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12 Best Cities to Buy Rental Property for Every Strategy

Location, location, location for every investment strategy

12 Best Cities to Buy Rental Property for Every Strategy
Whether you invest in long term or short-term rentals, the location of your property is one of the important factors in your investment returns. While you can change certain things about your property, it’s usually impossible to change the location.

Key takeaways

12 Best Cities to Buy Rental Property for Every Strategy

Analyzing many markets is a very time-consuming task, and beginner investors frequently don’t know where to find reliable real estate data. Thus, in this article we’ve put together a list of the 12 best cities to buy rental property in the US for every rental strategy. 

No matter if you’re looking for a traditional rental or an Airbnb, whether you are on a tight budget or have plenty of resources, one of these 12 top markets is a good match for your investing requirements and expectations.

The 12 best cities to buy rental property are:

  • Atlanta: Easy to Manage Rentals
  • Austin: Rentals With High Projected Appreciation
  • Bay Area: Medium Term Rentals for Temporary Relocations
  • Birmingham: Rentals on a Starter Budget
  • Charlotte: Traditional High Cap Rate Rentals
  • Chattanooga: Vacation Rental Opportunities on a Small Budget
  • Dallas-Fort Worth: Rentals With Positive Cash Flow
  • Miami: Luxury Short-Term Rental Properties on the Water
  • Nashville: Quickly Appreciating Long and Vacation Rentals
  • Orlando: Airbnb Properties in the Most Popular Vacation Destination
  • Sacramento: Rental Portfolio Anchors
  • Smoky Mountains: Vacation Rentals Near State Land

How We Chose the Best Cities to Buy Rental Property

When selecting the top cities for real estate investing, investors must look at property values, closing costs, rental rates, occupancy rates, vacancy rates, operating expenses, appreciation, property tax, rental income tax, and more. That’s why investors usually need years of experience making deals in a certain location to be confident.

When selecting the 12 best cities to buy rental property, we evaluated:

  • Fit with a particular rental strategy: We’ve used our machine-learning algorithms and our in-person work with investors to identify the best locations for vacation rentals, traditional rentals, cash flow, ROI, and appreciation.
  • Data on affordability, profitability, and growth: Our data experts analyzed both primary (in-house) and secondary (publicly available) data on home values, rental income, vacancy, return on investment, and long-term appreciation across the US to select the top cities for each investment strategy.
  • Investor experiences: We’ve deployed our experience from everyday work with investors to gather the markets where they’ve been able to achieve the best results in the short and long run.
  • In-house agent expertise: After completing hundreds of transactions with investor clients, our network of in-house real estate agents have provided us with unique insights to refine this list and confirm that each city is indeed the best for each strategy.

Before we get started with the list of the 12 top real estate investment markets, we’d like to confirm that investors can find investment opportunities for multiple strategies in each of these cities. However, it will be easier and faster to locate good deals for certain strategies in certain locations.

Atlanta: Easy to Manage Rentals

As one of the 40 most populous US cities and the 10th largest city economy in the US, Atlanta, GA has always been one of the best cities to buy rental property for long-term rentals.

Metro Atlanta has a population of over 5 million residents, which is growing at an annual rate of 1.3% - above the US average. Nearly 59% of the local population rents rather than owns a home, which translates into over 3 million tenants. From the point of view of landlords, this is an indicator of strong rental demand.

The average monthly rental income for long-term rental properties exceeds $2,400, which is higher than the rate achieved by many of the top locations for this strategy. As Atlanta has a strong and diverse economy with ample job opportunities, tenants can pay rent on time and in full, which makes rentals easy to manage. 

There are dozens of reputable rental property management companies in the area in case investors opt for completely passive income.

Meanwhile, the median price of Atlanta rental properties for sale is $403,646, or only 13% above the national average of $356,026. This is an affordable price even for beginner investors as most other top locations for traditional rentals have significantly higher home prices.

The annual appreciation rate in the Atlanta real estate market of 15.5% is comparable to the US average (16.5%). This means that investors can expect to make profit not only in the short term but also in the long run with their Atlanta investment properties.

Atlanta Rental Investment Properties

Austin: Rentals With High Projected Appreciation

The Austin housing market brings together all the factors that make up for a perfect location for buying a traditional rental property. 

Austin is the 11th largest US city by population. With a metro area population of over 2 million and a rent vs. ownership rate of 56%, rental demand is high. After all, this accounts for nearly 1.3 million potential renters.

As the population is increasing at an annual rate of 1.75%, the Austin rental market can expect to experience a further growth in occupancy.

One challenge which Austin real estate investors might experience is the relatively high property prices. The median home value is $642,650, which is 80% more than the US average. So it really helps to have more capital and good financing options.

