10 Best Cities to Invest in Rental Properties
If you want to be independently wealthy, you need passive income. A great way to earn passive income is to invest in rental property. As tenants pay rent, you can make money without having to do much, if anything.
In 2019, the country had around 43 million rent-based households. One thing is clear: more people are renting than buying. And the 2020/21 pandemic proved work-from-home works. Consequently, a workplace shift allows people to live wherever they want, and people are moving to their most desired place to call home.
Real estate investors can start buying properties now to rent them in the future. We have compiled a top 10 rental properties list of the best cities to buy a rental in 2021.
An Overview of the Rental Housing Market
Currently, the United States is experiencing a seller's market. As home prices continue to rise, current homeowners can expect to make more money by selling. In 2021, the median home price is around $400,000, the highest ever. Most houses only spend about 18 days on the market before getting bought.
Ironically, even though houses are selling fast, fewer people can afford to buy them. Instead, most of these properties are going to real estate investors. So, current homeowners may sell their house only to wind up renting another unit.
So, if you are an investor, now is an excellent time to buy income properties.
10 Best Cities for Rental Properties
Although the market is hot across the country, some cities are doing better than others. So before investing, pay attention to each local real estate market. Metrics like job growth, population growth, and the median rent price can tell you where to put your money.
Here are our favorite picks for the top 10 cities to start earning rental income.
- Houston, Texas
→ Gross Rental Yield: 10.4 percent
→ Houston Rental Vacancy Rate: 6%
→ Average Rental: $1,132
→ Average Rental Size: 881 sq. ft.
→ Monthly rent: $1,440
→ Median Household Income: $61,705 per year, $5,142 per month
→ Best Type of Property to Rent Out: Multi-unit properties with long-term rentals
→ Rental Insurance Cost in Houston: Around $4,100 per year
Texas has seen a massive influx of new residents. Houston is home to many tech companies, which deliver high-paying jobs and young, nimble renters. Currently, Houston is growing about 200 percent faster than the national average. Over the last eight years, the city has experienced a growth rate of almost 18 percent.
- Dallas, Texas
→ Dallas Gross Rental Yield: 9.06 percent
→ Dallas Rental Vacancy Rate: 8.4%
→ Average Rental: $1,276
→ Average Rental Size: 848 sq. ft.
→ Median Household Income: $59,607 per year, $4.967 per month
→ Best Type of Property to Rent Out. Single-family homes
→ Rental Insurance Cost in Dallas: Around $4,100 per year
With over seven million people in the greater Dallas area, this city has been booming for years. As we mentioned, the Lone Star State is seeing significant population increases, especially as city dwellers seek more affordable housing.
This mass immigration is due to businesses coming to Dallas and creating job growth, thanks in part to a tax-friendly environment. Higher growth rates mean more renters, so investors are also coming in droves. Also, work-from-home flexibility is trending.
- Atlanta, Georgia
→ Gross Rental Yield: 9.05 percent
→ Atlanta Rental Vacancy Rate: 4.9% (multi-Family)
→ Average Rental: $1,559
→ Average Rental Size: 974 sq. ft.
→ Median Household Income: $69,673 per year, $5,806 per month
→ Best Type of Property to Rent Out. In Atlanta proper - multi-unit buildings. Suburbs - single-family homes
→ Rental Insurance Cost in Atlanta: $3,000 per year
Atlanta has been up-and-coming for a while. Growth rates are due to high-profile companies and industries calling the city home. Coca-Cola's headquarters are there, and film companies are flocking to the Peach State to take advantage of its benefits.
Georgia offers wide-open spaces, a relatively moderate climate, and tons of film shooting locations. So, it is no wonder why renters are flocking to Atlanta and the surrounding suburbs. As demand for new properties grows, so do rentals.
Currently, the median home price is $190,000. The median rental fee is $1,434 per month, resulting in a nine percent gross rental yield. For comparison, the national average rent price is $1,124.
- Jacksonville, Florida
→ Gross Rental Yield: 8.9 percent
→ Jacksonville 2021 Rental Vacancy Rate: 6.2%
→ Average Rental: $1,196
→ Average Rental Size: 966 sq. ft.
→ Median Household Income: $55,807 per year, $4,651 per month
→ Best Type of Property to Rent Out: Single-family units and multi-unit buildings
→ Rental Insurance Cost in Jacksonville: About $4,000 per year
While Jacksonville is not as well-known as Orlando or Miami, the city has been growing. Over the last ten years, Jacksonville has grown by about 14 percent. It does not hurt that the city has four Fortune 500 companies, attracting plenty of job-seekers.
The climate in Jacksonville is also better than in other parts of Florida. Residents do not have to worry as much about hurricanes and extreme weather.
- Columbus, Ohio
→ Gross Rental Yield: 8.6 percent
→ Columbus 2021 Rental Vacancy Rate: 6.5%
→ Average Rental: $1,022
→ Average Rental Size: 882 sq. ft.
