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6 Markets to Avoid When Considering a Rental Property Investment

[Updated: Feb 09, 2021] Feb 20, 2020 by Aly J. Yale
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Obviously, finding the right place to invest is critical. But equally as important? That'd be steering clear of the wrong one.

We recently did a deep dive into the nation's best rental investment markets, highlighting the overall top 10 as well as the seven smaller towns you might want on your radar.

Now, it's time to look at the ones at the bottom of the list.

Are you planning to make any investments into rental properties this year? You may want to avoid these six markets:

1. Utica-Rome, New York

The Utica-Rome market took the very last spot on our rental markets list, with a mere score of 6.6 out of 100. The reason for the low ranking? For one, its population is on the decline. The number of residents has dropped 0.3% since 2017, and with employment opportunities holding steady, that's probably not changing anytime soon.

To make matters worse, the market's price-to-rent ratio significantly favors buying over renting. While that might be good news when initially purchasing your investment property, it doesn't bode well for local rental demand -- and you could find yourself with serious vacancies if the price isn't right.

2. Evansville, Indiana

Evansville is another market you'll want to steer clear of this year. The city's employment opportunities have plummeted in recent years (dropping 8.8% since 2015), and the local population is declining. Throw in that, like Utica, the price-to-rent ratio favors buying, and there's not much to hold onto as a rental investor in the area.

3. Pittsburgh, Pennsylvania

Despite its more than 2.3 million residents, the Pittsburgh market just isn't ripe with opportunity for investors. The population has dropped 0.2% since 2017, and employment hasn't done much better. Its home prices clock in far below the national average, too, making buying a more affordable option for most in the area. We scored it just a 13.2 in terms of investment opportunity.

4. Syracuse, New York

Another New York market makes the list in Syracuse. The local population has dropped 0.1% since 2018, and employment has inched up a mere 4.3% -- leaving little hope for a turnaround. Add in a price-to-rent ratio that puts renting out of reach for many, and there's just not much room for profit in a market like Syracuse.

5. Erie, Pennsylvania

Out of all the markets we analyzed, Erie had one of the steepest drops in population over the last few years. To make matters worse, employment is down 2% in the metro, and building permits are up (hello, more competition!). A low price-to-rent ratio is just the icing on the cake in this Northeastern market.

6. Youngstown-Warren-Boardman, Ohio

The Youngstown metro is almost a mirror image of Erie. The population's down, employment is slipping, and permit growth means more properties on the market to compete with. The market has a nearly identical price-to-rent ratio, too (13.5), only solidifying it as one of the worst places to buy a rental property this year.

Where should you invest this year?

If you're not sure where to make your rental property investments in 2020, check out our full analysis. Make sure you compare property tax rates when making your decision, too, as these can have a significant impact on your annual return on investment (ROI).

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