When it comes to acquiring investment properties that will generate high cash flow and growth equity, it pays to look at cities that have a booming population, high levels of job growth and are affordable.
After all, no landlord wants an investment property in a city where demand is low due to poor employment growth and a falling population.
But with over 3,000 cities in the United States, where should you start?
We take a look at what the experts are saying will happen to the US property market this year, and in doing so answer the question: what are the top 5 US cities to buy an investment property in right now, and why?
According to Forbes, it is predicted that this year, most real estate investors will stay clear of cities with soaring housing prices. This is supported by other real estate commentators who believe many investors are moving away from expensive coastal city areas and towards inexpensive real estate markets more inland.
This would suggest investors should stay away from already over-priced markets with high rents as there will not be enough people who can afford to rent expensive properties.
Although Forbes notes that it is impossible to truly know when a real estate bubble will burst, investors are being cautioned about places like San Francisco, Seattle, Miami, and Denver.
So, where are these cities experiencing high levels of population and job growth? And why should you invest there?
GoBankingRates have used 6 key factors to figure out what US cities are the best for investment. The factors are employment growth; population growth; demographic trends; interest/mortgage rates; valuations/cap rates/net rental yields; and inventory.
To figure out what cities are the best for owning property to rent out to tenants, GoBankingRates surveyed 67 of the most populous US cities and this is the results of their findings:
According to GoBankingRates, the number one place to buy an investment property in Arlington. It has a healthy population growth rate of 2.2%, an employment growth rate of 3.4%, and an increase in home value rate of 10.3%.
The median home price of $240,000 is affordable, while still producing relatively high rents at $1,498. With a strong rental yield of 7.5%, you can pay off your mortgage quicker.
Although the top spot has been taken by Arlington, Orlando is still among the top 5 cities in the US to buy an investment property for the third year.
With a population growth rate of 4.8%, an employment growth rate of 3.5%, an increase in home values rate of 10.7% and a rental yield of 5.7%, it's no surprise that Orlando is popular with investors and continues to be one of the best places to invest.
Florida has gained a reputation for being a great place to invest - and Jacksonville is no exception. With a 3.2% employment growth rate in one year and a 3.1% rate of population growth, Jacksonville is hard to ignore.
With a rental yield of 6.8%, Jacksonville is much better than the average. To top it off, home values are increasing at a rate of 10.1%.
Although the cost of living in this city is quickly rising, it still boasts a 4.1% rate of population growth and a 3% rate of employment growth.
Similar to other cities in the top 5, it has an increase in home values rate of over 10% but a slightly lower rental yield of 5.6%.
Last but not least, scraping in at number 5, is the city of Columbus. Despite a slightly lower population and employment growth rate of 2.3% and 1.2% respectively, Columbus home values have a better-than-average growth rate of 9.2%.
Columbus investors also benefit from the comparatively high rent prices, with the median price of a Columbus home being $179,900 and the median rent being $1,184.
We hope you found this blog interesting! However, do note that it should not be used as a substitute for competent legal and/or other advice from a licensed professional.
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