Real estate has long been considered one of the best asset classes for building wealth over time. In this article, we will explore the top 20 cities in America to own investment property post-pandemic. While the core message remains the same, we'll provide fresh insights to help you make informed decisions.
Why Invest in Lower-Cost Areas of the Country
With the collapse of mortgage interest rates post-pandemic and a shift in demographic trends towards lower-cost areas, investing in the heartland of America makes sense. Expensive cities like San Francisco, New York City, and Los Angeles are becoming crowded and unaffordable. The ability to work remotely has prompted companies and talent to move to more affordable areas such as Austin, Houston, and Salt Lake City.
The 20 Best Cities to Own Investment Property
Here are the top 20 cities ranked in reverse order, taking into account key factors such as population growth, employment growth, increase in home values, and rental yield. It's important to note that a high increase in home values is a lagging indicator and doesn't necessarily indicate future growth. Instead, focus on rental yield, which should be higher than the risk-free rate of return.
- Atlanta: With a population growth of 4.0% and a rental yield of 5.1%, Atlanta is thriving and becoming a tech hub.
- Denver: Denver boasts a population growth of 3.8% and a rental yield of 5.2%, making it an attractive investment destination.
- Kansas City, Mo.: With a population growth of 2.7% and a solid rental yield of 5%, Kansas City offers excellent investment opportunities.
- Boise, Idaho: Boise has a population growth of 2.6% and a rental yield of 5.2%, along with a vibrant job market.
- Fort Wayne, Ind.: Fort Wayne offers a rental yield of 7.64%, making it an appealing choice for property investment.
- Durham, N.C.: With a population growth of 4.2% and a rental yield of 5.6%, Durham is experiencing positive demographic and economic trends.
- Madison, Wisc.: Madison offers a rental yield of 6% and steady population growth, although employment growth is relatively low.
- Austin, Texas: With a population growth of 3.7% and an employment growth of 3.3%, Austin is a strong contender in the real estate market.
- San Antonio: San Antonio features a rental yield of 6.4% and favorable population and employment growth.
- Las Vegas: Las Vegas is known for its boom and bust cycles, but with a population growth of 3.3% and an employment growth of 2.8%, it presents investment opportunities.
- St. Petersburg, Fla.: St. Petersburg offers a rental yield of 5.6% and zero state income taxes, making it an attractive choice for investors.
- Tampa, Fla.: Tampa boasts a population growth of 4.6% and a rental yield of 5.1%, making it a promising investment destination.
- Charlotte, N.C.: Charlotte is a solid choice with its population growth of 3.7%, employment growth of 2.7%, and rental yield of 5.5%.
- Phoenix, Arizona: Phoenix has a population growth of 4%, employment growth of 3.1%, and a rental yield of 5.4%.
- Seattle, Washington: Seattle offers a strong population growth of 5.9% and employment growth of 3.3%, making it an attractive investment option.
- Columbus, Ohio: Columbus boasts a high rental yield of 7.9%, making it an ideal choice for investors seeking passive income.
- Colorado Springs, Colorado: With a population growth of 4.1% and employment growth of 3%, Colorado Springs offers promising investment opportunities.
- Jacksonville, Fla.: Jacksonville has a rental yield of 6.8% and positive population and employment growth.
- Orlando, Fla.: Orlando features a population growth of 4.8% and employment growth of 3.5%, making it an exciting investment prospect.
- Arlington, Texas: Taking the top spot, Arlington boasts a population growth of 2.2%, employment growth of 3.4%, and an impressive rental yield of 7.5%.
The Best of the Best Investment Property Cities
If we had to choose the top five cities from the list, we'd recommend focusing on Arlington, Texas; Columbus, Ohio; Charlotte, North Carolina; Austin, Texas; and San Antonio, Texas. These cities present lower valuations and higher rental yield properties, offering excellent opportunities for investors.
It's important to avoid expensive coastal city real estate markets and instead follow the BURL strategy: Buy Utility, Rent Luxury. This strategy involves arbitraging value in real estate markets across the country.
Best Real Estate Crowdfunding Platforms
To invest wisely in the best cities, it's crucial to choose reputable real estate crowdfunding platforms with robust vetting mechanisms. Two platforms that stand out are CrowdStreet and Fundrise.
CrowdStreet connects accredited investors with a range of commercial real estate investments, primarily focusing on 18-hour cities with lower valuations and higher net rental yields.
Fundrise is available for both accredited and non-accredited investors and offers innovative products such as eREITs and Opportunity Funds.
Both platforms have proven track records, extensive marketplaces, and stringent underwriting processes.
About the Author
Sam, the author of Financial Samurai, retired at the age of 34 by leveraging his investments, which now generate around $250,000 per year in passive income. With properties in San Francisco, Lake Tahoe, and Honolulu, he has $810,000 invested in real estate crowdfunding. Sam's expertise and experience make him a trusted source of financial advice.
In conclusion, the best cities to own investment property have strong demographic trends, attractive valuations, and higher cap rates. By leveraging real estate crowdfunding, you can invest in these cities without committing large sums of money upfront. Make informed decisions and seize the opportunities that lie within America's real estate market.