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Best US Cities to Invest in Rental Properties in 2022

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There are numerous factors to consider when analyzing potential investment opportunities. These range from assessing the local economy and job opportunities to analyzing specific property metrics such as cap rate, cash on cash return, net operating income, and many others.

Add to this your own personal financial goals and investment strategy and it can quickly become overwhelming. Where do you even start? Well, the first place to start is to find the best market for you. This could be close to where you live if you’re planning on being hands-on with property management, or you might look out of state for more landlord-friendly laws and better returns.

In this report, we take a closer look at the 10 most landlord-friendly states, the states with the most favorable landlord-tenant laws, low average vacancy rates, and low property prices for a high rate of return. We also break down 10 of the best cities across the US where investors can achieve top ROI and should consider exploring opportunities today.

How to judge a good investment market

The range of contributing factors can make it difficult and time-consuming to assess a potential market. There are, however, a few common considerations that investors can use to quickly get a picture of the viability of a market. These include:

  • Average house prices in the region. Not all regions are equally affordable. If you’re wanting to invest in a property in San Francisco, for example, you’re going to need a lot more capital than if you wanted to invest in say Cleveland, Ohio. However, higher property prices might make sense in the long term if you have the finances and can find a property that offers good cash flow. For example, a property in a city like San Francisco is likely to see much higher long-term appreciation.
  • Average rent amounts. Next on the list is average rent amounts. If there is low demand in an area or a high number of rentals, then you simply may not be able to charge enough to achieve the cash flow you need to make it a viable investment.
  • Rental demand. Following on from the previous point, another way to judge a good investment market is to analyze rental demand in the area. There are a few things you can look at to determine this including the average vacancy rates where a high average vacancy rate indicates low demand. The average age of the local population can also be taken into account, with a younger population much more likely to be renting.
  • Local economic investment. When looking at the infrastructure of an area, you want it to be able to support a large number of well-paid young individuals. This means there need to be plenty of jobs with large employers. There should be good infrastructure and public transport, a thriving downtown area, investment in infrastructure, and plenty of new business moving into the region.
  • Rental competition. Finally, you will want to check that the number of rentals in the market doesn’t exceed the rental demand. Again you can look at metrics like average vacancy rates as well as the current number of rental listings in the area on a platform like Zillow.

10 Most Landlord Friendly States

  1. Texas
  2. Indiana
  3. Colorado
  4. Alabama
  5. Arizona
  6. Florida
  7. Illinois
  8. Pennsylvania
  9. Ohio
  10. Georgia

Texas

  • 2021 average vacancy rate: 4.08%
  • How long do landlords have to return the deposit: 30 days
  • After non-payment of rent, landlords can give a 3-day notice quit.
  • Property taxes: 1.69%

Other

With several affordable property markets with high rental demand and good cash flow, Texas offers plenty of opportunities for investors.

Indiana

  • 2021 average vacancy rate: 6.67%
  • How long do landlords have to return the deposit: 45 days
  • After non-payment of rent, landlords can give a 10-day notice quit.
  • Property taxes: 0.81%

Other

Indiana has a low median house price and high median rent, making for a good price-to-rent ratio. This is ideal for investors that focus on cash flow.

Colorado

  • 2021 average vacancy rate: 1.95%
  • How long do landlords have to return the deposit: 1 month
  • After non-payment of rent, landlords can give a 3-day notice quit.
  • Property taxes: 0.49%

Other

Colorado is one of the few states that allow landlords to enter their property without notice, allowing landlords to keep a close eye on the condition of their property. On the other hand, tenants in Colorado have the right to withhold rent if they consider that the unit is not habitable and/or contains a potential health hazard for them.

Alabama

  • 2021 average vacancy rate: 12.92%
  • How long do landlords have to return the deposit: 60 days
  • After non-payment of rent, landlords can give a 7-day notice quit.
  • Property taxes: 0.48%
  • If a tenant breaches the rental agreement, landlords can give a 14-day notice to end the lease. If tenants do not pay the rent, the landlord can give a 7-day notice of eviction.

