Everyone knows that real estate investing is lucrative, but you still need to do extensive research if you want to make a profit. Buying a rental property comes with substantial risk, so you'll want to do your homework and make sure you choose the right city to invest in real estate. As the saying goes, location is everything, so you'll want to make sure you buy a rental property in a city that offers significant upside. Let's take a look at some of the best places to invest in real estate in the US.
The 10 Best Cities To Invest In Real Estate
Here are the top 10 US cities for real estate investing in 2020:
Las Vegas, NV
These ten cities show promise to investors based on their consistent population growth, employment rate recovery, and median home values – all of which are indicators of a strong economy with long term investment potential. Employment rate recovery denotes the increase in local employment rate from April 2020 through August 2020.
- Annual Population Growth Rate: 2.51%
- Employment Recovery: +6.4%
- Median Home Value: $301,901
Atlanta is one of America’s fastest-growing cities, and its population is expected to explode by 2050. Atlanta is one of the best places for investors to purchase a rental property because housing prices are still reasonable compared to the national average, but they’re increasing quickly. It’s shown a good recovery from COVID-19, and job growth is starting to get back to pre-pandemic levels. It’s a sprawling city that is a hub for media and entertainment. There’s a lot of opportunity for single-family homes and multifamily apartment complexes, and the median rental unit yields about $1100 per month.
Dallas Fort Worth:
- Annual Population Growth Rate: 1.36%
- Employment Rate: +6.5%
- Median Home Value: $232,721
Dallas is the 9th largest city in the US, and it’s the business and cultural hub of Northern Texas. There is plenty of potential within the city limits. There are also many cheaper properties with plenty of investment potential in surrounding suburbs like Plano and Frisco. Over 50% of Dallas residents rent their properties – compared to the national average of about 33% - which presents a lot of opportunity for investors. Dallas is also a prime location if you’re looking to purchase a large plot of land at a reasonable price. It’s an urban metropolis that isn’t overdeveloped, which makes it one of the best places to invest in real estate in the US.
Las Vegas, NV
- Annual Population Growth: 1.33%
- Employment Rate: +18.5%
- Median Home Value: $296,730
Vegas was one of the cities hit hardest by COVID-19, but it’s bouncing back rather rapidly, and it’s an excellent area for real estate investors. With low taxes and an abundance of land to develop, Vegas has always been a great city to invest in. Although you may have to wait until the tourism industry rebounds to turn a profit, now is a good time to invest while mortgage rates are low. Homeownership rates have been down since the 2008 recession, and many city residents are renters. It’s a city that will return eventually, and if you invest at the right time, you may walk away with a great bargain. The average rental unit in Las Vegas yields about $1050 per month.
- Annual Population Growth: 1.85%
- Employment Rate: +5.5%
- Median Home Value: $262,385
Charlotte is often overlooked as a major American city, but it has a bustling economy and was rated the 4th best real estate market in the US in 2019. It’s home to several Fortune 500 companies like Lowe’s and Bank of America. It’s a major tech and banking hub, and it’s one of America’s fastest-growing cities. It’s shown a solid economic recovery from COVID-19, and property values continue to increase, despite the pandemic. Charlotte boasts a high quality of life, a stable economy, and a relatively low cost of living, making it a solid bet for buying a rental property that will appreciate over time.
- Annual Population Growth Rate: 1.23%
- Employment Rate: +6.7%
- Median Home Value: $422,252
Austin is one of Texas’s quirkiest towns, but it’s also one of its most popular. Texas is a great place to invest because there is always an opportunity to develop. There is no income tax, and land is abundant, which is music to an investor’s ears. Austin was the number one fastest growing city in 2019, and that trend has continued into 2020. Many urban professionals are fleeing major cities like New York and Los Angeles to settle somewhere a bit more spacious. Austin is one of the cities these coastal residents are moving to, and it’s likely to continue on an upward trajectory. Median home values are a bit higher than other cities on this list, but the income potential is higher also—the average rental yields about $1225 per month.
