |
| Average Rental Prices | $1,795 per month |
| Average Rental Yields | 8.94% |
| Job Growth | 0.3% |
| Population Growth | 0.40% |
| Appreciation in last year | 2.59% |
| Property Tax Rate | 1.38% |
| Median Household Income | $65,781 (2021) |
4. Wahington, DC
Washington, DC, is one of the top housing markets in the nation. Home prices have skyrocketed as more people flock to the metro area to take advantage of its numerous job opportunities and vibrant culture.
From quaint neighborhoods like Capitol Hill to bustling city blocks like Dupont Circle, Washington offers something for everyone. There are also nine critical statistics about the Washington housing market that you should note.
Whether looking for luxury condos, historic townhouses, or affordable apartments, this area has it all! But what are some pros and cons of rental real estate in Washington?
Pros:
- High job growth and population increase.
- High rent prices (above the national average)
- Good rental yields.
Cons:
- High housing prices.
- Strict regulations for renting properties.
| Median Home Price | $553,846 |
| Average Rental Prices | $2,300 per month |
| Average Rental Yields | 6.67% |
| Job Growth | 6.8% |
| Population Growth | 0.58% |
| Appreciation in last year | 4.45% |
| Property Tax Rate | 0.92% |
| Median Household Income | $82,400 (2021) |
3. San Diego, CA
San Diego, California, is an excellent market for rental housing and an ideal place to invest in real estate. It boasts some of the best property values in the United States and offers an incredibly diverse landscape that appeals to outdoor enthusiasts and families alike.
There are plenty of possibilities for those looking for rental housing or to invest in property values here in San Diego–making it one of the best real estate markets in the USA! Let us see some of the pros and cons.
Pros of Renting a Property in San Diego:
- Access to the Beautiful California Coastline
- Enjoyable Climate Year-Round
- Variety of Attractions and Cultural Experiences
- Reasonable Cost of Living Compared to Other Major Cities
Cons of Renting a Property in San Diego:
- High Cost of Real Estate
- High Rental Rates During Peak Season
- Increased Traffic Congestion in Popular Areas
- Limited Availability for Single Bedroom Apartments
| Median Home Price | $873,825 |
| Average Rental Prices | $2,345 per month |
| Average Rental Yields | 6.34% |
| Job Growth | 3.4% |
| Population Growth | 0.73% |
| Appreciation in last year | 23.2% |
| Property Tax Rate | 0.61% |
| Median Household Income | $104,115 (2021) |
If you want to buy rental properties in California’s best cities, then you must read this blog about the 11 best cities in California to buy a house.
2. Miami, FL
Miami is another excellent option for real estate investors, with job growth and population increases driving rental demand in the area. To buy investment property in Florida, read this blog to understand the Florida market.
Let’s review a few pros and cons of investing in Miami real estate.
Pros:
- Affordable housing prices.
- High job growth and population increase.
- Good rental yields.
Cons:
- Rates of appreciation are lower than in some other areas of the USA.
- The property tax rate is higher than the national average.
- Higher insurance costs due to hurricane risk.
| Median Home Price | $528,788 |
| Average Rental Prices | $2,600 per month |
| Average Rental Yields | 7.07% |
| Job Growth | 4.5% |
| Population Growth | 0.80% |
| Appreciation in last year | 25.64% |
| Property Tax Rate | 0.97% |
| Median Household Income | $47,860 (2021) |
1. New York, NY
New York City, NY, is one of the most sought-after places to invest in rental properties. With rising job growth and population increases, New York City has become a hotbed for real estate investors.
You can also learn more about the places to purchase a house in New York through this blog.
The median rent price in NYC is $2,024 per month, with rental yields averaging around 4.78%. Let’s examine some of New York City’s pros and cons for real estate investors.
Pros:
- High job growth and population increase
- High median rent prices (above the national average)
- Good rental yields
Cons:
- High real estate prices
- Complex tax laws for landlords
- Strict regulations for renting properties.
| Median Home Price | $629,516 |
| Average Rental Prices | $3,400 per month |
| Average Rental Yields | 4.78% |
| Job Growth | 0.6% |
| Population Growth | 0.37% |
| Appreciation in last year | Annual appreciation of 5.88% |
| Property Tax Rate | 1.23% |
| Median Household Income | $64,971 (2021) |
Overview of the Critical Advantages of Rental Property Investments
Rental property investments have several advantages for real estate investors, such as potential long-term returns, tax benefits, and increased cash flow from rental income.
- Rental yields typically range from 5% to 8%, higher than most other investment options.
Additionally, there is a potential to make money even when the housing market is in decline since rental prices are usually more stable than home values. Thus, investing in rental property can effectively support those seeking income stability and capital growth.
Are you interested in investing in rental property? With careful planning and the right mortgage lender, a rental property in the US can offer multiple advantages to help you achieve your financial goals.
