Rental property investing is, by far, the best way to invest your money. Not only do you get passive income every month, but there are a total of 6 ways you make money investing in rental properties. But, where are the best places to buy rental properties today?
Today, there are a lot of places claiming to be the next hot spot or the next big thing when it comes to rental properties. But, there are I want to show you the best places to invest in real estate.
Here are the best places to invest in real estate and buy rental properties that I and my students are buying properties in.
Best Places to Buy Rental Properties:
- STATES: Florida
- STATES: Tennessee
- STATES: Ohio
- STATES: Texas
- STATES: North Carolina
- STATES: South Carolina
- CITIES: Cincinnati Ohio
- CITIES: Houston Texas
- CITIES: Charlotte NC
- CITIES: Gainsville Florida
- CITIES: Memphis TN
Later in the article, we will look further into these cities and states.
The presence of all these options can make it quite confusing for an aspiring investor to separate the real facts from hype. That is why I wanted to write this article to help you find great, money making investment rental properties.
FIRST!! You Need to Learn How to Invest in Real Estate!
Seriously, it is not as simple as buying a house and throwing a tenant in there. I suggest building the business first and I’ll show you how to do it.
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Are Rental Properties a Good Investment?
Seriously though, this is how I personally quit my job when I was 37 years old.
After 30+ properties, I had enough passive income that I didn’t need to work any more. That is the amazing thing about real estate and finding the best places to buy rental properties.
Here are two articles where I document how amazing real estate investing is and the best things about rental properties.
Make Monthly Passive Income and Cash Flow
Probably the number one reason why rental properties are good investment is because they act as a good passive source of income.
When you say passive, it means it can become a recurring income source that needs little to no effort to sustain.
This makes it an attractive choice for people who want to earn some cash on the side or as an extra layer of financial security after they retire.
Income from rent is also taxed in a different way than income from employment.
Better Sense of Security
There are people who need to move temporarily for work purposes. There are also those who inherit their family home but don’t have plans to sell it off because of sentimental reasons.
Due to these reasons, people sometimes end up with an unused property.
Vacant homes are prone to squatters and vandalism, not to mention maintenance problems that can go unnoticed and quickly turn into bigger problems.
Keeping an eye on a property can be difficult if you don’t live there yourself.
Renting out your property to tenants will give you an improved sense of security because you know that someone is there to maintain and watch over your home.
Diversify your investments
Maybe you already invested some money in stocks. Based on studies, owning a rental property lets you diversify your investment portfolio.
This can serve as an additional protection layer against risks. It will also let you make the most out of any positive shift in the market.
Appreciation of property value
Having a rental property lets you hold on to it once its value appreciates. It gives you the option to sell it off at the right moment. The appreciation’s amount can vary from one market to another.
Look into the potential of appreciation in different neighborhoods and cities to set your expectations.
For example, you are all set to move yet the market isn’t in its best condition yet. Instead of selling off your property and incurring a loss, why not rent it out until the condition improves?
Again, you can sell your property when you are in a much better position to earn profit from the property.
A choice to move back
Maybe you can no longer stay in your current house for whatever reason.
If your job requires you to move temporarily, you can have the peace of mind knowing that you will still have a house to live in upon your return.
How to Look for the Best Rental Properties?
There are certain things you need to look for in a rental property.
I have a terrific free tool for you to find your first or next rental property. The tool finds the best rental properties and lists them for you to browse through.
PLUS! It also has all the information you need to know you are buying a good property.
Check it out here: MPI Property Search Portal
What Should You Look For When Finding The Best Places To Buy Rental Properties?
Once you have finally made up your mind to buy a rental property, there are several factors to consider. On top of that, best places to invest in real estate have these characteristics in them to make sure you make money.
Monthly Passive Income of $250 or More
You want to buy properties that are around $250 a month in passive income.
It can be hard to calculate the return so check out my single family home investment calculator.
In the calculator, you will account for all the expenses and income from the property to make sure you are making money every month in passive income.
Low Purchase Price with Good Cash on Cash Return
Buying a property for $500,000 and only rent it for $1500 will put you into the poor house fast. This is why invsetors use the cash on cash return to know if we are getting a good property.
Basically, it calculates the amount of money you pay to get the property rented and how much money you make in the first year.
You want to make sure the properties have a good cash on cash return and these best places to invest in real estate have this as well.
Use my cash on cash calculator here to calculate the cash on cash return.
Properties Everyone Wants to Rent Or Own and Are the Best Places to Invest in Real Estate
I personally suggest the cookie cutter type home.
- 3 bedroom
- 2 bathroom
- 2 car garage
- 1200-1500 square feet
There are many reasons for the cookie cutter home but the biggest is that you will get the most renters and the most buyers when you sell.
Location has a direct effect on the quality of tenants you attract and the revenue you will earn.
When searching for potential locations, know the things that tenants consider to be the most important.
Good tenants will be more than willing to pay higher or ignore less desirable features of rental units as long as the property is located in an excellent neighborhood.
Neighborhood and school quality, distance to parks and grocery stores, and proximity to big employers are some of the main features that great tenants look for.
Renting out your property is easier if it is near major highways and public transportation.
Many people never stay at home the whole day so they prefer convenient access to those routes that will let them go to work, entertainment, and shopping areas right on time.
There are some states where rental properties are required to have off-street parking. But, even if it is not a requirement in your place, this feature is in demand and attracts higher quality tenants.
It might be a bit tricky to find in urban areas but you can search for properties with a dedicated parking garage that is 5 or 6 blocks away from the property.
If your rental property has several units, it will be more convenient if every unit has its own utilities.
