The real estate market has changed drastically over the past year. The outbreak of the coronavirus pandemic has shifted the rental market. Which has created hot new housing markets and crushed longtime leaders. If you’re looking to invest in residential rental property in the coming year. Here’s a list of 10 best places to buy rental property in 2023.
Top Factors That Affect Rental Property Investments
There are countless factors that play into a location’s rental market. The sheer number of variables that have even the slightest impact on an area’s rental property performance can be staggering.There are some factors that affect a rental property investment inherently more than others. Some of which include:
Demand
Investors want to purchase rental property in an area that is in high demand for rental units. Demand is determined by a number of factors, including unemployment rate, population growth, career opportunities, rental-rate growth, and overall demand for rental units in the current market.
Planned Development
Areas with future development projects in the works are typically representative of a healthy market. Most likely, projects have broken ground because the area has shown economic promise. Which bodes well for rental property investors.
On the other hand, a distinct lack of development suggests there is reason to avoid the area. Therefore, you’ll want to contact the local county planning department to gather information on all the new projects that are either currently underway, or will be sometime soon.
Rental Yield
The median home price is supported by the median rental rate. The higher the median rental rate relative to the housing cost, the greater the rental yield. The rental yield is determined by the percentage value of rental income compared to the property’s market value.
10 Best Places To Buy Rental Property
10. El Paso, TX
- Median home price: $195,000
- Median rental rate: $823
- Unemployment rate: 8%
El paso’s cost of living is one of the lowest amounts in the U.S. Its affordability is one of the area’s major selling points for new residents. Making it one of the best cities to buy rental property. El Paso is home to one of the largest military bases in the United States, Fort Bliss. It is largely supported by the U.S. Department of Defense and educational industries.
Below-average median home values, as well as stable appreciation and year-over-year rental growth make this a leading market for owning rental property.
9. Orlando, Florida
- Median home price: $275,000
- Median rental rate: $1432
- Unemployment rate: 4.2%
Florida has made the list as one of the best places to buy rental property in 2021. Demand for single-family homes has been skyrocketing in Orlando, Florida. Rental rates have risen by about 6% in the past year. This is expected to continue throughout 2023 making Orlando one of the best places to buy rental property. The value of properties in Orlando is expected to continue rising as inventory levels continue to decrease.
Property insurance is incredibly low in Orlando. Also, there is no state income tax. More and more people are deciding to retire in Orlando for its warm sunny weather and excellent healthcare. Its population continues to rise every day. Making it one of the best places to own rental property. Career seekers, and students are all taking advantage of these benefits of higher quality living for an affordable cost.
Orlando’s job growth is now one of the best in America with over 45,000 new jobs created in one year. Up to a 35% increase in housing prices is projected for 2023, rent has grown by 3.44% in the past year alone, and the population has grown by 20% since 2010. Making Orlando one of the best places to buy rental property in 2023.
8. Greensborough, NC
- Median home price: $234,934
- Median rental rate: $991
- Unemployment rate: 6.4%
The diverse economy in Greensborough, which includes technology, transportation, and education. Results in consistent net migration and job opportunities for residents. Currently, unemployment rates are higher than national averages. But the low median housing price when compared to the median rental rate and rental growth makes this an ideal location for owning rental property. Helping it break into the list of best rental property markets in the U.S.
7. Tucson, AZ
- Median home price: $290,000
- Median rental rate: $994
- Unemployment rate: 7.1%
Warm weather, sunny skies, and little to no snow every year are all reasons why snowbirds like to live in Tucson. It is one of the large metropolitan areas that has maintained steady rental-rate growth and home appreciation over the past year. Despite other large cities seeing residents leaving.
While unemployment rates hover above the national average. Tucson, still ranks as one of the best cities to own rental property. The city has diversified industries, including education with the University of Arizona and governmental or contracting agencies like Davis-Monthan Air Force Base.
The median home price and rental rates allow room for investors to achieve competitive returns. While seeing steady year-over-year rental rate growth and home appreciation. Helping it become one of the best investment property locations in the U.S.
6. Tampa Bay, Florida
- Median home price: $314,900
- Median rental rate: $1375
- Unemployment rate: 4.8%
Florida is one of the best states to own rental property. The second-largest metro area in Florida, Tampa Bay is an interesting rental market for real estate investors. Investors who can find the right deal could secure a purchase price below the national average. The key will be to strike fast, as Tampa Bay is expected to see a large population growth in the coming years.
The reason for Tampa Bay’s increasing population comes down to job growth. Four Fortune 500 companies are headquartered in the area, and its dynamic economy is worth over $130 billion.
5. Allentown, PA
- Median home price: $159,900
- Median rental rate: $1241
- Unemployment rate: 7.7%
Allentown’s convenient location, commitment to a healthy lifestyle and celebration of the arts. Make it a great place for the active lifestyle. It’s a perfect example of how suburban markets surrounding large metro areas are currently benefiting from the mass exodus from cities.
Just a short 90-minute drive from New York City, Allentown is seeing massive rental growth and record demand for rental housing. While I don’t see the economic activity and infrastructure keeping people in the city for decades to come. I think the rental market can benefit from the short-term trend of city dwellers seeking more of the small-town life.
4. Albuquerque, NM
- Median home price: $243,300
- Median rental rate: $748
- Unemployment rate: 8.6%
Albuquerque is an economic hub for New Mexico, home to several universities and large contracting and government institutions. Which includes, Kirkland Air Force Base and Sandia National Laboratories. The city’s unemployment rate is in line with the national average. While rental rate growth has solidly risen and home appreciation is expected to increase slightly over the next year.
3. Memphis, TN
- Median home price: $155,525
- Median rental rate: $887
- Unemployment rate: 6.5%
Memphis, Tennessee remains one of the top markets for best places to buy rental property. The city’s below-average median home price but comparably high median rental rate. Allows investors the opportunity to achieve above-average returns.
One of the things that makes Memphis so attractive to people who are relocating there. Is the relatively low cost of living. Right now, unemployment rates compete with the national average while still achieving a fairly decent appreciation rate. The city’s economy is diversified, with jobs in the tourism, agribusiness, and technology industries.
2. Huntsville, Alabama
- Median home price: $265,000
- Median rental rate: $735
- Unemployment rate: 2.9%
Livability ranked Huntsville, Alabama as the #1 most affordable place to live and Wallet Hub recently ranked Huntsville as one of the Best Cites for Renters. The job growth in the technology and defense industries is immense in Huntsville. As the military and the NASA Marshell Space Flight Center are the two top employers in the area.
This accompanied by several technology start-up companies have attributed to more and more interesting opportunities in Huntsville. Among the benefits of living in Huntsville are low tax rates and an increasing rental market. Huntsville’s population has increased by about 10% over the last decade.
In that same time, the U.S. population grew by 6%. It’s clear that many are moving to Huntsville at a much higher rate than many other cities in the U.S. With many affordable real estate investment opportunities, Huntsville has become one of the best rental markets in 2023.
1. Boise, ID
- Median home price: $449,900
- Median rental rate: $1047
- Unemployment rate: 4.3%
Boise has been called the best place for millennials to live in the US. It’s one of the fastest-growing in the US. Attracting transplants from states like Washington, California, and Oregon. Boise has proven to be one of the best states to buy rental property.
Due to its relatively low cost of living, the booming tech industry, and easy access to nature. It is frequently praised as a great place to raise a family due to its low crime rate and abundance of outdoor activities.
Conclusion
This list comprises the best places to buy rental property in 2023. Investing in these locations, can be very profitable. While there can be great rewards, you should always remain cautious and do your due diligence before investing.
