Best Cities to Invest in Rental Property 2023: A Comprehensive Guide

Investors are eagerly seeking opportunities in the rental property market for 2023. As the real estate landscape continues to shift, it's essential to stay abreast of the best cities and states for rental property investment....

Investors are eagerly seeking opportunities in the rental property market for 2023. As the real estate landscape continues to shift, it's essential to stay abreast of the best cities and states for rental property investment. In this guide, we will explore the top cities and states to invest in and provide you with invaluable insights to make informed decisions.

The Latest SFR Rental Market Report by AttomData

AttomData is a renowned provider of nationwide property data, specializing in single-family homes. Their latest report, "Q1 2023 Single-Family Rental Market," ranks the best U.S. markets for buying single-family rental properties this year. The report reveals that rent yields are increasing in 91% of the markets, with rents rising faster than home prices. This trend indicates a profitable opportunity for rental property investors.

Counties with the highest potential gross rental yields for 2023:

  • Indian River County, FL (Sebastian-Vero Beach) area (15%)
  • Collier County, FL (Naples area) (14.7%)
  • Wayne County, MI (Detroit area) (13%)
  • Mercer County, New Jersey (Trenton area) (12.7%)
  • Charlotte County, FL (Punta Gorda area) (12%)
  • Cook County (Chicago), IL (11.5%)
  • Cuyahoga County, OH (Cleveland) (10.1%)
  • Oakland County, MI (outside Detroit) (9.1%)
  • Palm Beach County, FL (West Palm Beach) (8.5%)

It is worth noting that 60% of the top-performing counties are located in the southern United States, particularly in Florida. However, several cities in California, such as Orange County and San Francisco County, have seen the highest growth in yields.

Cities, States, and Economic Trends

Understanding the macro view of the U.S. economy and each state's outlook is crucial when considering the best rental properties to purchase. Factors such as the end of the COVID-19 pandemic, inner-city crime rates, office re-openings, apartment vacancy rates, and the affordability of single-family homes in suburban areas can significantly impact the rental market.

Property Prices in Some States Remain High

While single-family homes are still in high demand, particularly in California where prices have soared, there are still opportunities available in modular construction and built-to-rent developments. States like Pennsylvania, Tennessee, Arkansas, Georgia, and South Carolina offer lower prices, but their supply is limited, and prices are expected to rise.

Hottest Cities to Buy

Texas, with its diverse economy and strength in key commodities, continues to be a hot real estate market for prices and yields. Other states drawing significant interest from buyers include Indiana, Virginia, North Carolina, Michigan, and Connecticut. As global trade dynamics change, these states are poised to benefit from the repatriation of manufacturing back to the USA.

What Factors Rank Highest in Purchasing Rental Property?

To help you make informed decisions, we have identified six key factors to examine when considering an investment property:

  1. Local economy and state/city taxes: Evaluate the economic conditions and tax policies of the city and state you are considering for investment.
  2. Employment and wage growth: Ensure the city has a robust job market with stable wage growth.
  3. Population growth: Look for cities experiencing population growth, as this indicates potential rental demand.
  4. Increase in home values: An upward trend in home values signifies the potential for appreciation, which can lead to higher rental income.
  5. Increase in rent prices: Rising rent prices can provide a substantial return on investment.
  6. Rental yield: Calculate the rental yield to determine the profitability of the property.

NAR's Hottest Cities List

The National Association of Realtors (NAR) has provided its newest estimate of the best cities to buy rental properties. These cities demonstrate strong underlying economic fundamentals, including demand and price.

Some of the cities that made the NAR's list are Austin, Cary, Nashville, Allen, Denton, Raleigh Durham, Charlotte, Dallas-Fort Worth, Orlando, and Atlanta.

The Search for Better Assets

The demand for rental housing continues to grow, presenting substantial profit potential for rental income investors. It is crucial to identify the best cities and neighborhoods to maximize returns and mitigate risks.

To make your search easier, we have compiled a breakdown of the best cities and states to buy rental properties based on affordability, economic factors, and potential rental income.

The Big Picture Property Investor

As you navigate the rental property market in 2023, it is essential to consider various macroeconomic factors, such as oil prices, trade deals, interest rates, industry growth, new construction levels, and major employers. Understanding these dynamics will help you identify the most promising cities and neighborhoods for investment.

Remember, this guide is meant to provide a starting point for your research and is not intended as specific investment advice. Use these insights to develop your shortlist of ideal cities and neighborhoods for profitable rental property investments.

Happy hunting!

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