best places to buy rental properties

Every landlord would love to know the best places to buy rental properties, but determining what is ideal for each business can vary. What are the best places for rental property nationwide, and can those locations be a good investment for your own business?

By learning about the best places for rental property both near and far from your current portfolio, you can better understand the rental market’s variability and potential. Are you missing out on great opportunities by remaining in only one area?

The only way to find out is to learn about the best investment property locations and see how their potential returns align with your current investment plan. You might be on par with other investors, or you might be missing out on serious profits.

Learn all about where to buy rental property to achieve the most success with RentPrep.

Table Of Contents: Best Places To Buy Rental Property

Figuring out where investment properties make sense is complicated, but there are a few tricks that you can use to make these important calls. Learn the top regions for investment properties right now, as well as how to determine the best place for you to own a rental property for.

The Best Places To Buy Rental Property Now

The Best Places To Buy Rental Property Now

What are the best places nationwide to buy a house for rental income right now? Getting a glimpse of where experts believe are the best investment locations can help you make future growth plans. Let’s learn what the top five cities or regions are for rental growth.

#1: Austin, Texas

Austin is a tech hub that has been growing for the last few years, and this city has continued to see sustained growth in both housing and rentals throughout the pandemic. With YOY rental growth of more than 20%, investing here will likely see long-term returns. Cities nearby are seeing that growth seep into their own markets, too.

Keep in mind that everyone can see how hot the market is, which can lead to fierce competition when attempting to invest in properties alongside rising property costs. Hunt for the perfect investment piece in the right neighborhoods if heading to Austin.

#2: Tampa, Florida

Analysts have noted the rental market in Florida as one of the fastest-growing in the nation. Demand for rentals in this region is high, and the supply has not yet met the demand. Home prices have gone up but remain affordable for many investors. Paired with low unemployment rates and high rental growth, Florida has a lot of potential.

#3: Raleigh, North Carolina

Raleigh is another current hot spot for rental growth, and investment property owners should move quickly if they want to catch the momentum here. Rental prices are growing at a reasonable rate, and tenants in the region are known at the national level for on-time payments. Finding the right property here could lead to significant long-term income.

#4: Atlanta, Georgia

Metropolitan Atlanta is thriving thanks to an improving job market, and that can be seen reflected in the rental market as well. Investors considering this area will see many properties with potential, though costs can be high. Those ready to put in some work, in particular, can line up long-term equity while also making tidy monthly profits from short-term rentals.

#5: Baltimore, Maryland

Finally, many investors are finding Baltimore a great location to purchase rental property right now. Tenants have noticed that rent prices here have not skyrocketed as rapidly as in other metropolitan areas, which means more renters are coming. This increased demand leads to lower vacancy rates even if monthly rents in the region are lower than the national average.

The Best Investment Property Locations For You

While those five regions are doing great for many investment property owners, they aren’t necessarily the best options for your specific needs. Many landlords will prefer to invest in their own area to be involved in the process personally, and that’s okay.

Before you consider doing business somewhere you aren’t centrally located, consider the following:

  1. Are you prepared to work with a property manager?
  2. Do you have the necessary credentials to do business in that area?
  3. Are you familiar with the rules and regulations of the area that may differ from current rental laws?
  4. Is there significant potential to increase your business profits by doing out-of-town business?

The Best Investment Property Locations For You

Asking these questions can help you determine if investing in hot rental markets will make sense for your business. In some cases, it simply won’t line up with your preferred way of doing business.

The critical thing to remember is that you need to have limits that match your business preferences and requirements, even when looking for stand-out rental markets. Markets that don’t meet those needs cannot be considered even if they would potentially be immensely profitable.

Remember this key point: Always seek properties with the highest returns and the least risk.

This rule applies whether you are in the nation’s hottest rental markets or doing business around your hometown. Expanding your portfolio at this time relies on you making smart choices, so slow down to look for properties that will reduce risk and allow productive equity growth.

Seek the following when choosing new areas to buy rental property:

  • High rental demand
  • Low tenant default rate
  • Low unemployment rates
  • Expected future rent growth
  • Current vacancy rates

Considering big-picture trends like these will allow you to figure out what local areas might be worth a closer look, and that will enable your business to expand.

