If you're thinking about buying a rental property, it's important to familiarize yourself with the best rental markets in the country. These markets not only offer great investment opportunities but also provide valuable insights into how to invest in specific locations. The location you choose to invest in will determine the success of your rental property. By understanding market indicators, you can identify the best rental markets and make informed investment decisions.
Best Rental Markets in 2023
The Midwest is emerging as one of the top rental markets for 2023. Over the past year, the Midwest has experienced significant rental rate growth, and this trend is expected to continue into the next year. Record rent increases combined with inflation have forced more people to seek alternative living arrangements, such as moving back in with family or finding roommates.
As a result, the best rental markets in 2023 are shifting towards the following cities:
- Chicago, Illinois
- Cincinnati, Ohio
- Columbus, Ohio
- Grand Rapids, Michigan
- Louisville, Kentucky
- New York, New York
- Phoenix, Arizona
- Spokane, Washington
- Raleigh, North Carolina
- San Diego, California
Chicago, Illinois
Chicago's real estate market is set to be one of the best rental markets in 2023. As the third-largest metropolitan area in the United States, Chicago offers a high volume of potential renters. With a relatively high private sector employment rate and a housing sector with limited supply, the demand for rental properties in Chicago is expected to increase. Rents have already risen by approximately 7.3% in the last 12 months, and this upward trend is likely to continue.
Cincinnati, Ohio
The rental market in Cincinnati is becoming increasingly attractive. The city has experienced a rental rate growth of around 6.0% in the past six months, thanks to its relative affordability compared to other areas. The demand for rental properties in Cincinnati is driven by people looking for more affordable housing options. With a limited supply of homes for sale, more people are turning to renting, which is expected to significantly increase rental rates in the city.
Columbus, Ohio
The Columbus real estate market is another top choice for rental property investment in 2023. With a median home value below the national average and a relatively affordable cost of living, Columbus attracts many people looking for more affordable housing options. The city has a limited inventory of homes for sale, which has created a high demand for rental properties. As more people move to Columbus in search of affordable living situations, rental rates are expected to increase, making it an attractive market for investors.
Grand Rapids, Michigan
Grand Rapids may not have experienced rental rate growth as high as other cities on this list, but it still presents a great opportunity for passive income investors in 2023. With a limited supply of inventory and attractive affordability, Grand Rapids is expected to see an influx of demand for rental properties. Discrepancies between supply and demand have already resulted in a 5.4% increase in rents over the past year, and this upward trend is likely to continue.
Louisville, Kentucky
Although not technically part of the Midwest, the Louisville real estate market is benefiting from similar migration trends as the other top rental markets. The city offers more affordable housing options compared to the national average, attracting renters looking for affordable living arrangements. With a limited supply of homes for sale and an increasing population, rental rates in Louisville have already risen by 8.1% over the past year. The demand for rental properties is expected to continue increasing, leading to further rental rate growth.
New York, New York
The New York real estate market has proven to be an excellent market for landlords. The city has seen rent growth of over 5.0% in the past six months, trailing behind only Columbus and Cincinnati. The demand for rental properties in New York is driven by the city's recovery from the pandemic. As people return to the office, landlords are experiencing increased demand for their rental units. Rent increases are expected to continue, making New York one of the best rental markets in 2023.
Phoenix, Arizona
Phoenix has seen significant rental rate increases in the last three years compared to other metropolitan areas. With a relatively affordable housing market and desirable weather, Phoenix attracts both older generations on the brink of retirement and young professionals in the tech industry. The demand from multiple generations of buyers and renters makes Phoenix one of the top rental markets for 2023.
Spokane, Washington
Spokane's real estate market is benefiting from an influx of demand resulting from the expensive neighboring cities of Seattle and Portland. Many households are looking for more affordable living arrangements, leading them to Spokane. With limited inventory and increased net migration, rental demand is on the rise. Investors with rental properties in Spokane are expected to experience high demand and the ability to increase rental rates in 2023.
Raleigh, North Carolina
The Raleigh real estate market has experienced significant growth due to migration patterns caused by the pandemic. Home values and rental rates have increased, attracting investors and landlords. Despite rising prices, there has been no significant decrease in demand, and more people are looking to call Raleigh home in 2023. This suggests that Raleigh may continue to be one of the best rental markets in the coming year.