Austin also has above-average monthly rental rates at $2,491. This means that overall return on investment (ROI) is excellent in Austin, TX.

Austin real estate prices have appreciated by over 300% since 2000, averaging an annual growth rate of over 6%. This places Austin as one of the fastest appreciating US cities despite all the turbulence in the US housing market over the last two decades.

Austin Rental Investment Properties for Sale

Bay Area: Medium Term Rental for Temporary Relocations

Our analysis of the Bay Area real estate market reveals that it is suitable for investing in furnished medium term rental properties.

The Bay Area economy is one of the strongest across the US market, which creates many opportunities not only for full-time employment but also for temporary relocations for various professionals. 

These professionals usually prefer to stay at furnished apartments and other rental properties that are a hybrid between Airbnb rentals and long-term rentals. Leases for these properties usually last three to six months and include furniture.

If you think that this might be the right investment strategy for you, you’ll be happy to know that rental rates in the Bay Area housing market are high. 

Long-term rental properties yield $4,030 in monthly rental income in San Francisco, $4,147 in San Jose, and $2,977 in Oakland. And if you rent out a furnished apartment on a monthly basis, you can expect to generate even more revenue.

The California real estate market and the Bay Area market have some of the highest property prices nationwide.

The median home values in some of the top locations with the highest rental demand are $1,534,709 in San Francisco, $1,385,280 in San Jose, and $955,409 in Oakland.

In these markets more than half of the population rents, so demand is strong.

The top areas for investing in medium term rental properties in the Bay Area are San Francisco, San Jose, and Oakland.

Bay Area Rental Investment Properties

Birmingham: Rentals on a Starter Budget

Beginner real estate investors with a very limited budget should check out the Birmingham, Alabama housing market. In our list of the 12 best cities to buy rental property, Birmingham boasts the lowest median property price.

With a typical home value of $109,888, new investors can buy a Birmingham rental property for less than a third of the average US price.

Despite these highly affordable home prices, as much as 56% of residents prefer to rent rather than buy a home. With a population of over 1.1 million, this translates into close to 636,000 tenants. Combined with the low investment requirements, the high rental demand assures profitable Birmingham real estate investment opportunities.

Although the average home rents for $1,403, which is below what most other US cities offer, it is more than enough to bring good return on investment, considering the low current market values. Because of the low cost of living, monthly expenses are affordable, especially for remote investors coming from more expensive markets.

It’s worth mentioning that investors in Birmingham traditional rental properties can benefit not only from short term cash flow but also from long term appreciation. Over the past 12 months, the Birmingham real estate market experienced an above-average appreciation rate, exceeding 17%.

So, if you’re wondering where to start your real estate investing journey without access to ample financial resources, consider Birmingham, AL.

Birmingham Rental Investment Properties for Sale

Charlotte: High Cap Rate Rentals

Charlotte’s status of the 15th most populous city in the US and a commercial hub in North Carolina makes it an ideal location for investing in traditional rental properties. The metro area has a population of about 2.7 million residents, and 48% are tenants, accounting for nearly 1.3 million people who rent.

Over the past year Charlotte, NC experienced one of the highest city-level population growth rates of 3.38%, so we expect rental demand to continue going up in the coming years.

The Charlotte real estate market averages a monthly rental rate of $2,150, which is higher than many locations on our list. As an economic, business, transportation, and cultural center, Charlotte boasts excellent employment opportunities and above-average per capita income of $39,834. This means that local renters can afford to pay rent, so Charlotte investors and landlords worry less about late payments.

Property values in the Charlotte housing market are affordable. The median home price of $402,643 is only 13% higher than the US average, which is not a lot considering the fact that Charlotte is a major city.

The affordable property prices and high rental income result in excellent cap rate for Charlotte investment properties.

It’s important to highlight that over the past year Charlotte home values underwent an increase of 24%.

Charlotte Rental Investment Properties for Sale

Chattanooga: Vacation Rental Opportunities on a Budget

Similar to other markets in Tennessee, Chattanooga emerged as one of the top Airbnb locations across the US soon after the establishment of the short-term rental property marketplace. And it’s been able to keep this position to the present day.

Chattanooga hosts dozens of outdoor and indoor tourist attractions which bring in over 3 million visitors per year. Many of them choose to stay at Chattanooga vacation rentals rather than hotels. Some of the most popular sites include Rock City Gardens, Ruby Falls, Lookout Mountain, the Tennessee Aquarium, and the Battles of Chattanooga Museum.

Tennessee short-term rental laws are favorable for Airbnb hosts and allow the operation of both owner-occupied and non-owner occupied vacation rentals. 