Beyond Buying: The Right Tenants Matter

Buying investment properties in the right areas is a big part of finding success as a landlord, but that’s not the extent of it. You’ll also need to ensure you’re choosing the right tenants. Tenants range from incredible to high-risk, and the right choice for your property may be different from what works for someone else.

The only way to be sure about your tenants is to do thorough tenant screening. And the best way to accomplish this is to enlist a quality third-party service, like RentPrep, created explicitly for landlords like you. We want you to have the information you need to make the right call, and that’s why we have a variety of tenant screening packages.

Choose the right package for your budget and needs, to start doing tenant screening the right way today.

Best Investment Property Locations: FAQs

Is it a good year to buy rental property?

As we exit the most challenging stages of the pandemic, the rental market remains strong. However, the housing market is also very competitive. This means that buying rental property could be challenging, but there are still great long-term profits to be made if you can afford the investment.

Investing in real estate is often investing in equity. The immediate short term may not show huge returns, but the long-term equity generated will lead to a great return. Only buy properties that fit your plans and budget. Reassess your portfolio and address underperforming properties regularly.

Rental vacancies are at an all-time low, so many renters are looking for properties. Getting into the market may come at a high investment cost right now, but you will be able to begin growing your investment and see returns once you do.

What is a good rate of return on a rental property?

Calculating ROI on your property is a great way to check how it performs. The return on your investment can be calculated relatively easily. Divide the annual return of your property by the total cost of investment, and then multiply this amount by 100 to get a percentage.

Now, determining what exactly is a good ROI is a bit more complicated because this number is a risk indicator and way of comparing investments as opposed to a hard and fast rule.

Most experts suggest that you want to see at least a 10% ROI. However, the ideal percentage will vary depending on the type of purchase method you used on the property, as well. Mortgage-financed properties will be different from those purchased with cash, so you will also want to take that into account.

How do you calculate if a rental property is a good investment choice?

Two standard formulas can be used as a quick start to your investment property research. Using these formulas when you first consider a property can quickly rule out less desirable contenders and allow you to focus on those with more potential.

The first formula, the 1% rule, is a take on an ROI calculation. For this formula, you will check if the property’s monthly rent will generate at least one percent of the total investment cost. To do this, divide the total investment cost by 100. Can the property be rented for at least this much monthly? If so, it’s a solid investment choice.

The second formula is the capitalization rate, also known as the cap rate. This formula is best to use after the 1% rule when narrowing down your investment options.

Here’s how to easily calculate cap rate:

  • Calculate gross income by multiplying the average monthly rent by 11.5, allowing for a small vacancy period.
  • Subtract monthly operating expenses from gross income to get potential net income.
  • Divide the net income result by the property’s purchase price; this is the cap rate.
  • Get your potential return percentage by multiplying the cap rate by 100.

The higher this number, the better choice it is. Calculating cap rates can be an excellent way to determine which property to choose among a small pool of options. While the simple calculation explained above doesn’t account for financing differences, it provides a precise measure that can be used for straightforward comparisons.

Is rental property still a good investment for retirement?

Rental property remains one of the best investment options for building up long-term equity, but it is not a “set it and forget it” type of investment. If you are willing and ready to still be involved in the investment process, then investing in rental property might be a good choice for your needs.

Remember, you can always hire property managers and other employees to keep your properties organized and functioning. However, you will still need to be present for the overall management at times. If this works for your investment needs, rental property could be a good plan for building up future retirement funds.

The Best Place To Buy Investment Property: Your Choice

That’s it: Those five locations are currently some of the best locations in the US to buy rental property as you build out your investment portfolio. But remember, it’s your portfolio, which means that the best locations nationwide might not be the best locations for your own business needs.

Keep in mind the following as you browse potential rental property locations and consider how to round out your investments:

  • Do you want to manage properties locally, or are you willing to do business out of your area if it is more profitable?
  • Who will you have to manage your properties on-site if you are more than a few miles away?
  • Where will you see the biggest ROI on your profit?
  • What types of housing fit your management style best, and where can you find those rental properties at great investment prices?

There are an incredible number of places where you can potentially look for investment properties. Finding out the correct region for you and your growth goals takes time. We hope this information will help you to do just that.