San Diego, California
San Diego is one of the hottest real estate markets, attracting people who seek warmer locations. Rental rates and home values have increased exponentially over the past three years. However, the high prices haven't deterred potential buyers and renters. Demand remains strong, and landlords in San Diego have been able to increase rents significantly. In 2023, landlords are expected to experience high demand, lower vacancies, and the ability to increase rental prices.
Caption: Best rental markets in the US.
Best Rental Markets in 2022
The impact of COVID-19 has reshaped the real estate market, leading to the emergence of new indicators for rental property investment. The best places to buy rental property in 2022 were influenced by work-from-home trends and the search for more affordable options in areas less affected by the pandemic. The following cities were considered the best places to invest in real estate in 2022:
- Boise, Idaho
- Tampa Bay, Florida
- Seattle, Washington
- Salt Lake City, Utah
- Providence, Rhode Island
- Dallas, Texas
- Orlando, Florida
- Austin, Texas
- Atlanta, Georgia
Boise, Idaho
Boise was one of the best rental markets in 2021 and continues to offer great investment opportunities. The city attracts people looking for more affordable living arrangements and an outdoor lifestyle. Demand for rental properties in Boise is expected to increase, leading to higher rental rates.
Tampa Bay, Florida
Tampa Bay remains one of the top rental markets due to its limited inventory and high rental demand. The lack of listings and low vacancy rates suggest that rental rates will continue to increase, benefiting landlords.
Seattle, Washington
Seattle's housing market has experienced significant growth due to increasing job opportunities in the technology sector. The high demand for homes and limited inventory have led to substantial appreciation in home values and rental rates. Demand for rental properties is expected to remain strong in 2022.
Salt Lake City, Utah
Salt Lake City's real estate market had a remarkable year in 2021. The city experienced fast appreciation rates in both home values and rental rates. The limited supply of homes, combined with increasing demand, will drive rental rates even higher in 2022.
Providence, Rhode Island
In Providence, rental rate increases have outpaced home value growth. The city's affordability and low price-to-rent ratio make renting more attractive than buying. With a limited supply of rental properties, landlords have been able to increase rents faster than homeowners can raise listing prices.
Dallas, Texas
The Dallas market offers high rental rates and a strong rental demand across all income levels. The city's growing economy and more affordable rental options make it an attractive market for buy-and-hold investors.
Orlando, Florida
Orlando is a popular tourist destination, making it an ideal location for short-term and long-term rentals. The city's growing economy and attractions attract renters throughout the year, providing landlords with consistent income.
Austin, Texas
Austin's booming tech industry attracts professionals from around the country. The city's job growth and relative affordability make it an excellent rental market. With a growing population and a real estate market that shows no signs of slowing down, Austin offers promising investment opportunities.
Atlanta, Georgia
Atlanta's population and job growth rates make it one of the best places to buy rental property. The city offers a diverse range of industries, including finance, healthcare, manufacturing, and film and television. Investors in Atlanta can expect strong rental demand and potential for high rental rates.
Caption: Best places to invest in real estate.
Top Factors that Affect a Rental Property Investment
Several factors determine the viability of a rental property investment. The location is the most critical factor, as it impacts all other aspects of an investment. Before considering a rental property, you must choose a location with a healthy rental market. Factors such as the local economy, demand, job opportunities, affordability, and population trends affect renters' decisions.
The local economy is another crucial factor in rental property investments. Sales and prices of existing homes, new construction volume, population trends, and unemployment rates all provide insights into an area's economic health.
Vacancy rates and listings are also essential indicators to consider. High listings may indicate a declining market, while low vacancy rates suggest strong demand. Understanding the supply and demand dynamics in the area will help you assess rental market potential.
Future development projects in an area indicate a healthy market. These projects show promise and attract renters. It's crucial to research and stay informed about upcoming developments in an area to identify investment opportunities.
Summary
Finding the best places to buy rental property is essential for successful real estate investing. By considering indicators such as local economy, vacancies, listings, and future development, you can identify the most promising rental markets. The cities mentioned in this article provide a starting point for your research, but it's important to analyze the factors unique to each market. With thorough research and attention to market trends, you can find the best location for your rental property investment.
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Sources: Redfin, Apartment List
