The 5 Best Markets for Buying a Rental Property in 2022

In order to operate a profitable investment portfolio landlords need to know which are the best markets with the greatest potential returns.

Since time immemorial, investing in real estate properties has been a surefire way to generate a substantial income and grow your wealth. There are many ways to invest in real estate, but buying and managing rental properties has always been one of the most popular strategies.

Investing in a rental property involves much more than just finding and closing on a great investment opportunity. As a smart investor, you also need to conduct market and property analyses. And then you need the tools and processes for efficient property management.

One way to carry out market analysis is by familiarizing yourself with the best rental markets to buy investment properties. The location you choose to invest in ultimately determines the level of success your assets acquire.

Keep reading to find out some of the best places to buy rental property in 2022. We’ll start with the basics:

You may also like: Top 10 Places to Invest in Real Estate in 2023

What Are Long-Term Rentals?

A long-term rental property is also referred to as a traditional rental. It’s a property that’s rented out to a long-term tenant for an extended period, say 30 days, 6 months, or more. Most long-term tenants lease rental property to live permanently but also may lease them if they’re travelling for work, or taking a long vacation.

Compared to short-term rentals, long-term rentals offer tenants a level of security. They have a place they can call home. Traditional rentals also offer landlords a myriad of benefits which we detail below.

Why Invest in Long-Term Rentals in 2022?

Real estate experts recommend long-term rental properties as the best strategy for novice investors since it requires less hands-on involvement. You could get started as long as you have startup capital and access to financing.

With this in mind, let’s look at some of the reasons why you should consider this type of investment in 2022:

Consistent Income

One of the vital reasons why long-term rentals may be more suitable than their short-term counterparts is because of the consistent income they offer. This could be the best investment for you if you’re looking for stable cash flow.

With short-term rentals, the occupancy rate is irregular and varies depending on the season. You can have your rental fully booked during the summer, then struggle to get any guests during the winter. Long-term rental landlords don’t have to worry about occupancy rates since the property is occupied during all seasons.

Easier Property Management

Traditional rental owners have fewer property management responsibilities compared to short-term rental hosts. Airbnb hosts have to ensure their property is cleaned and in tip-top condition every time a guest checks out. On top of that, they have to keep advertising their property to gain exposure to their target guests.

With traditional rentals, your tenants are in charge of cleaning their own unit. Since they’re staying on your property for long, they’re more likely to take care of the basic maintenance tasks.

Also, traditional landlords charge security deposits. This fee is used to sort out any major damages on the property before the tenant moves out at the end of the lease. This saves landlords money.

Find out how Landlord Studio can save you time and money with your property management →

Paying Off Debt

Not many real estate investors are privileged enough to pay cash for their investment properties. It’s likely that you’ll have to take out a mortgage loan for your investment. As such, debts for buying a rental property can accumulate fast.

Due to the positive cash flow and consistent income that traditional rentals offer, you can pay off your debts faster. This will help you invest in more properties and ultimately increase your monthly income.

Besides paying off your mortgages, long-term rentals can help you in other financial aspects too. For example, you can set up your retirement account and save a significant amount every month. These rental properties are your path to financial freedom.

out of state real estate investing

Best Markets for Rental Properties in 2022

Whether you’re looking to purchase your first rental property or add another one to your portfolio, we’ve analyzed and compiled the five best markets for you to consider based on cash on cash return.

Cash on cash return is a return on investment metric used by real estate investors to determine the amount of rental income they can make in relation to the total amount of cash invested. When we talk of the amount of cash invested, we mean the sales price (if buying in cash) or the down payment (if using a mortgage) plus the closing costs and any other expenses to rehabilitate the property.

Unlike the capitalization rate (cap rate), cash on cash return considers the method of financing used. A cash on cash return calculator helps you understand what amount of income you’re getting from the cash invested. The higher the cash on cash return is, the more lucrative an investment property is.

That said, let’s look at the best housing markets for rental property investment in the US in 2022. The statistics shown below are provided by Mashvisor, a real estate data and analytics company, and are based on the performance of rental comps in each market.

  1. Tampa, Florida

Tampa is known for its coastal living and year-round warm weather. It offers a great property appreciation potential as well as a good rental income growth. The city attracts investors since property taxes are lower than average. There’s also no personal income tax.

Here are the Tampa housing market statistics:

  • Cash on Cash Return: 2.65%
  • Monthly Rental Income: $2,235
  • Median Property Price: $631,607
  • Average Price per Square Foot: $345
  • Price to Rent Ratio: 24
  • Number of Listings for Sale: 1,299
  • Number of Rental Listings: 2,135
  1. Phoenix, Arizona

Phoenix, Arizona’s capital, is a great city driven by the tourism, military, technology, and education sectors. Its warm weather has been attracting many residents in the past decade who come to visit, work, and live. Between 2010 and 2020, Phoenix was ranked among the fastest-growing cities in the US.

Here are the city’s rental market’s latest statistics:

  • Cash on Cash Return: 1.94%
  • Monthly Rental Income: $1,973
  • Median Property Price: $648,439
  • Average Price per Square Foot: $372
  • Price to Rent Ratio: 27
  • Number of Listings for Sale: 807
  • Number of Rental Listings: 5,555
  1. Charlotte, North Carolina

Charlotte has the highest population in North Carolina. It ranks among the fastest-growing real estate markets due to many developers and investors focusing on Charlotte and its economic growth potential. The job market expansion has also made the city a top destination for businesses and professionals.

Let’s look at the Charlotte real estate market statistics:

  • Cash on Cash Return: 1.85%
  • Monthly Rental Income: $1,969
  • Median Property Price: $555,972
  • Average Price per Square Foot: $321
  • Price to Rent Ratio: 24
  • Number of Listings for Sale: 2,016
  • Number of Rental Listings: 2,694
  1. Seattle, Washington

Seattle has consistently been one of the best real estate markets for rental properties for a few years. The city has experienced impressive job market growth, especially in the tech sector. This has resulted in population growth and, in turn, led to housing demand.

Here are the latest Seattle market statistics:

  • Cash on Cash Return: 1.78%
  • Monthly Rental Income: $2,160
  • Median Property Price: $668,391
  • Average Price per Square Foot: $607
  • Price to Rent Ratio: 26
  • Number of Listings for Sale: 54
  • Number of Rental Listings: 1,546
  1. Boston, Massachusetts

Known for the American Revolution, Boston has an excellent public transit system that allows its residents to live and work anywhere within the city without having to endure long commutes. The city has been a major US metropolitan for centuries and continues to attract hordes of residents.

Here are Boston’s statistics:

  • Cash on Cash Return: 1.06%
  • Monthly Rental Income: $2,592
  • Median Property Price: $1,063,363
  • Average Price per Square Foot: $1,012
  • Price to Rent Ratio: 34
  • Number of Listings for Sale: 51
  • Number of Traditional Listings: 5,634

Bottom Line

When it to finding the next property, whether you’re buying a turnkey property your first investment or diversifying your portfolio through BRRRR, it's essential for you to fully understand the number. You need to consider various factors before buying your rental property to ensure it’s profitable. One of the key ways of buying a profitable investment property is by investing in the best markets with the potential for the greatest return on investment.

You Might Like