Top Locations15 Cities with the Lowest Property Price to Rent Ratio by Eman Hamed December 20, 2018February 20, 2019 by Eman Hamed December 20, 2018February 20, 2019To make wise investment decisions, real estate investors look at different factors in the housing market where they want to invest. After all, it’s no secret that the location is a major criterion that affects how investment properties perform in terms of ROI. Arguably the most important factor to consider in any location is the price to rent ratio. This is a simple metric that calculates the ratio of house prices to annual rental rates, which allows you to decide which option gives better financial rewards: buying or renting a property. It ranges between1 – 15 (low) means it’s better to buy16 – 20 (relatively high) means it’s better to rent21 or more (high) means it’s much better to rentBy looking at the price to rent ratio, real estate investors can determine whether or not buying a rental property in a housing market is a good investment decision. Now, you might be wondering “What is the best price to rent ratio for investors to stand by for a real estate investment?” Opinions vary. Some argue that the best places to invest in real estate are markets with a high price to rent ratio because demand for rental properties will be high.Related: 10 Best Places to Invest in Real Estate in 2019However, that is not necessarily an accurate assumption. In fact, many real estate investors would consider buying an investment property only in housing markets with the lowest price to rent ratios, and here’s why.Why Invest in Cities with Low Price to Rent RatioThe first and most obvious reason to invest in markets with a low price to rent ratio is the lower property prices. Financing is a big concern for beginner property investors, and many of them don’t have a large amount of capital for buying an investment property in cash. Therefore, the lower prices in these markets present the best real estate investment opportunities.Moreover, data from Mashvisor’s predictive analytics shows that investment properties in these markets reap high rental income. This is another reason why low price to rent ratio is favorable for buying real estate, especially for cash flow property investors. The list of the cities we provide below proves it.To learn more about Mashvisor and how we’ll help you make faster and smarter real estate investment decisions, click here.Related: The Use of Predictive Analytics in Real Estate InvestingWhat About Markets with High Price to Rent Ratio?As mentioned, just because markets with a high price to rent ratio have high demand, that doesn’t always make them the best places to buy rental properties. First, property prices in such locations can be crazy expensive! Take a look at San Francisco which has a price to rent ratio of 28. The median property price in the city is $1,564,111 – not many real estate investors have the finances for such a huge investment, making it very difficult to enter the real estate market.Second, while rental rates in such markets are higher, they don’t always generate enough rental income to justify the investment. Going back to our example, the average rental income in San Francisco is $4,627 and, according to Mashvisor’s Investment Property Calculator, it’ll only leave you with a cash on cash return of 1%. Thus, investing in locations with a high price to rent ratio is a good option if you’re investing for appreciation, not cash flow.Finally, it’s important to note that the price to rent ratio doesn’t indicate anything about absolute affordability – it only gives a relative breakdown for a city between renting and buying. It doesn’t tell you anything about the market’s conditions, whether it’s a seller’s market or buyer’s market, or rental expenses. In addition, it’s only one metric used when considering where to invest. Property investors must remember to calculate the cap rate, NOI, cash on cash return, and overall ROI for real estate investments.Related: What Are the Most Important Metrics in Real Estate Investment Property Analysis?Lowest Price to Rent Ratio by CityIf you’re convinced about investing in a real estate market with a low price to rent ratio, these 15 cities are our top picks for you. In all the following cities, you can find investment properties for lower prices, high rents, and a pretty good cash on cash return based on data provided by Mashvisor’s Investment Property Calculator.To find similar data for your city and neighborhood of choice, start out your 14-day free trial with Mashvisor now!Camden, NJMedian Property Price: $101,550Price Per Sq/Ft: $75Rental Income: $1,241Price-to-Rent Ratio: 7Cash on Cash Return: 5%Trenton, NJMedian Property Price: $140,947Price Per Sq/Ft: $103Rental Income: $1,510Price-to-Rent Ratio: 8Cash on Cash Return: 4%Sinton, TXMedian Property Price: $128,775Price Per Sq/Ft: $87Rental Income: $1,126Price-to-Rent Ratio: 9Cash on Cash Return: 4%Waterloo, IAMedian Property Price: $132,088Price Per Sq/Ft: $86Rental Income: $1,144Price-to-Rent Ratio: 10Cash on Cash Return: 4%Davenport, IAMedian Property Price: $147,815Price Per Sq/Ft: $111Rental Income: $1,271Price-to-Rent Ratio: 10Cash on Cash Return: 4%Wareham, MAMedian Property Price: $343,167Price Per Sq/Ft: $218Rental Income: $2,777Price-to-Rent Ratio: 10Cash on Cash Return: 4%Quincy, CAMedian Property Price: $289,033Price Per Sq/Ft: $170Rental Income: $2,321Price-to-Rent Ratio: 10Cash on Cash Return: 3%Marion, INMedian Property Price: $96,315Price Per Sq/Ft: $63Rental Income: $783Price-to-Rent Ratio: 10Cash on Cash Return: 3%Dayton, OHMedian Property Price: $106,669Price Per Sq/Ft: $77Rental Income: $871Price-to-Rent Ratio: 10Cash on Cash Return: 3%Wynnewood, PAMedian Property Price: $257,737Price Per Sq/Ft: $164Rental Income: $2,004Price-to-Rent Ratio: 11Cash on Cash Return: 4%Cedar Rapids, IAMedian Property Price: $151,845Price Per Sq/Ft: $99Rental Income: $1,178Price-to-Rent Ratio: 11Cash on Cash Return: 3%Saint Cloud, MNMedian Property Price: $188,459Price Per Sq/Ft: $109Rental Income: $1,299Price-to-Rent Ratio: 12Cash on Cash Return: 3%Baltimore, MDMedian Property Price: $233,291Price Per Sq/Ft: $361Rental Income: $1,582Price-to-Rent Ratio: 12Cash on Cash Return: 3%Lancaster, SCMedian Property Price: $187,221Price Per Sq/Ft: $98Rental Income: $1,192Price-to-Rent Ratio: 13Cash on Cash Return: 4%Santa Rosa, CAMedian Property Price: $675,598Price Per Sq/Ft: $374Rental Income: $4,177Price-to-Rent Ratio: 13Cash on Cash Return: 4%Click here to start looking for and analyzing the best investment properties in your city and neighborhood of choice.The Bottom Line Real estate investors need to do their due diligence before buying a rental property in any location. Among the metrics to account for is the price to rent ratio. While some suggest investing in cities with a ratio higher than 16, cities with the lowest price to rent ratio are more favorable for beginner property investors. In these markets, you can buy for a lower price and charge high rents to generate positive cash flow. Start Your Investment Property Search! START FREE TRIAL Affordable MarketsBaltimore MDCamden NJPrice to Rent RatioSanta Rosa CATrenton NJ 0FacebookTwitterGoogle +PinterestLinkedin Eman HamedEman is a Content Writer at Mashvisor. With a focus on market reports, she enjoys researching the state of the real estate market in different cities across the US. Eman also writes about trends, forecasts, and tips for beginner investors to gain the confidence and knowledge they need to make wise decisions. Previous Post Will 2019 Be the Year to Invest in the Phoenix Housing Market? 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