The Best Places to Buy Rental Property

Rental properties are an effective passive income source for securing financial stability. However, reaching a profitable point requires significant time and energy, causing many people to struggle to establish themselves.

One of the earliest and most impactful decisions is where to buy a rental property. Numerous factors, including affordability, surrounding attractions, demand, economic growth, appreciation potential, and more, determine each property's viability.

Separate states and cities offer distinct opportunities for investors. Understanding these unique characteristics gives investors the best odds of thriving in the market.

Top Locations for Buying Rental Properties in the USA

The US real estate market consists of thousands of smaller markets. These markets are often referenced based on the appropriate city or region, such as the “Kansas City Real Estate Market” or the “Laguna Niguel Metro.”

Many of the most desirable markets are in southern or midwestern states, defined by growing populations and expanding job markets. Affordability depends on the investor’s means, but the market must have a favorable price-to-rent ratio.

In these aspects, some of the best places to buy rental property in the USA include:

Dallas, Texas

Dallas is one of the fastest-growing metroplexes in the country. It is currently ranked fifth in economic power among US metros and is projected to move into third place by the end of the decade.

DFW is also home to burgeoning tech and finance sectors, bringing numerous businesses and high-income potential renters. Targeting this demographic is crucial due to home prices more than doubling in the past ten years.

Increasing home prices are accompanied by matching rent bumps of roughly 4 percent per year in the same period. At the start of 2024, the average rent for a one-family home was $1,787. Despite rising rental prices, Dallas has a healthy vacancy rate of 6.1 percent.

If you are considering buying rental property in Texas, you can check Texas properties to evaluate opportunities in different cities and neighborhoods. That will help you analyze property prices, rental yields, and vacancy rates, allowing you to make informed decisions about where to buy rental properties. This is especially valuable in thriving areas like Dallas, where the rental market continues to grow.

Atlanta, Georgia

Atlanta’s rapidly expanding population is mainly due to its impressive job market. Many of the top Fortune 500 companies are headquartered in Atlanta, and the city’s GDP has inflated by more than 32 percent since 2020.

This growth rate surpasses the national average, causing home and rent prices to rise concurrently. Many predictions show that Atlanta’s growth will continue into the coming decades, making it a beneficial place to invest early.

Atlanta’s average rent is $1,897, with annual increases of 5.6 percent. The metro has a somewhat high but still healthy vacancy rate of 8.4 percent.

You can check Georgia state property values, neighborhood trends, and property history to identify the best locations for your investment. By exploring detailed property records and local market conditions, you can gain a deeper understanding of which areas in Georgia, particularly Atlanta, have strong rental potential and future appreciation.

San Antonio, Texas

San Antonio topped the charts for city population growth in 2020. Its many job sectors and attractions offer diverse opportunities to motivate a consistent influx of new renters.

This city is also among the more affordable rental areas, with a median home price roughly 20 percent below the national average. Additionally, San Antonio is a cultural hub in the south. The city has several museums and historical landmarks to increase tourism, offering a substantial market for short-term rentals.

Best States for Real Estate Investment: Rental Property Edition

Many states offer more investor-friendly conditions due to favorable tax laws and consistent economic power. Below are some of the best states for your next rental property.

Idaho

The Gem State is one of the most moved-to states in the US, with a vacancy rate of 2.5 percent as of 2024. These figures imply a significant increase in the demand and price of available rental spaces.

Idaho's median household income and population are steadily increasing. This is due to the state's diverse mix of industries and high-paying occupations. Rental property owners also benefit from Idaho’s low property tax rates and high tourism due to its six national parks.

Texas

Austin, Dallas, and Houston have some of the fastest-growing economies among US cities. The Lone Star State boasts many business-friendly policies, such as no income taxes or sole proprietor fees, attracting small and large businesses.

Additionally, the major cities have increasing rental rates that match or surpass home price inflation. This means investors can expect to receive profits while their initial investment appreciates continually.

Tennessee

Tennessee has a rich cultural scene centered around the music industry. Increased tourism provides an explosive economy with many jobs and a strong rental presence. Property owners can choose between catering to short- and long-term renters.

Tennessee also has a relatively low cost of living compared to its population growth. Memphis, Knoxville, and Nashville are tourist hubs and highly desirable locations to purchase property.

Affordable Cities with High Rental Yields

If you're seeking low upfront costs with high returns, consider these affordable yet high-yielding cities:

Cleveland, Ohio

Unlike other recommended locations, Cleveland is not experiencing a population boom to improve its economy. Instead, its economic power comes from its existing healthcare, manufacturing, and bioscience industries.

These industries experience high turnover rates, leading to a steady replacement source for new and existing rentals. This focus on existing fields doesn’t mean that Cleveland isn’t going through economic growth.

Over $1 billion has been allocated for construction and businesses in the downtown area. This investment will increase home prices and interest in the region.

Additionally, Cleveland’s average home price is over $100,000 lower than the national average, leading to impressive potential rental yields. Cleveland’s rental yields nearly reach 10 percent in early 2021.

