Rental real estate can be an incredibly valuable way to diversify your investment portfolio, create passive income, or boost your retirement savings. From single-family rental housing to multifamily properties, rental real estate holds a world of opportunity in today's red-hot rental market. Over the past year, rental rates grew 17.8% year over year (YOY), with certain markets growing at even higher rates, making right now a great time to get into the landlord business. If you're looking to buy a residential rental property in the coming year, here are the five best places to buy a rental property in 2022.
|
Market |
Median Home Price |
Median Rental Rate |
Unemployment Rate |
YOY Rent Growth |
|---|---|---|---|---|
|
Greensboro, NC |
$215,000 |
$1,384 |
4.2% |
23.2% |
|
Austin, TX |
$625,000 |
$1,820 |
3.4% |
24.3% |
|
Boston, MA |
$709,900 |
$2,140 |
4.7% |
25.7% |
|
Phoenix, AZ |
$415,000 |
$1,490 |
3.2% |
27.9% |
|
Tampa, FL |
$350,000 |
$1,760 |
3.8% |
31.4% |
5. Greensboro, North Carolina
Greensboro was originally a major industrial town of the Southeast, but as industrialization demand changed, the city gracefully adapted. Textiles remain an important industry in the city, but Greensboro has expanded into a financial sector as well. Given its more affordable home prices, it provides investors with a more economical entry point for rental real estate while still having a strong rental growth rate to back it.
4. Austin, Texas
Friendly faces, warm weather, and an upbeat cultural scene make Austin a magnet for young and old. Austin has a world-renowned food scene and some of the best outdoor music venues in the country. The city has quickly grown into the hottest and most abundant job market across a diverse range of industries in the U.S. and is home to headquarters for several start-up companies and huge corporations.
This robust job market along with pleasant weather have built lasting demand for rental housing and are certainly fueling the 24.3% YOY rental growth. However, given the higher cost for real estate here, Austin's rental market can be tight for investors. The key is to choose targeted neighborhoods within the city that support strong rents and demand.
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3. Boston, Massachusetts
Home base for the American Revolution, the buildings and streets of Boston exude history. This major metropolitan city dating back to 1630 has a wonderful public transit, allowing residents to live and work anywhere in the city without long commutes. Although unemployment is slightly higher than average, this city has been a major metropolitan center of the U.S. for centuries and will continue to attract residents going forward.
2. Phoenix, Arizona
The capital of Arizona, Phoenix is a well-established city rooted in tourism, education, technology, and the military. Its warm weather makes it an appealing place to live, work, and visit and has been attracting new residents in droves over the past decade. From 2010 to 2020, Phoenix was among the fastest-growing cities in the USA, adding over 163,000 residents, a 15.8% increase in population for Maricopa county. Currently, the city's unemployment rate is slightly below average and it achieved tremendous YOY rent growth, making it a good rental market to jump into with long-term prospects and demand.
1. Tampa, Florida
Situated on Florida's west coast in an area known for warm weather, pristine beaches, and lots of metropolitan amenities, Tampa is among the fastest-growing rental and housing markets in the nation. Tampa and the surrounding areas have some of the highest YOY rent growth predictions in the country. With average unemployment rates and an affordable median home price, Tampa can offer fantastic potential for rental properties for real estate investors.
Stand-out rental markets
Whether you are investing for long-term passive income, as a productive retirement strategy, or as a hedge against inflation, finding the highest returns with the least amount of risk is always the ideal scenario for investors. When determining where to buy, investors would typically look for areas with high rental demand, a low tenant default rate (which we can infer from unemployment rates), and the expected rent growth.
While all of these factors are important and can direct us toward stand-out options, this article is a look at big-picture trends. There will always be markets outside of this top-down view that can offer cash-flowing rental property opportunities. It's important to always perform your due diligence when purchasing a rental property to ensure that the numbers work for your particular situation and aspirations.
