If you’re looking to invest in real estate, the rents in these 5 cities are on the rise and likely to be a sound investment.
We calculated the 5 most in-demand cities for renters by looking at the cities where the average rent price increased at the highest rate between 2017 and 2018 using proprietary data from the Apartment Guide database.
We looked at the average rental rates of the top 100 cities in the market. For the purposes of our research, we considered only the entry rental rate. By “entry level rate”, we are referring to the lowest priced apartment in any given complex. Using the percentage change in rental rates from 2017 to 2018, we were able to determine the 5 most in-demand cities in the country. For real estate investors, these translate into the best places for buying an investment property in 2018.
Rental price increases can be caused by a variety of factors. In some cities, they may be part of the long come-back from housing markets that were decimated by the Great Recession. Demand in other cities may come from the rise of new industries or corporate offices. Still others may come from the development of major infrastructure or city planning projects in a given location.
The average entry level rental rate in Daytona Beach is up 8% from $864 in 2017 to $945 this year. In this, it falls squarely into the general trend of population growth in Florida’s cities. Daytona’s popularity as a tourist destination provides a secondary rental market for short-term rentals in addition to long term leases. A number of corporations are headquartered in Daytona Beach, including NASCAR, International Speedway Corporation, and the LPGA.
Chattanooga, TN used its city-wide gigabit broadband network to draw small tech companies and startups. This strategy worked remarkably well, and now the city is experiencing major economic and population growth. Numerous startups have moved to the city, creating a thriving tech scene. Chattanooga, a highly affordable metro area just a few years ago, is becoming a more expensive place for both renters and home buyers. The average entry level rental rate in 2017 was $771. So far this year, the average rate has gone up by $70 to $841, a 9% increase year over year.
3. Detroit, MI
In the Motor City, the 10% growth in average entry level rental rates is likely connected to its continuing recovery and revitalization since the Great Recession. The city went to great lengths to preserve its unique architectural heritage and encouraged large scale revitalization projects. Its low cost of living and unique cultural heritage have contributed to the significant population growth Detroit, Michigan has experienced over the past several years. With the growing population, there has been growing demand for rental housing. Average entry level rental rates have climbed to $823 up from $750 as demand for rental properties has increased.
In neighboring Indiana, Fort Wayne has seen demand for housing rise, as indicated by the 10% increase in average entry level rental rates. A little under a decade ago, Fort Wayne was hit hard by the Great Recession along with many other cities in the Rust Belt. In the intervening years, its economy has continued to grow in a diverse number of industries from defense to fashion design. The city has invested significantly in its redevelopment, particularly in downtown Fort Wayne. As the city has continued to pick up economic speed, the average entry level rental rate has kept pace, increasing from $685 to $752 monthly.
1. Reno, NV
At the top of the list, Reno, Nevada has seen tremendous growth over the past several years. Its location only 4 hours from Silicon Valley has likely contributed to its popularity. In the past several years, the economy in “The Biggest Little City in the World” has been expanding far beyond casinos and hotels. Tesla and Google have sent prices in East Sparks soaring, and the median home price in Reno and Sparks is now approaching levels last seen at the height of the housing bubble. Rental rates have increased as well. The average entry level rental rate in 2017 was $880. This year it’s gone up to $973, the largest year over year price increase of all cities in the top 100 markets at 11%. Reno does not have state income tax or property tax, so it’s a great option for anyone looking to invest.
So, if you are looking for a place where to invest in real estate in 2018, these are four markets that you want to consider.
This article has been contributed by our friends at Apartment Guide.