How to Qualify for Mortgage Based on Rental Income
Lenders will consider several factors when applying for a mortgage based on rental income. Generally, lenders require borrowers to provide proof of current rental income from an investment property.
- The average gross rent multiplier (GRM) is around 25 – 30%, and this number serves as an indication of your debt-to-income ratio and creditworthiness.
- Additionally, lenders may require a 20%-25% down payment to invest in rental properties, though some will accept lower prices if the investment is low-risk.
Finally, borrowers should have sufficient cash reserves to cover unexpected costs or repairs from owning an investment property. By understanding these requirements and having an experienced lender, investors can successfully invest in rental properties and build wealth.
If you are looking for a lender to help you qualify for a mortgage based on rental income, then HomeAbroad is just the place for you. HomeAbroad specializes in investment property loans, offering the best loan terms with fast approvals. Get your rate quote today!
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Summary
Investing in rental property can be a terrific way to grow your finances and generate passive income. Whether you’re looking for a commercial or residential estate, there are many attractive locations in the US with plenty of potential for success.
The top 11 best places to buy a rental property in the USA discussed in this article have all proven their worth as desirable real estate markets, offering investors various options, such as affordable housing, good rental yields, job growth, and population increases.
However, it is essential to thoroughly research each city and its real estate housing market before investing to ensure the best possible return on your investment. Lastly, investors should take advantage of all the tax benefits of owning rental property.
Frequently Asked Questions
Q. Where is the hottest rental market in the US?
A. The hottest rental market in the US is highly dependent on individual preferences and investment goals, as each location has unique advantages and drawbacks.
However, some of the top rental markets in the US include cities like New York, NY; Austin, TX; Portland, OR; and San Diego, CA.
Q. Which is the best State to buy a rental property in 2023?
A. It largely depends on your investment goals. Some states, such as Texas and Florida, offer favorable tax incentives for real estate investors, while others may provide more affordable housing options.
Q. Where is the best property investment in the USA?
A. It depends on various factors, including job growth, population increase, rental yields, and median home prices. Some of the best property investments in the US include cities like Austin, TX; Portland, OR; San Antonio, TX; and Washington, DC.
Each of these locations offers favorable conditions for real estate investors.
Q. Is it a good time to buy property in the USA?
A. It can be a great time to invest in real estate, depending on your preferences and financial goals. The US real estate market is growing, increasing median home prices and rental yields.
Additionally, rental property investments have tax benefits and potential long-term returns.
Q. Can foreigners buy a rental property in the USA?
A. Yes, foreigners can invest in real estate in the US. However, certain restrictions and regulations must be considered when buying property in the US as a foreign investor.
Q. What is the most profitable property?
A. As it depends on individual preferences and investment goals. For example, multifamily properties can offer higher returns than single-family homes due to their potential for increased cash flow.
Similarly, commercial properties may also be more profitable than residential, depending on the size and type of investment. Ultimately, the most beneficial property is the one that best suits your individual needs and financial goals.
Q. Which State has the best rental return?
A. It is not easy to answer, as the best rental return will vary depending on location and market conditions. Generally, states with high job growth rates and local economies on the upswing tend to offer higher rental returns.
Additionally, states with low taxes and other incentives for real estate investors may be beneficial.
Q. Where are rents growing the fastest?
A. It is highly dependent on local market trends and the current economic conditions in each State. Generally, states like California, Texas, and Florida tend to have higher rental growth rates as they have strong local economies.
Q. What is the 50% rule in real estate?
A. The 50% rule in real estate is a guideline for estimating the expenses associated with owning and managing rental properties. According to the 50% rule, you will allocate 50% of the rental income to operating expenses like maintenance and repairs, insurance, property taxes, management fees, and other costs.
Q. What credit score do you need to buy a rental property?
A. The minimum credit score needed to buy a rental property varies from lender to lender but ranges from 600 to 650. However, some lenders may require a better credit ratio if you apply for an investment loan.
Q. What is the best return on rental property?
A. The best return on a rental property depends on multiple factors such as location, market conditions, and property type. Generally, multifamily properties can offer higher returns due to their potential for increased cash flow.
Commercial properties may also have higher rental returns compared to residential investments.
Q. What is an excellent buy-to-let yield?
A. An excellent buy-to-let yield is generally considered a rental income covering at least 1% of the monthly market value.
Q. How much deposit do you need for a buy-to-let?
A. Most lenders require a deposit of at least 25-30% of the purchase price for a buy-to-let property. You may also need to invest your capital in other costs, such as repairs and maintenance.
Q. Is rental property a good investment in 2023?
A. The real estate market is growing, increasing median home prices and rental yields. Additionally, rental property investments have tax benefits and potential long-term returns.
Depending on your preferences and financial goals, investing in rental properties can be a fantastic way to create wealth and generate passive revenue in 2023.
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