→ Median Household Income: $61,305 per year, $5,109 per month
→ Best Type of Property to Rent Out: Long-term single-family homes and units
→ Rental Insurance Cost in Columbus: About $2,500 per year
As with other cities on this list, Columbus owes its growth to the booming tech industry. The state capital, Columbus, is also the largest city in Ohio, making it a prime investment opportunity. Currently, Columbus has just over two million residents, with a 10-percent increase over eight years.
- Orlando, Florida
→ Gross Rental Yield: 8.12 percent
→ Orlando 2021 Rental Vacancy Rate: 6.1%
→ Average Rental: $1,444
→ Average Rental Size: 963 sq. ft.
→ Median Household Income: $58,254 per year, $4,855 per month
→ Best Type of Property to Rent Out. Short-term tourist rentals
→ Rental Insurance Cost in Orlando: About $4,400 per year
As one of the most-visited tourist destinations in the U.S., Orlando has a lot going on. Orlando has ranked as one of the top places for real estate investment for the last three years. Home and rental prices continue to go up, along with a steady job market and population growth.
- Charlotte, North Carolina
→ Gross Rental Yield: 6 percent
→ Charlotte 2021 Rental Vacancy Rate: 6.7%
→ Average Rental: $1,321
→ Average Rental Size: 941 sq. ft.
→ Median Household Income: $62,817 per year, $5,235 per month
→ Best Type of Property to Rent Out. Single-family and multi-family units
→ Rental Insurance Cost in Charlotte: About $1,600 per year
Since Charlotte is friendly to businesses, more and more companies are coming to the city. Small business owners are also taking advantage. It is easy to develop a positive cash flow, both in business and real estate.
Housing prices in Charlotte have increased by more than five percent since 2020. So, Charlotte is an excellent place to buy a rental property as, for some, it is more affordable to rent than buy.
- Phoenix, Arizona
→ Gross Rental Yield: 5.1 percent
→ Phoenix Rental Vacancy Rate: 6.6%
→ Average Rental: $1,252
→ Average Rental Size: 804 sq. ft.
→ Median Household Income: $64,468 per year, $5,372 per month
→ Best Type of Property to Rent Out. Long-term rental properties, such as single-family homes
→ Rental Insurance Cost in Phoenix. Around $1,600 per year
Since high-profile tech companies are moving to the desert, those jobs attract more professionals. The land is also cheap in and around Phoenix. So, workers can buy houses and raise a family for less than cities like Seattle or New York. However, Phoenix itself has over one million residents, so renters are plentiful.
- Las Vegas, Nevada
→ Gross Rental Yield: 4.5 percent
→ Las Vegas Rental Vacancy Rate: 5.1%
→ Average Rental: $1,196
→ Average Rental Size: 882 sq. ft.
→ Median Household Income: $59,340 per year, $4,945 per month
→ Best Type of Property to Rent Out. Short-term tourism rental properties with amenities like a pool
→ Las Vegas Landlord Insurance Cost: Around $1,100 annually
No matter how developed Vegas gets, it always seems to be expanding. Even with so many hotels and resorts in Sin City, there's still room for more. While most people visit Las Vegas, the city must house workers for all the hospitality jobs.
Overall, Vegas is one of the largest cities in the United States, with 2.7 million residents.
- Boise, Idaho
→ Gross Rental Yield: 4.3 percent
→ Boise Rental Vacancy Rate: 1.2% (single-family), .53% (multi-family)
→ Average Rental: $1,396
→ Average Rental Size: 882 sq. ft.
→ Median Household Income: $66,293 per year, $5,524 per month
→ Best Type of Property to Rent Out: Single-family homes.
→ Rental Insurance Cost in Boise: About $1,000 per year
As coastal cities get too expensive, more people start moving inland for jobs. Boise has been exploding in the last few years, making it a haven for businesses and investors.
Thanks to that, population rates are increasing, driving the demand up for rentals. In 2021 Boise has the lowest rental vacancy rate, 1.2% for single-family homes, in the nation. 39,651 or 43% of Boise City households are renter-occupied, while 51,904 or 56% are owner-occupied.
Home sales prices have increased steadily, by as much as eight percent in 2020. Housing prices have skyrocketed, making the median price about $430,000 in 2021.
Best of all, Idaho has one of the cheapest landlord insurance rates. So, you can spend less on monthly costs and put more money into your pocket.
Get Your Rental Insurance Quote
Protect your real estate investment with Young Alfred! We can help you find and purchase the best landlord insurance for your rental property at the best price. We are an online licensed insurance agency in all 50 states and sell for the top 40 insurance companies nationwide.
Landlords love working with us since we can provide one rental property insurance portfolio for all your properties regardless of the location. Click now to get started!
Hope that helps!
At your service,
Average Rentals Prices and Rental Sizes
Our average rental price by city data came from RENTCafe.com, a nationwide apartment search website. The used Yardi Matrix to gather market-rate large-scale multi-family properties (50+ units) through a telephone survey.
Median Household Income
Our median household income per city came from Cubit Planning Inc. that used the US Census Bureau and the 5-year estimates from the 2019 American Community Survey. The values are 2019 inflation-adjusted and from data downloaded on December 10, 2020.
Rental Vacancy Rates
Our rental vacancy rates are for 2021 and came from various websites linked in each city.