In 2021, Where Does It Make Sense To Invest In A Long-term Rental Property?

Sean Locke is a photographer who works for Shutterstock.

Editor’s Note: This article first appeared on SmartAsset.com

Traditionally, owning real estate has been thought of as a good way to protect against inflation.The logic is simple: as the cost of goods and services rises, so does the value of real estate.

Rental properties, like other types of real estate, have the potential to appreciate in value, but that isn’t the only advantage of this asset class.Landlords earn passive income or cash flow from their properties, take advantage of certain tax breaks, and build equity while paying down their mortgages (if they have one).

With inflation in the United States on the rise,SIn the year 2021, investors may be looking for new real estate markets to invest in.SmartAsset set out to find the best places to buy and own long-term rental properties with this in mind.

We used data from the 120 U to do so.STo assess home investment favorability, home affordability, and the health of the rental market in each city with a population of 200,000 or more, we looked at cities with populations of 200,000 or more.Check out the data and methodology section at the end for more information on our data sources and how we put everything together to create our final rankings.

The best places to buy long-term rental properties in 2021 are listed below.

St. John’sLucie, Florida

Port St Lucie Florida

Shutterstock/Felix Mizioznikov

According to our findings, Port St.The best place in the United States is St. Lucie, Florida.Slong-term rental properties to buy and own

It tops our study’s home investment favorability index, which includes price-to-rent ratio, median home value change over four years, and estimated annual cash flow.

Investors in rental properties have an estimated annual cash flow of $606, which ranks fourth among all cities in our study.And, of the 120 cities studied, home values have increased by more than 54% between 2015 and 2021, making it the fifth-largest increase.

Buffalo, New York

Buffalo New York

Shutterstock / Sopotnicki

Buffalo, New York, has the fourth-highest home investment favorability score, thanks to a 55% increase in median home values between 2015 and 2021, the study’s fourth-largest increase.

In addition, this Rust Belt city has the eighth-best price-to-rent ratio, which is calculated by dividing median home value by median annual rent (the lower the price-to-rent ratio, the better for the investor).

In addition, median housing costs (mortgages, taxes, utilities, and so on)There are only 13 of them in Buffalo.The city has the third-lowest median national household income of all 120 cities, at 17%.

Mesa, Arizona

Mesa, Arizona

Tim Roberts is a photographer who works for Shutterstock.

Mesa, Arizona, is a high-ranking city in our study, owing to the city’s housing needs.Mesas’ population increased by 5% between 2015 and 2021.The growth of its housing stock is 46% faster than the growth of its population, the sixth-largest difference in our study.

Rents increased by 26 percent on average.From 2015 to 2021, the 17th-largest increase of all 120 cities was 46%.Rental properties, on the other hand, are expected to generate $2880 in annual cash flow.

Tampa, Florida

Tampa, Florida

Shutterstock kevin-j-king

While the Port of St.The city of St. Lucie on Florida’s Atlantic coast tops our list, but Tampa isn’t far behind.Tampa, on the west coast of the state, has the tenth-best home investment favorability score and the fifth-best rental opportunities score.

Between 2015 and 2021, median rents increased by more than 23%, while unemployment remained low as of May 2021 (4%)6%), making Tampa one of the most appealing places to invest in rental properties.

In 2021, the median home value in Tampa was 265700, putting it in the middle of our study’s 120 cities (59th).

Birmingham, Alabama

Birmingham, Alabama

Shutterstock/Sean Pavone

Alabama’s capital city has the highest home affordability index score of any of the 120 cities we looked at.

Birmingham has one of the cheapest housing markets in the country, with a median home value of $98800 in 2021.

In comparison to the median national household income (14), median housing costs were also low.39%) is the fifth-lowest percentage in our study.

Detroit, Michigan

Detroit, Michigan

Shutterstock/Harold Stiver

The cheapest median home values (58900) and best price-to-rent ratio (5%) are found in this area.67) in our study of 120 cities, Michigan’s Motor City is a good place to invest in rental properties.

In Detroit, housing costs are only $9 per square foot.In our study, 90% of the median national household income was also the lowest.Due to low housing costs, Detroit rental properties generate an estimated 5616 in cash flow per year, which is the seventh best in the country.

Glendale, Arizona

Shutterstock trekandshoot

Glendale, Arizona, is ranked ninth in terms of home affordability, thanks to a low average effective property tax rate (0%) and other factors.The 15th-lowest percentage in our study (56%)

The cost of living is also reasonable (241100 in 2021).Glendale rental properties also generated an average cash flow of $2712 per year, placing the city in the top third of the study in that category.

Huntsville, Alabama

Huntsville Alabama cityscape skyline

Shutterstock/Sean Pavone

Huntsville, Alabama, has a particularly low cost of living.In 2021, the city’s median home value was 185200 (34th lowest), with an average effective property tax rate of 0 percent.54% is good enough for 11th place overall.

The city’s population is also outpacing the construction of housing units.In fact, between 2015 and 2021, Huntsville’s population growth outpaced housing unit growth by nearly 5%, the study’s ninth-highest rate.

Pittsburgh, Pennsylvania

Pittsburgh, Pennsylvania

Shutterstock/Sean Pavone

The third Rust Belt city to make the top ten, Pittsburgh, Pennsylvania, is ranked ninth overall for price-to-rent ratio (12).26) and third overall (6276) in terms of estimated annual cash flow.

Steel City may also appeal to real estate investors due to its affordable housing. The median home value in 2021 was only 149200, which was the 14th lowest in our study.

Nashville, Tennessee

Nashville, Tennessee

Shutterstock user jdross75

Nashville, Tennessee, had the third-highest increase in median home values between 2015 and 2021, with a 55% increase.

Despite the fact that homes in the Nashville area are more expensive (287300 in 2021) than nearly 60% of all places in our study, real estate investors may be drawn to Music City and its environs by an average annual cash flow of nearly 4300 and median rents that increased by nearly 30% between 2015 and 2021.

Methodology and Data

Man analyzing data on a laptop

Shutterstock fizkes

We looked at data from all cities with populations of at least 200000 to rank the best places to buy and own long-term rental properties.That left us with a total of 120 people.After that, we compared them in these three categories.

  • Possibility of a profitable home investmentThe price-to-rent ratio (median home value divided by median annual rent), the percentage change in median home values between 2015 and 2021, and estimated annual cash flow (75th percentile of rent minus median housing costs) are all included in this index.The estimated annual cash flow was given a double weighting, making it the most important metric in our study.
  • Affordability of housingThe following three metrics make up this index: 2021 effective property tax rate (annual property taxes divided by median home value), 2021 median home value, and housing costs as a percentage of national median household income.
  • Rental possibilitiesThe percentage point difference between population growth and housing unit growth from 2015 to 2021, the unemployment rate in May 2021, and the four-year change in median rent between 2015 and 2021 make up this index.

All metrics come from the Census Bureau’s 2015 and 2021 1-year American Community Surveys, with the exception of unemployment data.The Bureau of Labor Statistics published the unemployment rate for May 2021.

The information you’ll find on this site is always objective.However, we may be compensated if you click on links within our stories.

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