Investors who opt for hiring one of the top Airbnb management companies can easily invest in Chattanooga short-term rentals remotely.

Chattanooga is a good option not only for experienced investors with various financing options but also for beginner investors on a limited budget. That’s because the median home value in the Chattanooga real estate market is only $286,174, or 20% less than the national average price.

Meanwhile, Airbnb daily rates and occupancy rate outperform the US market, on average, which results in excellent Airbnb profit margins in Chattanooga.

While generating high Airbnb revenue is an important factor for making money in real estate in the short run, buying a property with a strong appreciation potential is equally important for making money in the long run. Chattanooga real estate prices increased by almost 25% in the last year, which is a very positive indicator.

Chattanooga Vacation Rental Properties

Dallas-Fort Worth: Traditional Rentals With Positive Cash Flow

There is barely a need to explain why Dallas-Fort Worth is one of the best cities to buy rental property across the entire US market.

As one of the metro areas in the top 10 US cities by population and the 6th largest economy in the US market, Dallas-Fort Worth offers endless opportunities for investors looking to profit from traditional rental properties and generate positive cash flow. 

The metro population of 7.6 million, combined with a rental rate of 59%, results in a tenant pool of nearly 4.5 million people. This means that Dallas-Fort Worth landlords are unlikely to see high vacancy rates.

The metro area benefits from both a large, robust economy and a diverse job market. New employment opportunities are common, so we expect Dallas-Fort Worth to continue attracting new residents. Importantly, because of the well-paid and stable jobs, tenants can pay rent without causing problems for landlords.

Rental rates are good - at $1,814 in Dallas and $2,018 in Fort Worth - compared to the US national averages. Rental expenses are affordable, which leads to opportunities for investments with positive cash flow.

Affordable property prices are another favorable indicator for Dallas-Fort Worth where the median home value is $329,047 at the moment, which is right around the US average. Long term ROI is also excellent as seen by the annual appreciation rate of 22.5%.

Taking all the above factors into consideration, it’s no surprise that the prestigious Emerging Trends in Real Estate annual publication by PwC consistently includes Dallas-Fort Worth in the top 10 US markets with the best prospects year after year.

Dallas-Fort Worth Investment Properties

Miami: Luxury Vacation Rental Properties on the Water

While some investors look for affordable markets to invest in real estate, others are on the lookout for luxury investment opportunities. If you are among the latter, then you should consider Airbnb Miami.

The factors that make Miami the perfect market for investing in luxury short-term rentals are endless.

In 2019 alone Miami welcomed over 24 million visitors. While this number took a dip in 2020 and 2021 because of the Coronavirus pandemic, 2022 saw a major recovery in domestic and international travel to all top US tourist destinations, including Miami and other Florida cities. As the last restrictions drop, tourism experts expect individuals to travel at an increased rate to make up for the opportunities missed during the peak of the pandemic.

Many visitors opt for staying at Miami short-term rentals - especially luxurious ones - to benefit from the local experience at more reasonable rates than those charged by top hotels.

Miami Beach, South Beach, the Art déco Historic District, Little Havana, the Vizcaya Museum and Gardens, Miami Zoo, the Miami Seaquarium, the amazing nightlife, and the warm climate are just some attractions that keep bringing visitors year-round.

Before deciding to invest in a Miami Airbnb property, future hosts should prepare for high property prices. A typical Miami home costs $560,169, or 57% above the price of a typical US home.

If you’re thinking of starting an Airbnb business and have plenty of financial resources, it’s worth considering the Miami real estate market. However, Miami faces some of the most restrictive short-term rental laws in Florida. That’s why we recommend consulting with a local vacation rental property manager before buying a Miami investment property.

If you think that Miami real estate prices are already too high to further appreciate, consider the following. Over the past 12 months the median home value in Miami went up by almost 31%, from an already high level in 2021. And experts agree Miami home values are nowhere close to their peak point. This means that investors in luxury Miami vacation rentals will continue making money from appreciation in the future.

Miami Vacation Rental Investment Properties

Nashville: Quickly Appreciating Long and Short-Term Rentals

While some cities are best for buying short-term or long-term rental properties only, others provide excellent opportunities for both strategies. Nashville is one of those cities, so we highly recommend that you check out the local real estate investment options if you’re unsure of your strategy or would like to have the flexibility to switch gears down the road.

Several positive factors coming together make the Nashville real estate market the perfect location for investing in both traditional and vacation rental properties.

As the 21st largest city in the US in terms of population, the metro area is home to nearly 2 million people. 48% of residents prefer to rent, providing Nashville investors with over 950 million potential tenants. The local population increases at a rate of 2.09% per year, so the number of potential renters will keep going up.