Other

Landlords can raise the rent within reason with only 30 days’ notice. Rental laws prevent tenants from withholding rent if a landlord does not make repairs to the property. There are also no restrictions on late fees

Arizona

  • 2021 average vacancy rate: 2.82%
  • How long do landlords have to return the deposit: 14 days
  • After non-payment of rent, landlords can give a 5-day notice quit.
  • Property taxes: 0.62%
  • If a tenant breaches the rental agreement, the landlord can give a 10-day notice.
  • In serious cases, landlords can give an unconditional quit notice to vacate the property within 10 days.

Other

Arizona laws are generally seen to be beneficial to landlords as the guidelines when it comes to written notices and eviction laws are more flexible than in other states. Additionally, Landlords can raise the rent, within reason, with only 30 days’ notice. Phoenix, Arizona is a thriving economic hub and offers many good investment opportunities.

Florida

  • 2021 average vacancy rate: 6.67%
  • How long do landlords have to return the deposit: 15-60 days depending on disputes and deductions.
  • After non-payment of rent, landlords can give a 3-day notice quit.
  • Property taxes: 0.98%

Other

Landlords have the freedom to set many of their own rental guidelines. There is no limit to the amount a landlord can charge for a security deposit. Rent control is prohibited in Florida. Landlords can set their own price for late rent fees.

Illinois

  • 2021 average vacancy rate: 5.96%
  • How long do landlords have to return the deposit: 30 days.
  • After non-payment of rent, landlords can give a 10-day notice quit.
  • Property taxes: 2.16%

Other

Though less friendly to landlords than some others on this list, Illinois has a large tenant market and good investment opportunities.

Pennsylvania

  • 2021 average vacancy rate: 5.24%
  • How long do landlords have to return the deposit: 30 days.
  • After non-payment of rent, landlords can give a 10-day notice quit.
  • Property taxes: 1.68%

Other

The average Fair Market Rent for a two-bedroom home in Pennsylvania is $1032 per month, offering attractive cashflow opportunity.

Note: cities such as Philadelphia and Pittsburgh have different landlord-tenant laws than the state.

Ohio

  • 2021 average vacancy rate: 4.22%
  • How long do landlords have to return the deposit: 30 days
  • After non-payment of rent, landlords can give a 3-day notice quit.
  • Property taxes: 1.57%

Other

Rental property is affordable, and returns are decent. However, there is legislation in place that requires landlords to keep any security deposit that’s greater than $50, or one month’s rent, in a separate interest-bearing account at 5% interest.

Georgia

  • 2021 average vacancy rate: 5.16%
  • How long do landlords have to return the deposit: 1 month.
  • After non-payment of rent, landlords can give a 1-10 day notice quit.
  • Property taxes: 0.87%

Other

After landlords issue an eviction notice, tenants have seven days (unless otherwise specified) to pay rent. If they do not, landlords can begin court proceedings to remove tenants if necessary.

There are also no limits on late rental fees or security deposits

Data Sources

orlando city

10 Best US Cities to Invest in Real Estate in 2022

When assessing the best US cities to invest in during 2022, we looked at the following key indicators:

  • House prices, average rents, and cash-on-cash return
  • Appreciation rates
  • Occupancy rates
  • Local investment and employment opportunities

About Cash-on-Cash Return

The cash-on-cash return rate, also known as cash yield, measures the amount of cash flow relative to the amount of cash invested in a property and is calculated on a pre-tax basis. This is often a favored calculation for real estate investors as it is a reasonably accurate estimate of cash flow.

