- Demand for rental property has changed since the onset of the pandemic.
- A new report from Millionacres identified the best cities for investors to own rental homes.
- The best city to own rental property is Boise, ID, followed by Memphis, TN, and Tampa, FL.
Where we live has been reimagined due to the pandemic. Americans have migrated in and out of metropolises, secondary cities, and vacation towns over the last 18 months. And as people have moved, the rental market has moved with them.
Migration and remote work have driven housing booms in what once were small cities and resort hideaways — from the Sun Belt through the Mountain West, and low interest rates and new lifestyle needs have propelled many into becoming first-time homebuyers.
However, rental demand also has changed, despite an ever hot market for real estate investors as they look for safe property investments and to maximize returns.
A new report from Millionacres identified the best places to buy a rental property, based on factors from appreciation and demand to cost of housing and rental yield: elements all critical to determining if a market is right for rental property ownership.
Finding out if an area is ripe for investment comes down to understanding factors like a location’s affordability (which impacts a homeowner’s potential returns) and demand (which, if high, helps ensure a strong pool of potential renters). In addition, it means taking measure of median home prices, year-over-year rent growth, unemployment rates, appreciation forecasts, and median rental rates (which identify the typical cost of rent in each city).
Those factors considered, Millionacres pinpointed the seven best places across the US for investors to buy rental property in 2021 — where homes cost between $100,000 and $400,000 and rents go for between $1,200 and $1,600 a month.
7. Greensboro, NC
Median home price: $177,642
Median rental rate: $1,238
2021 appreciation forecast rate: 4.1%
Greensboro is a city about an hour and a half northwest of the Raleigh metro, just east of Winston-Salem. The third most populous city in North Carolina is home to around 300,000, where residents are evenly split between homeowners and renters, according to Niche.
Despite a local unemployment rate higher than the national average, Greensboro is an ideal location for rental property ownership due to a low median housing cost in comparison to the median rent rate.
6. Albuquerque, NM
Median home price: $232,982
Median rental rate: $1,243
2021 appreciation forecast rate: 4.9%
Albuquerque is a dense suburban area in New Mexico, home to around 600,000 residents. Located in the high desert, Albuquerque is the state’s largest city, home to both a modern Downtown city center and Old Town Albuquerque that dates back to the city’s founding as a Spanish colony in the early 1700s.
Around 60% of Albuquerque’s residents are homeowners while 40% are renters, according to Niche. Millionacres reports that the city’s unemployment rate, 6.8%, is proximate to the national average while rental-rate growth (6.8% year-over year) and home appreciation have and are expected to continue to rise slowly.
5. Allentown, PA
Median home price: $188,881
Median rental rate: $1,446
2021 appreciation forecast rate: 4.9%
Allentown is a dense suburban city in eastern Pennsylvania home to around 120,000 and known for its deep rooted American history (the locale is also home to The Liberty Bell Museum). About 40% of residents are homeowners, according to Niche, while 60% rent their homes.
Rents in Allentown have grown 10.8% year-over-year, according to the report, which specified that landlords have an opportunity to benefit from the short-term renters seeking out city-living with small-town lifestyle.
4. Fresno, CA
Median home price: $280,058
Median rental rate: $1,585
2021 appreciation forecast rate: 8.5%
Fresno is a city in California’s San Joaquin Valley, about two and a half hours from San Jose. Home to over 500,000 residents, Fresno is a dense suburban area where about 47% of residents are homeowners, according to Niche, and 53% of residents are renters.
Fresno’s year-over-year rent growth stands at 8.8%. An economic hub led by a bustling agriculture industry, the city’s landlords can find security in the area’s demand, according to Millionacres, and the city’s high year-over-year rental-rate growth and anticipated home-price appreciation makes it an ideal place to invest in a rental property.
3. Tampa, FL
Median home price: $253,032
Median rental rate: $1,581
2021 appreciation forecast rate: 7.5%
The Tampa Bay metro area (including cities like St. Petersburg and Clearwater) is home to about three million. Located in western Florida along the Gulf Coast, the Tampa area is evenly split between homeowners and renters, according to Niche.
Year-over-year rent growth in the Tampa area stands at 4.1% in 2021, according to the report, which emphasized that the area’s rapidly growing population and economy mean ample job opportunities generate strong demand for housing.
2. Memphis, TN
Median home price: $108,237
Median rental rate: $1,320
2021 appreciation forecast rate: 4.8%
Memphis, Tennessee is a city located on the Mississippi River in southwest Tennessee, famous for its ties to the rock ‘n’ roll and blues legends that began there, from Elvis Presley to Johnny Cash. Now home to around 700,000 residents, according to Niche, 47% of residents are homeowners while 53% are renters.
Memphis’s year-over-year rent growth rate is 6.9%. Ranked as the second best market to own a rental property, the city’s low median home cost compared to its high median rental rate means there are opportunities for investors to make above-average returns on their rental investments.
1. Boise, ID
Median home price: $391,754
Median rental rate: $1,402
2021 appreciation forecast rate: 9.1%
Idaho’s capital saw a banner year for real estate in 2020, with a housing market on fire and year-over-year rent growth of 11.7%. Home values in Boise have risen nearly 20% in just one year, and compared to the rest of the US, Idaho had the largest year-over-year population increase in 2020, Insider previously reported. About 40% of Boise residents are renters, according to Niche.
With an expanding economy, the Boise market is expected to continue growing across industries, and as a low unemployment rate and rapid year-over-year rental growth continue to drive the market forward, Boise’s forecasted growth through 2021 makes the most attractive market for rental property investment.