Besides strong rental demand, Nashville investment properties benefit from above-average rental income, at $2,177 per month.

That’s why it’s easy to find profitable long-term rental opportunities in the Nashville market.

Nashville Traditional Rentals for Sale

Nashville short-term rentals, the city brings in over 14 million visitors per year. The most popular tourist attractions include the music and art scene, the local cuisine, the whiskey traditions, the Country Music Hall of Fame and Museum, the Grand Ole Opry, the Ryman Auditorium, and others.

Because of high occupancy and excellent nightly rates, Nashville Airbnb cap rates are well above the national average.

According to Nashville short-term rental laws and regulations, both owner-occupied and non-owner occupied vacation rentals are workable in the local market.

Nashville Airbnb Investment Properties for Sale

Something that concerns both long term and short-term rental investors in the Nashville real estate market are property prices. The median property value in the city stands at $462,211 at the moment. This is 30% more than the US average.

The good news, however, is that Nashville real estate prices increase at an annual rate of nearly 28%, on average.

Orlando: Airbnb Properties in the Most Popular Vacation Destination

When investing in a short-term rental, buyers should look not only for high Airbnb revenue potential but also for stability. Being a stable vacation market makes Orlando one of the best cities to buy rental property for this investment strategy.

As the 4th most visited US city, Orlando attracts 75 million short-term guests per year. We expect this number to increase further as they eliminate travel restrictions. Many of these visitors prefer the comfort of vacation rentals over traditional hotels, creating ample opportunities for Orlando Airbnb hosts.

The major attractions in Orlando include Walt Disney World, Universal Studios, the Wizarding World of Harry Potter, and many others. The warm climate ensures that Airbnb guests come throughout the year, so there is little seasonality in terms of demand and Airbnb revenue.

However, as the Orlando short-term rental market faces major legal restrictions, it’s a good idea to consult with a local Airbnb property manager before investing.

Another factor which makes Orlando one of the best Airbnb markets within Florida is the affordable median home value. A typical Orlando property costs $389,144, which is comparable to the US average. Airbnb cap rates are significantly above the national average in Orlando.

Browse Orlando Airbnb Investment Properties for Sale

Sacramento: Rental Portfolio Anchors

Investors aiming to build diverse, stable yet over-performing real estate portfolios should look into buying long-term rental properties in the Sacramento market.

Year after year the Sacramento real estate market continues to be one of the leading traditional rental locations across the US. There are many factors that come together to help it achieve this status.

51% of the 2.4 million metro population opts for renting. As over 1.2 million people rent at any point in time, this creates a consistent demand for rental properties.

Sacramento rental rates - at $2,315 - are higher than the US average, and as investors know, the combination of high occupancy and high rental income is ideal for achieving high returns.

One thing to keep in mind before buying an Orlando investment property is that home prices are relatively high. The median value of $503,651 exceeds the US average by over 42%. However, this is typical for most California real estate markets.

Sacramento Long Term Rental Investment Properties for Sale

Smoky Mountains: Vacation Rentals Near State Land

The Smoky Mountains prove that not only waterfront destinations make for the best places to invest in vacation rental properties. 

The Great Smoky Mountains National Park attracts over 14 million visitors per year, which makes it the most popular national park nationwide. This number of visitors is comparable to the tourists attracted to major destinations in California and Florida.

Many of these visitors decide to stay overnight to enjoy the many outdoors activities, and they opt for short-term rentals as their preferred lodging option.

Smoky Mountain short-term rentals boast high Airbnb occupancy rates and daily rates - the ideal combination for above-average return on investment.

Tennessee Airbnb laws are favorable to hosts, which is another positive indicator.

Median property prices in the Smoky Mountains real estate market vary, from $378,911 in Sevierville, through $527,616 in Pigeon Forge, to $596,931 in Gatlinburg. This means that investors with different budgets can find relevant opportunities to buy a vacation rental.

You should pay attention to the high appreciation rates, driven by investor demand. If you invest in a Gatlinburg, Pigeon Forge, or Sevierville short-term rental property now, you can expect to make a lot of money once you decide to sell it in the future.

The best markets for buying vacation rental properties in the Smoky Mountains are Gatlinburg, Pigeon Forge, and Sevierville.

Smoky Mountains Vacation Rental Investment Properties

Takeaway

Location is a multifaceted factor in real estate investing. To make profitable rental property investment decisions, it’s not enough to choose the best states; select the best cities to buy rental property and the best neighborhoods within each city. If you’re looking to invest in long term or short-term rental properties anytime soon, focus your investment property search on these 12 top US cities.

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