The formula for calculating cash-on-cash return looks like this:

Cash-on-Cash Return = Annual Cash Flow (before tax) / Total Cash Invested

Where Annual Cash Flow = Income – Operating Expenses – Vacancy Period – Mortgage Repayments

    Median Property Price Average Monthly Rental Income Average Cash on Cash Return
Orlando FL $452,055 $1,876 2.70%
Atlanta GA $597,191 $2,334 2.48%
Houston TX $561,196 $2,020 1.87%
Charlotte NC $552,606 $1,964 1.88%
Birmingham AL $583,542 $1,485 2.15%
Las Vegas NV $598,873 $1,656 1.39%
Austin TX $950,468 $2,271 0.57%
Nashville TN $756,925 $1,823 1.32%
Boise ID $771,782 $1,386 0.16%
Tampa FL $632,352 $2,281 2.70%

Data source: Mashvisor

About appreciation rates

Real estate appreciation refers to the increase in value of a property over time. Each of the cities listed below have experienced an increase in real estate appreciation on an annual basis and over the past 11 years.

    Average annual appreciation rate Appreciation rate from 2000 Q1 -2021 
Orlando FL 4.68% 173.54%
Atlanta GA 3.84% 128.88%
Houston TX 4.41% 158.68%
Charlotte NC 4.00% 136.76%
Birmingham AL 3.13% 96.82%
Las Vegas NV 4.40% 157.75%
Austin TX 6.44% 294.86%
Nashville TN 5.11% 199.38%
Boise ID 6.39% 290.47%
Tampa FL 5.68% 237.01%

Data source: NeighborhoodScout

1. Orlando FL

Orlando is a rapidly growing metropolitan hub. As the fourth largest city in Florida and the state’s largest inland city with a population of about 2.5 million, it offers a sizable pool of potential renters and plenty of employment and investment opportunity.

  • Ranked #2 in America’s Fastest-Growing Cities – Forbes.
  • Over 60% of the population rents.
  • Orlando is a major industrial and hi-tech center employing thousands of people.
  • March 2022 saw unemployment drop to 3%.
  • The 2019 vacancy rate in Orlando was 11.65%

2. Atlanta GA

Atlanta is one of the fastest-growing major cities in the country with hundreds of people from all around the US flocking there each year. According to the data of the U.S. Census Bureau, the city gained the fourth-most residents last year with a population of almost 5.8 million.

Second of all, the real estate market of Atlanta has been in a growth mood for the last few years and the trend is gaining momentum. Given that the metro area welcomes almost 100,000 new residents per year, it comes as no surprise that real estate developers are swamped with work. And it goes without saying that buying income properties could hardly go wrong here.

  • Atlanta has a growing economy that is 8th in the nation for GDP and is home to a wide variety of businesses including Fortune 500 companies.
  • March 2022 saw unemployment drop to 3.9%
  • The 2019 vacancy rate in Atlanta was 6.2%

3. Houston TX

Houston provides a healthy and diverse range of real estate investment opportunities. It has a growing population, and world-renowned businesses in the energy, medicine, space, and manufacturing sectors.

  • 4th largest city in the US.
  • March 2022 saw unemployment drop to 4.3%
  • It’s home to more Fortune 500 headquarters than anywhere in America except for New York.
  • The 2019 vacancy rate in Houston was 8.59%

4. Charlotte NC

Charlotte ranks among the hottest real estate markets in the U.S., following a multi-year trend of developers and investors focusing on Sun Belt cities like Charlotte for economic growth potential.

Charlotte, North Carolina is the most populated city in the state and one of the fastest-growing metro areas in the U.S. The diverse economy and quality of life in Charlotte helps to explain why the housing market is so hot. The Charlotte metro area is the second-largest financial center in the U.S., home to popular pro sports teams, and has one of the best year-round climates in the country.

  • It is rated one of the best places to live in North Carolina and one of the best places to live in the United States for 2019, according to U.S. News & World Report.
  • Charlotte has become a major U.S. financial center with the second-most banking assets after New York City.
  • March 2022 saw unemployment drop to 3.8%
  • The 2019 vacancy rate in Charlotte was 7.12%

5. Birmingham AL

Birmingham’s solid economic base and outstanding real estate opportunities are perfect for both short-term investing and for rental property investors holding for the long term.

Realtor.com ranks Birmingham as one of the top 25 housing markets for 2022, with a combined sales and price growth increase of 13.7%.