- Annual Population Growth Rate: 0.31%
- Employment Rate: +6.9%
- Median Home Value: $299,838
Nashville is the capital of Tennessee, and it’s strategically located in the center of the state – making it a favorite location for both business and investors. It’s a major music industry and tourism hub, but its economy is also supported by sectors like healthcare, government, and education. So, you get the best of both worlds – year-round tourism when live music venues are allowed to reopen, as well as a consistent population of local residents who love the city’s low cost of living. Housing prices in Nashville have risen consistently over the past five years, and that trend is expected to continue for the foreseeable future. As such, it's a great place to buy a rental property.
- Annual Population Growth Rate: 1.27%
- Employment Rate: +6.6%
- Median Home Value: $287,856
Phoenix is the 6th largest city in the US and is a hot spot for real estate investing. It features a high quality of life for residents and an affordable standard of living. Following a brief slump in demand in the early months of the pandemic, the Phoenix real estate market has returned in full force, reaching new heights in July and August of 2020. Almost 10% of home sales in 2019 the area were fix and flips because it’s such an attractive city for investors. It’s the only state capital with over one million people and a fast-growing city with a lot to offer. It’s currently a seller’s market because the supply of housing has slowed while the demand continues to increase. But property values are relatively affordable, making it a great city for flippers and wholesalers.
- Annual Population Growth Rate: 1.04%
- Employment Rate: +5.8%
- Median Home Value: $268,945
Orlando is another favorite city of investors because of its robust economy and its population growth. Although tourism has slowed due to COVID-19, that demand will eventually bounce back. Disney Orlando and Universal Studios alone attract millions of people per year, and it’s a major technology and distribution hub for Florida. As a landlocked city in a state known for its coastal attractions, Orlando developed a unique identity that made it an important commercial and cultural hub. Whether you’re looking to purchase a vacation rental, do a flip, or even invest in commercial, Orlando has a little bit of everything. Orlando also claims one of the highest rental yields in the US at about 8.1%. This makes it an incredibly attractive city to investors, even with major attractions like Disney not attracting as many tourists as usual.
- Annual Population Growth Rate: 1.14%
- Employment Rate: +6.6%
- Median Home Value: $294,355
Madison, WI is often overlooked as a major US city, but it’s one of the best US cities to invest in real estate. It’s a young, vibrant city with a high quality of life. Single-family homes dominate the Madison real estate market, and the market offers plenty of investment opportunities. The city’s population and the median sale price of single-family homes have consistently increased over the past five years, and that trend has only continued with COVID-19. It’s a safe city with affordable suburban areas surrounding the urban center - making it attractive to those who want to escape to wait out the pandemic. The median age of the city is only about 34, and 43% of the population are renters. There are great opportunities to invest in fix and flips or simply to buy a rental property and hold onto it. Just be aware that you'll need to be patient to find a quality property, as there is currently a housing shortage.
- Annual Population Growth: 1.64%
- Employment Rate: +5.4%
- Median Home Value: $180,899
Columbus is a sleepy city in central Ohio that boasts one of the best real estate markets for investors in the country. It’s the state capital, and the economy is supported by state and federal jobs. Columbus is attractive to investors because it features a growing population and cheap property values. The median home sale price for a home is just above $180,000 – which is over $100,000 less than the national average. Prices are low, yet demand is consistent, and values have appreciated by 9.3% over the past year, according to Zillow's Home Value Index. Property values are so low that a greater number of investors can pay cash for investments and save themselves from paying the interest rate on a loan. This makes deals all the more lucrative and enticing to those looking for a cheap property to buy or flip.
There Are Plenty Of Other Great Cities To Invest In
Overall, where you choose to invest depends on where you live, the investing strategy you’re planning to use, and how much money you have to invest. Real estate investing is not a get rich quick scheme, and you’ll need to do extensive planning and research if you want to turn a profit. But if you’re ready to take the leap of faith, or at least interested in starting the scouting process for potential investment properties, these are the best cities to begin with. They all offer a growing population, a strong economy, and housing values that are not in a bubble – all factors that make for a healthy real estate market.
Methodology: We calculated the employment recovery rate by looking at employment data from the bureau of labor and statistics between April 2020 through August 2020 in each city. Home pricing data is based on home sales between September 1, 2019, and Aug 31, 2020. For the annual population growth rate, we used data from World Population Review.