As a real estate investor, you should search for investment potential in all parts of the US housing market, not just the major metros. Today, we’re talking specifically about some of the Rust Belt cities of the Midwest real estate market which are making a comeback.
What Is the Rust Belt?
The “Rust Belt” refers to the Northern region in the United States which stretches from New York through the Midwest. It’s mainly made up of states near the Great Lakes. The Rust Belt cities got their name because they were once dominated by the coal, steel, and manufacturing industry. With the industrial decline, these raw materials were left to rust, hence the name ‘Rust Belt Cities’.
Different parts of the nation obviously go through different economic cycles. And even though the major industries of the Rust Belt cities have died down as a result of de-industrialization, we’re slowly seeing some markets emerge with some serious housing market potential. Recently, a major driving force drawing people back to the cities in the Rust Belt is affordability. So this, in addition to a couple of other factors, has really influenced activity in the real estate investment markets in this region.
Best Rust Belt Cities for Real Estate Investment
Here are some of the Rust Belt cities real estate investors should consider:
1) Gary, IN
Choosing where to invest in real estate can depend on a number of factors. When looking at Midwest real estate, the Indiana real estate market is a strong contender. Gary is a city in Lake County, Indiana with a population of 76,000 people and it’s only 25 miles away from Chicago, Illinois. Mashvisor’s investment property calculator has analyzed rental property investment performance in Gary. Let’s take a look at the data:
- Median Property Price: $136,233
- Price per Square Foot: $73
- Average Days on Market: 52
- Monthly Traditional Rental Income: $1,016
- Traditional Cash on Cash Return: 3.8%
- Monthly Airbnb Rental Income: $2,465
- Airbnb Cash on Cash Return: 7.8%
- Airbnb Occupancy Rate: 45%
There are a lot of positive projections for a Gary real estate investment. The affordable price point, as well as the fact that Gary homes for sale only stay on the market for less than two months, are signs of a strong local housing market. Now let’s discuss the thing that’s really impressive about this Rust Belt city- the return on investment. Both rental strategies generate really good levels of rental income considering the cost of the property. Are vacation rentals a good investment in Gary, IN? Based on the data, yes they are. But we need to also consider the law. To date, there aren’t any short-term rental regulations set in place for Airbnb Gary. And the State of Indiana actually passed a law which limits the ability of cities and towns to restrict short-term rentals. A real estate investor should consult with local officials before setting up an Airbnb rental property business to ensure compliance with the law.
2) Pittsburgh, PA
The Pittsburgh real estate market is one of the hottest markets among the Rust Belt cities. It’s got a metro population of over 2.4 million people and is called the “The Steel City” because of its former steel manufacturing base. Recently, it’s gained some extra attention from buyers as neighborhoods have been transformed. We’re seeing a resulting strong return on investment and a lot of positive cash flow properties in the area. Check out our stats on Pittsburgh investment property:
- Median Property Price: $250,721
- Price per Square Foot: $108
- Average Days on Market: 77
- Monthly Traditional Rental Income: $1,235
- Traditional Cash on Cash Return: 2.6%
- Monthly Airbnb Rental Income: $2,151
- Airbnb Cash on Cash Return: 6.2%
- Airbnb Occupancy Rate: 55%
The Pittsburgh real estate market is definitely one of the Rust Belt cities on the rise. The city’s ongoing transformation is really seen in how its housing market is performing. We’re seeing affordability and cash flow- a winning combo for any real estate investment. This is looking more and more like a strong real estate market for long-term opportunities. When it comes to Airbnb restriction, the State of Pennsylvania doesn’t directly prohibit short-term rental properties. There just seems to be some zoning regulations that you’ll need to abide by depending on the local ordinances.
3) Buffalo, NY
Although Buffalo house prices were in the league as some of the fastest rising in the nation this year, the Buffalo real estate market is still considered to be one of the most affordable real estate markets- even in regards to the Rust Belt cities. The level of real estate appreciation Buffalo homes have experienced is indicative of healthy market activity. According to Zillow, the median home value of Buffalo real estate has increased by 8.9 percent over the past 12 months. Take a look at Mashvisor’s data:
- Median Property Price: $190,506
- Price per Square Foot: $100
- Average Days on Market: 51
- Monthly Traditional Rental Income: $1,018
- Traditional Cash on Cash Return: 1.9%
- Monthly Airbnb Rental Income: $2,257
- Airbnb Cash on Cash Return: 7.6%
- Airbnb Occupancy Rate: 59%
The main factor applying upward pressure on prices of Buffalo houses for sale was the level of buyer demand in the real estate market. Demand was too high for supply to catch up and that led to a 6 percent year-over-year increase in the median sales price. Since then, however, there has been a drop in the pressure, making it easier for real estate investors to get a good deal. But if you’re planning on buying an Airbnb investment property, keep an eye out for the new bill which was proposed earlier this year. Following in the footsteps of the town of Amherst, hosts will have to start registering their short-term rentals with the city of Buffalo. Investor-owned Airbnb rental properties, which are houses used exclusively for short-term renting, will have to pay an initial $500 fee.
4) Canton, OH
The next Rust Belt city on our list of the best places to invest in real estate is the Canton real estate market. It isn’t one of the biggest Ohio cities, but it has been making a name for itself recently as increased competition and tight inventory make it a hot seller’s market. Let’s take a look at why buyer demand is so high for Rust Belt real estate in Canton, OH:
- Median Property Price: $171,106
- Price per Square Foot: $91
- Average Days on Market: 115
- Monthly Traditional Rental Income: $925
- Traditional Cash on Cash Return: 1.2%
- Monthly Airbnb Rental Income: $2,656
- Airbnb Cash on Cash Return: 8.7%
- Airbnb Occupancy Rate: 66%
Real estate investors will find good cash on cash return, high Airbnb occupancy rate, and affordable property in the city. Clearly, it’s one of the best cities for Airbnb investment. And in addition to our data reflecting the strong rate of return on a rental property in Canton, there are other signs of a strong rental market there. For example, 54 percent of housing there is rented not owned, meaning there’s a high traditional occupancy rate as well. Both real estate strategies can be profitable here. In regards to Airbnb Canton, however, there are some stricter regulations. An ordinance passed last year makes it illegal to operate Canton rental properties as short-term rentals unless you’re in an area zoned for multi-family use and have a conditional use permit.
So of the Rust Belt cities, these are a couple of the best cities for real estate investment. If you were wondering where to buy investment property in this region of the country, those are our top picks.
Do you have a free Mashvisor account? Use our Property Finder to find lucrative investment properties in the Rust Belt cities that match your criteria in a matter of minutes! What is Mashvisor? To find out details on how our real estate investment tools work and how Mashvisor removes the need for a real estate market analysis, read our FAQs.