  • Birmingham is the most populous city in Alabama.
  • Being home to several colleges and universities, Birmingham has a large pool of student renters.
  • Birmingham is a leading banking center and a powerhouse of construction and engineering companies.
  • March 2022 saw unemployment drop to 2.3%
  • The 2019 vacancy rate in Birmingham was 8.5%

6. Las Vegas NV

The Las Vegas Valley as a whole serves as the leading financial, commercial, and cultural center for Nevada and has a diversified economy driven by health-related, high-tech, and other commercial interests. As the population continues to grow, this could present a great investment opportunity if you want to sell your home for a profit down the road. Plus, rates for apartments and single-family homes have increased over recent years This means there is high demand for rentals in the city and good appreciation.

  • Las Vegas is the most populated city in the state of Nevada with an estimated population of 2,699,000.
  • The absence of state tax for individuals or corporations, as well as a lack of other forms of business-related taxes, have aided economic growth.
  • March 2022 saw unemployment drop to 5.2%
  • The 2019 vacancy rate in Las Vegas was 8.85%

7. Austin TX

Austin, Texas is known for its world-class food, music and art scene, and thriving nightlife. It is currently seen as one of the hottest housing markets in the country as Austin’s rapidly expanding economy is driving more demand and dollars into the city than ever before.

  • Austin has a strong economy, low unemployment of 2.7%, and a growing population.
  • It is the 4th most populated city in Texas.
  • You can get quality investment properties in the price range of $200,000 to $250,000.
  • March 2022 saw unemployment drop to 2.6%
  • The 2019 vacancy rate in Austin was 5.57%

8. Nashville TN

Nashville has a mixture of owner-occupied and renter-occupied housing units with around 48% of the households in Nashville being renter-occupied. One and two-bedroom single-family detached homes are the most common housing units in Nashville.

The Nashville housing market has been good for sellers in the past years due to the rising prices, and it is considered one of the hottest housing markets in the U.S. The Nashville real estate boom began about 10 years ago and the investors expect these trends to continue into the foreseeable future, making Nashville one of the most desirable housing markets in the country.

  • Average household income in Nashville is $44,829
  • March 2022 saw unemployment drop to 4.3%
  • The 2019 vacancy rate in Nashville was 8.65%

9. Boise ID

Boise is a highly liveable city and over the last few years has been attracting a lot of younger professionals in the tech sector. A high number of jobs brought in by large tech firms means low unemployment and the increasing population is helping drive house price appreciation. All of this means Boise offers investors some great opportunities.

  • Low cost of doing business.
  • Forbes ranked Boise #6 for job growth in the US.
  • March 2022 saw unemployment drop to 2.6%
  • The 2019 vacancy rate in Boise was 3.9%

10. Tampa FL

The rental market is very strong in Tampa and it is one of the most popular areas for investors with nearly 1 in 4 properties being snatched up by investors between July and September 2021.  There are several economic and development prospects attached to this market and Tampa, which is helping to keep unemployment low and bring in new people to the area.

  • Tampa has the headquarters of four Fortune 500 companies which makes it a moderately attractive city for work and economic growth.
  • March 2022 saw unemployment drop to 2.6%
  • The 2019 vacancy rate in Tampa was 8.18%

Data Sources

Final Words

Deciding where to invest next is an exciting but also daunting prospect as there are so many variables at play. By undertaking research into the factors discussed in this article (rental demand, appreciation rates, and local economic investment, among many others), you can easily narrow down your options to find the right location for your next investment property.

While a little work is required to find the perfect property, investing in a good market and economy in a landlord-friendly state can help you on your way to expanding your rental property portfolio and contributing to your own personal financial goals.

Find out how Landlord Studio can help you scale your portfolio →

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Investment Strategyportfolio growthReal Estate Investing

Ben Luxon

Ben is the editor and lead writer for Landlord Studio. He has worked with real estate professionals all over the world and written educational articles on tech, real estate, and financial growth for sites such as Forbes, TechBullion, and Business Magazine.

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