This will save you from the hassle of breaking down the costs yourself and worrying if your renters are charged fairly or you are the one who shoulders all the expenses.
What Are The Best Cities To Buy Rental Properties?
I have found that these are some of the best places to invest in real estate. My students are buying all over the mid-west and here are some of the hot spots.
All of them have unique strengths and weaknesses yet many of them are more affordable compared to nationwide averages.
Memphis, TN is dubbed as rock n’ roll’s place of birth, home of the blues and many iconic landmarks including the world-renowned Beale Street, Stax Museum, Sun Studio, and Graceland.
Memphis owns a spot in this list mainly because of the low housing prices and high yields in the area, making it one of the most attractive cities to buy rental properties.
Homes in Memphis are affordable with average price of $136,000. Rent prices increased by 3.4% and housing experienced a growth of 9.6% recently.
Memphis is a cultural and entertainment hub with desirable living cost that is 15.7% lower than the national average.
They say that you won’t lose money when you invest between two expanding cities close to each other.
Dayton and Cincinnati are affordable with 25.1% home prices lower than national average.
With the rising rents and strong gross rent multiplier, these cities are tempting investment targets.
The low rate of unemployment and healthy rate of job growth balance out the anemic growth of the city’s population.
Cincinnati and its sister city Dayton appears to have the best potentials for better rental performance in the near future.
They have a strong economy that attracts a rapid population swelling.
With approximately 7 million residents, Houston’s metro area is Texas’ fifth largest so far and its growth is continuous almost doubling the growth rate of the nationwide population.
The city of Houston is business-friendly that helps fuel the economic and employment growth.
It is the home to 53 Fortune 1000 companies that made it land the third spot as the most concentrated city after New York and Chicago.
But, despite the wealth and size of Houston, its real estate market remains affordable with the media home values lower than national average.
Charlotte’s greater metro area boasts of excellent growth of both population and job market. One reason for this is the fact that the city is business-friendly.
In fact, it is even named as the third best city in the whole country where a business can be started.
While some investors are hesitant to take a shot in the city, all signs are pointing towards the continued demand and growth in Charlotte.
What Is The Best State To Buy Rental Properties?
When investing, I like to stick to these states which seem to be some of the best places to invest in real estate.
But, the states below are considered as some of the best because they have everything you might be looking for:
The state of Florida offers a long list of benefits, making it one of the most attractive options for landlords that include both personal and financial considerations.
This is among the few states that don’t charge any income tax.
Florida also receives a surging number of tourists every year compared to the rest of the states. In 2018 alone, there are over 126 million people who visited Florida.
With the high demand among tourists and residents alike, you will never have any problems looking for a tenant in Florida compared to most of the states.
This is a good choice for landlords who are searching for a lucrative long term and short term investment.
Living in Florida is also very comfortable and the place itself is beautiful.
It is not really surprising that South Carolina is one of the best states to buy rental properties.
It is rich in cultural heritage, with locations close to mountains and beaches, a great weather, and the irresistible southern hospitality.
Although South Carolina’s population is relatively small with only 5 million residents, the Palmetto State never fails to attract large numbers of retirees who want a slower pace and less stressful way of life.
The combination of attractive locations, the talented workforce, and the strong economy can all help increase and maintain the value of the real estate investments in the state for the many years to come.
North Carolina gives you access to the Blue Ridge Parkway, the Great Smoky Mountains, the Emerald Isle, and the Outer Banks.
However, the sandy white beaches and lush green hills are not just the scenic things that make North Carolina stand out from the rest.
The cost of living is lower than the national average as well as the tax burdens of employers.
The population of the state was already starting to grow faster compared to the national growth rate because of the relative affordability.
As global and national corporations move in because of the low cost of starting a business, it only makes sense to expect that there will also be an increase in new residents in the state.
The real estate market in Tennessee has been a hot destination among investors through the years.
Although the investment properties in the state are not as affordable as other listed states, the median price is still lower than the national median.
Most of the cities in the state enjoy high rates of appreciation and it is expected that home values will continue to increase in the next years.
The profitability and affordability of investment properties in the state make this one of the most ideal locations for real estate investor, sellers and buyers alike.
Statistics revealed that the median price of for sale homes in Indiana grew up to 4.2% recently and it is expected that the growth will continue in the coming years to do better than the national average.
Others may think that it means that homes in Indiana are expensive but it is actually the opposite.
If you look at the median price then compare it with the national median, you will see that Indian is in fact one of the cheapest states where you can buy an investment property.
Aside from the affordable market, the state is also among those that are most landlord friendly with a property tax rate of as low as 0.87%.
All things considered, this can be one of the best places to invest in real estate.
Yet another cheap place to buy a rental property, Missouri has the fourth lowest cost of living with its 3.2% unemployment rate much lower than the national average.
One reason why real estate investors are buying homes for sale in the state is that it is landlord friendly, giving you a chance to rent out the property on Airbnb or traditional to enjoy great investment return.
Ohio is the country’s 10th most densely populated and 7th most populous, which means that there is definitely a housing demand there.
The state is still regarded as among the cheapest states where you can purchase a house. On top of that, Ohio has also been named as among America’s hottest real estate markets recently.
Also, if you will compare the states based on the data available, you will notice that Ohio has the highest cash on cash return on Airbnb.
Best Places to Invest in Real Estate Conclusion
Now that you know where to look, you must learn how to do it right. Even if you are looking in the best places to invest in real estate.
If you do not build the rental property business first, you are almost guaranteed to lose money.
Remember to read through my entire article on how to invest in real estate here. AND get my free real estate investing course here.
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