10 Best Cities to Invest in Rental Properties in 2022

The housing market has been hot -- record hot -- since low interest rates and a high interest in working from home began driving up prices and keeping supply low throughout most of the country.

High prices have added more oomph to the rental market, too. Rental rates have risen as well, although not as fast as the prices for buying in most cases. That means more people are looking to rent, whether because of high prices or just to remain mobile without the burdens of a mortgage or maintenance.

Each market, of course, is different, but real estate remains a great investment option for many Americans. Here are, in alphabetical order, 10 cities that can make an argument for being among the best to invest in next year.

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Austin has a population of about 917,000 -- up from 790,000 or so in just a decade. It's been among the nation's fastest-growing markets for years, with an established technology-heavy economy -- Dell Technologies (NYSE:DELL), for starters -- that’s being rapidly bolstered by major newcomers like Oracle (NYSE:ORCL).

Being the state capital and home to the University of Texas Longhorns and a legendary music and arts scene just add to the allure. It’s a red-hot housing market, too, with a shortage of supply for new homes and apartments alike, driving median rents to $1,750 a month with investment properties in the $200,000 to $250,000 range.

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According to census and other data, the Birmingham-Hoover metro area in Alabama has a population of about 1.14 million and some of the nation’s highest homeownership rates, at 76%. The city has transformed from a steel-making to a banking center, and its downtown neighborhoods are seeing significant revitalization.

The University of Alabama-Birmingham’s medical center anchors a major healthcare presence, too, along with a population of students from UAB and other local colleges and universities there for the leasing.

The average home value is $90,047, and the rent-to-income ratio is 11.10%, making it look like a good market to find deals on properties to rent to that large proportion of the population that the data indicates can afford them.

With a population of about 236,000, Boise is a university and state capital market that has been among the country's hottest housing markets. Lifestyle and job growth are two reasons for an expanding population, and home prices -- which have risen by about 20% in just the past year or so -- are expected to keep rising.

A median home sale price that's still at about $350,000 means investors have a good chance of affordably moving into the Boise rental market, too, and taking advantage of the rising demand for digs.

With about 2.75 million people in the city proper and 9.62 million in the metro area as a whole, Chicago is the nation's third-largest market. The Windy City is home to hundreds of major corporations and a wide range of housing options, from the most affordable to the most expensive.

Older neighborhoods in the downtown area are good places to start looking for single-family homes and small apartment buildings for $200,000 or less. The rental demand from students and young professionals -- and for Airbnb-type rentals that enable people to visit the city to experience its sports, culture, and food -- should be strong.

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Rebounding from decades of decline -- the city itself has a population of about 639,000 and the metro area about 4.3 million -- Detroit is undergoing a transformation from Motor City to Mortgage City. Rocket Mortgage and its chairman Dan Gilbert are the big names here, but countless individuals, organizations, and companies -- private and public -- are taking stakes in the revival of one of the world’s iconic manufacturing centers into a diverse, thriving place to work and live.

Billions of dollars are pouring into renovations and new construction, but the prices are still comparatively low for such a major metro: The median home price is only $188,000. Further, one can still easily find small rental properties for $200,000 or so and rent for about $1,500 a month in some of the trendy downtown areas.

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There’s more to Durham than Duke University, although the prestigious school and Duke University Medical Center are major draws. With a population of about 239,000, Durham is in North Carolina’s Research Triangle, and along with Chapel Hill and Raleigh, provides a mobile population of students and young professionals to keep the rentals full.

In October 2021, Durham home prices were up 25.4% compared to last year, selling for a median price of $370,000. Meanwhile, the average rent for a one-bedroom apartment is $1,180, up only 3% from the previous year. Savvy buyers who can find good deals here will not go wanting for tenants.

With a population of about 123,000, Independence is the largest suburb on the Missouri side of the Kansas City metro, and it's where you'll find plenty of history, especially about former shopkeeper Harry Truman, our nation's 33rd president.

You also could find good opportunities for real estate investment, with a rental vacancy rate of 4.9% and a rent-to-income ratio of 21.6% combined with an average home value of $165,893 to indicate deals should be available for picking up properties to rent to residents for the small-town-meets suburbia life on the south bank of the Missouri River.

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With such major draws as Orlando, Tampa, and Miami dominating Florida real estate, it could be easy to overlook Jacksonville. But this is a big, dynamic market -- with a 2020 population of about 950,000, it's actually the most populous city in the South outside of Texas.

There are four Fortune 500 companies based here and dozens of other major employers, including about 20 hospitals. The costs of living and real estate are generally below the pricier Florida markets. Along with great weather, there are many good neighborhoods with homes for under $200,000 and rents averaging about $1,100 per month, yielding the opportunity to generate some steady income from that investment.

There’s only one big market in the country where less than half the households own their own home (i.e., they rent). That’s the Los Angeles-Long Beach-Anaheim area with a 48.5% homeownership rate in 2020. Los Angeles itself has about 4 million people, and there are about 19 million in the five-county area that’s considered greater Los Angeles.

Census figures from 2019 show a median rent of $1,460 per month and an owner-occupied median value of $583,200 per housing unit. There’s a lot of high-dollar places, of course, pulling up that number. This vast metropolis holds plenty of opportunities for savvy investors to find places at the right prices and the people to make the purchase pay off.

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Youngstown was once the hub of a thriving steel-manufacturing center between Cleveland and Pittsburgh. Its best days are long behind it, but there’s revitalization underway there now, and real estate prices are low -- really low.

The city’s population is about 60,000, and its metro area is about 541,000. The average home value is $42,867, and the rental vacancy rate is only 3.2%. That low price of entry and meeting that demand for affordable housing can well spell opportunity to investors, especially those taking advantage of the tax-deferral opportunities offered in the area’s 10 opportunity zones.

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Each of these markets -- from little Youngstown to gigantic Los Angeles -- are mosaics of neighborhoods, each with its own characteristics to consider when mulling a residential rental buy. Looking at the big picture surrounding each of these metros, though, is a good place to start. Each of these has its own reasons that might make it a good destination for your investment dollars.

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