Besides Cleveland, you can also check other properties records across Ohio to explore different investment opportunities. Ohio offers a variety of cities and neighborhoods with diverse market conditions. By examining property history and current values in areas such as Columbus, Cincinnati, and Akron, you can identify promising regions that offer strong rental returns and long-term growth potential.

Houston, Texas

Like the other recommendations, Houston is home to numerous Fortune 500 and Fortune 1000 companies. The city is sought after due to its relatively low property costs compared to the economic benefits of an already sizable business sector and two international airports.

Houston’s real estate market has nearly doubled in the past ten years, but home prices have remained stable. The growing population and real estate competition caused rental prices to jump 26 percent in the same period.

This disparate price-to-rent ratio makes Houston one of the most affordable places to buy a rental property. Due to the area's rapid development, investors can pay comparatively low prices while capitalizing on a high rental yield.

Emerging Markets: Hidden Gems for Rental Property Buyers

Emerging markets are areas that most of the prospecting community has yet to discover. Quickly locating these markets allows astute investors to enter markets early, buy low, and reap maximum benefits.

Several signs point to an emerging market. The first green flag is community or government investment. New businesses opening up and developing infrastructure can attract new residents and increase property values.

You can also look into areas surrounding college towns. These areas constantly rotate tenants, and new properties are frequently built to accommodate students and faculty. Look for campuses with limited housing and expanding student bodies.

Urban vs. Suburban: Where Should You Invest in Rental Properties?

Many investors are torn between urban and suburban communities. Both have unique advantages, but ultimately, it depends on the target tenant demographic, budget, and amenities found in specific locations.

Rental Income

Urban properties are often surrounded by closer entertainment and popular businesses and are, on average, more walkable. These factors increase the demand for investment properties and potential rental income compared to suburban options.

Stability

Property owners looking for long-term tenants will have better luck with suburban housing. Urban apartments and other rental units are more attractive to short-term tenants looking for a more energetic lifestyle. This leads to more frequent vacancies and advertising costs.

Suburban properties appeal more to families and older tenants wanting to set roots in quieter places. These units may be more challenging to fill but likely will result in fewer tenant replacements.

Appreciation

Urban properties typically have higher mortgages than their suburban counterparts. However, they are more likely to be located in areas with strong business and infrastructure development that raises their value over time.

Suburban properties appreciate far more slowly on average. This means that investors buying these properties should plan for the long game.

Property Owners History Search

When deciding whether to invest in a property, it’s important to also find the property’owner. By doing so, you can understand the previous owners' maintenance habits, the property's past value, and any potential red flags. You can access this information through property records and owner history reports, which can provide valuable insights into the long-term viability of your investment.

How to Research the Best Places to Buy Rental Property

A location’s fitness depends on various factors, including:

• Lower home prices
• High renter income
• Strong property appreciation
• Growing job opportunities
• Low vacancy rates

A property doesn’t have to meet all these requirements, but each contributes to a high price-to-rent ratio. Investors can get recommendations from professionals and others in their network, but verifying the information with objective data is crucial.

Analyze Market Trends

Check properties in the area for information like days on the market, listing prices, rental prices, and yearly property tax percentages, covering both current and historical data to identify favorable trends.

You can also analyze property value by checking property records, which provide details on sales history, property assessments, and ownership changes.

For hard data, look to local real estate associations and county tax offices. These sources will help determine demand, overhead, and profitability.

Investors should also know the median resident age, income, and population growth. This will help them better understand whether properties in the area are suited for their current lifestyle and how long they will rent.

Study Economic Factors in the Market

An explosive population growth isn’t required for a profitable rental property. A steady influx of new businesses and growing industrial sectors stimulate growth and appreciation of surrounding properties. Cities that actively invest in community growth through policies and subsidies are prime locations.

On the other hand, if a major employer is on a downward swing, it may indicate future problems in employment rates. These trends will make it more difficult to find tenants who can afford the planned rental rates, leading to losses.

Learn What Sells in Neighborhoods

Some amenities appeal to the universal renter. However, unique climates and cultures may appreciate distinct features. For example, rental spaces with a pool may attract more applicants in hot states like Arizona.

Consider who you’re trying to rent to and prioritize locations that match their needs. This means carpet floors for young families with children or single-story homes for older people. Building information can be found easily through sites like Zillow or Homes.com.

It’s also essential that these amenities don’t price renters the property too far outside the neighborhood. Marble countertops may cause some people to believe a property is outside their means.

Tips for Choosing the Right Location for Rental Property Investment

Choosing the right location requires a strong understanding of economics, demographics, and property values. Keeping this information straight can be challenging, but here are a few tips to guide your research.

1. Consider the proximity to amenities such as schools, restaurants, public transportation, and major businesses. Think about which are most important to your target demographic and ensure the property has easy access to them.
2. Look at properties’ vacancy rates and days on the market. This will quickly tell you about demand in the area and how difficult it will be to remain profitable in both long—and short-term endeavors.
3. Evaluate signs of growth, such as new construction and developments. These factors indicate economic growth and lead to a faster appreciation of the rental property.