Finding cities with the highest rental appreciation is crucial if you want to make a profitable investment in the rental market. Even in an expensive housing market, finding suitable buy-and-hold assets is possible if rent prices are rising. There are plenty of rental properties in great places for investors.
The hot housing market in the U.S. means that it can be a boom time for investors—if you know where to look. According to Reuters, home prices are expected to rise by 10.3% in 2022. However, some analysts say it may slow down by 2024 to around 4%. Others have different predictions, such as a 10% price correction in either direction.
With rising inflation and the cost-of-living crisis, the rental market in the U.S. is set to grow over the next few years. So, where are the top cities with consistent growth in the rental market if you are considering buying an investment property?
This article lists the best rental markets to invest in 2022.
The Top 10 Best Rental Markets to Invest In
Rental properties are an excellent way to earn regular income from secure investments. To ensure a high return on investment (ROI), finding affordable properties with excellent cash on cash return is crucial.
A quick glance at a property value map makes it easy to see where the best investment properties in the U.S. are. For example, Florida, Texas, South Carolina, and Ohio all have cities with affordable housing prices, high rental yield, and tremendous job growth.
| Market | Average Rent Price |
|---|---|
| Orlando, FL | $1,820 |
| Tampa, FL | $1,834 |
| Salt Lake City, UT | $1,562 |
| Austin, TX | $1,735 |
| Boise, ID | $1,574 |
| Raleigh-Durham, NC | $1,522 |
| Cleveland, OH | $1,238 |
| Houston, TX | $1,263 |
| Atlanta, GA | $1,812 |
| Phoenix, AZ | $1,547 |
1. Orlando, Florida
The housing market in Florida always performs consistently well for real estate investments. High demand for single-family homes and global attractions like Walt Disney World and Universal Orlando means investors can make excellent profits off short-term rentals. Additionally, the amusement parks mean there are always plenty of job opportunities.
The average home price in Orlando is $367,000, and the median rent is $1,820. However, it’s possible to buy investment properties cheaper and lock in the same rental rates in some areas.
2. Tampa, Florida
Like the rest of the Sunshine State, Tampa’s housing market remains excellent for investors. Stock availability is the primary reason Tampa performs well, and home prices continue to rise. In 2022, the median sales price for a Tampa-area property was $390,000, and the average rental rate for a one-bedroom apartment was $1,897.
It’s good to note that analysts predict that active listings in the Tampa housing market will drop, leading to a surge in rental demand.
3. Salt Lake City, Utah
The Salt Lake City housing market has experienced a boom in home prices and rental rates over the previous few years. Limited inventory, increased demand, and low mortgage rates have resulted in tremendous appreciation. According to some reports, the median home value in the city increased by 24.1% in 12 months. Similarly, rental rates have experienced a 21% increase.
There is no sign that the Salt Lake City housing market will slow down in the coming months, especially as big tech companies like Microsoft and Adobe move in.
4. Austin, Texas
Austin has been one of the hottest real estate markets in the United States due to tons of investment and explosive job growth. According to the Urban Land Institute, Austin has the highest projected population growth over the next five years. You’d have to put Austin at the top of the list for real estate prospects.
The average cost to buy a home in Austin is $639,900, and the average rent is $1,735. However, it’s good to note that rental rates in the city are increasing at over 15% per year. Rental appreciation and year-round warm weather make Austin an ideal city to buy a residential investment property. The only challenge you may find, especially as a newer investor, is being able to find good deals in Austin.
With a housing market exploding as much as it is there, you’re paying top dollar for most properties.
5. Boise, Idaho
In 2021, Boise was one of the hottest housing markets due to a growth in home sales, a strong economy, and monthly rent prices. Factors that make Boise ideal for long-term investment include:
- Strong population growth.
- Steady growth in the jobs market.
- Low fixed-mortgage rates.
- Low unemployment rates.
Even during the COVID-19 pandemic, home prices in the city continued to rise.
In 2022, the median house price in Boise was $425,000, a rise of nearly 28% compared to 2021. If you rent a house in the city, you can expect an average rental income of $1,574—a rise of over 50% over the past three years.
6. Raleigh-Durham, North Carolina
Raleigh and Durham consistently appear on the list of best real estate investment markets. Compared to other cities in the U.S., the rental market in Raleigh-Durham is large—around 43%. In addition, the large student populations from Duke, North Carolina State, and the University of North Carolina at Chapel Hill mean there is always a demand for rental apartments.
According to some figures, Raleigh and Durham’s homes sell for a median price of $405,000, a 22% annual increase. For interested investors, the average rent price in the metro area is $1,522.
7. Cleveland, Ohio
Cleveland has an excellent market for investors wanting to invest in apartments. Although Cleveland hasn’t experienced the population growth of other cities, many young professionals are looking for rent accommodations in downtown Cleveland. In addition, in 2021, 10 Fortune 500 companies have a headquarters in the city.
Cleveland is one of the most affordable cities to buy a rental property. Median home prices are as low as $115,000. With average rental rates of $1,238 in Cleveland, investing in rental properties provides an excellent ROI.
Overall, Cleveland is one of the best cities to find a good deal in.
8. Houston, Texas
Houston is the 4th largest city in the U.S. and is continuing to grow each year. Excellent job prospects and a vast metropolitan area make investing in Houston real estate a sensible choice. However, investors find that despite the large housing stock, properties sell relatively fast. According to data from Redfin, the median days on market in Houston is currently 13 days.
Median home prices are 21% below the national average, which should make finding a good deal a little more possible. Overall, you can expect an average rental income of $1,263 per month.
9. Atlanta, Georgia
Atlanta offers solid investment opportunities for buy-to-rent investors. Over the past few years, the city has experienced a population boom, growing on average by 14%. Also, a rapid job growth rate—10% above the national average—continues to attract more residents to Atlanta.
The median listing price of an Atlanta home is $412,000, and the average rent for an apartment is $1,812.
10. Phoenix, Arizona
Phoenix is an excellent place for buying an investment property because of its affordable real estate prices and tremendous economic growth. Average home selling prices have surged by 17.8% since the start of the pandemic, making it one of the hottest housing markets in the U.S. In addition, the city attracts people from more expensive areas like Los Angeles and San Francisco.
The median listing price of a home in Phoenix, Arizona, is $392,500 and the average price to charge for rent is $1,547.
How to Analyze Real Estate Markets
Whether you plan to flip a home or buy and hold a property, an accurate real estate market analysis is key to your success. If all that sounds overwhelming, don’t fear. This guide explains exactly how to perform a market analysis, which will help you decide if an individual property matches your investment targets.