American job markets have taken a hit since the emergence of the coronavirus in 2020. While things are returning to
normal, there is still more required for the economy to reach stability. The unemployment rate currently stands at 6.1%, according to the U.S. Bureau of Labor Statistics. This is much better than the unemployment rate as of April 2020 when it rose to 14.7%.
However, some cities are seeing exponential growth in terms of employment opportunities. For people looking for where to invest in real estate in 2021, these are some of the best investments right now. If you’re wondering why top job markets make great locations for real estate investment, keep reading.
Why Top Job Markets Make Great Investment Destinations
Job markets play an important role in the success of any real estate market, from both a buyer’s and a seller’s point of view. Cities with low unemployment rates often see a larger influx of people moving in, especially from locations with higher unemployment rates.
Here are more reasons why the best job markets are also great locations for real estate investing:
Low unemployment rates drive rental demand
Cities with better job prospects offer an attraction to people looking for greener pastures or a way to increase their earning power. According to the U.S. Census Bureau in 2019, 10.3% of the 32 million Americans who moved the previous year did so because of a new job. For the welcoming real estate market, this means more demand for homes, whether it’s for ownership or rent.
An example of this is the Williston, ND housing market in 2012. People started to move to the area after an employment boom in the energy industry in North Dakota. This caused an increase in Williston’s population, almost doubling from 14,176 to about 27,000 people in a space of 5 years.
As someone looking for where to invest in real estate, this is the kind of situation you want to be in — a location where the demand for rent is getting higher as more people will be looking for traditional rentals when they move to a new place. This will allow you to increase your monthly rental rate without causing a high vacancy rate.
A strong job market brings consistent tenants
Due to the Covid-19 pandemic, many tenants could not keep paying their rent. Many of these were due to unexpected job losses, especially in areas with weak economies. According to CNBC, as of January 2021, roughly 20% of renters in America were behind on their rent. Add this to the eviction moratoriums across the US housing market which aimed to protect vulnerable renters against the negative economic impact of the pandemic.
This is not good news for landlords or real estate investors, some of who survive on these payments. As a result, many investors prefer cities with strong job markets when looking for the best places to buy rental property. Also, some of these cities turn out to have really high income ranges, which can easily exceed the national average. So, this gives investors confidence that since their tenants are not just employed but also well paid, they are more likely to never renegade on rent. Hence, the idea that a strong job market is the best place to invest money in long term rentals.
More jobs may mean higher rent
Over the years, job growth has been a good indicator of the future performance of rental property investment. This is evident in some markets where rent has shot up by 5% to 10% as a result of the booming job market, including cities like the San Jose, Nashville, Austin, and San Francisco real estate market.
Generally speaking, if you’re looking for where to invest in real estate with a great chance of real estate appreciation in 2021, you should consider locations with strong job markets. This is because job growth has a direct correlation with other important factors like population and rent paid on time and in full on traditional rental properties.
Learn More: Investing in a Rental Property? The 10 Real Estate Tips You Need in 2021
Where to Invest In Real Estate: 10 Best Job Markets in 2021
Now that we have established the importance of job markets in real estate investing, the next step is to show you the top locations across the nation. WalletHub has recently published a report on the best cities for jobs in the U.S. The survey was carried out across 182 locations, including the 150 most populated cities in the country. Two major factors were considered in the report: the job market and socioeconomics. Over here at Mashvisor, we think these locations make for some of the best places to invest in real estate in 2021, especially for long term rental properties. Thus, we provide you not only with the reasons why each of these U.S. cities is a great location for buying rental property but also with some of our real estate data to show you what return on investment to expect in each of them.
1. South Burlington, Vermont
South Burlington is one of the most expensive places in Vermont but also the most appealing one for white-collar jobs. According to NeighborhoodScout, 90% of the workforce in South Burlington works in white-collar jobs, which is above the national average. This makes it an attractive destination for professionals.
Also, South Burlington’s appreciation rate ranks in the top 50% across the country, at an annual average of 3.01%. While investment potential in South Burlington differs per neighborhood, the average rates shown below give you an idea of what a real estate investor can generally expect.
- Median Property Price: $430,000
- Average Price per Square Foot: $223
- Average Traditional Rental Income: $1,581
- Average Traditional Cash on Cash Return: 2.00%
- Price to Rent Ratio: N/A
2. Columbia, Maryland
According to Niche.com, Columbia is one of the 10 best places to live in the U.S. This is largely due to its strong job market. But people don’t just come to Columbia, Maryland for employment opportunities as it is also filled with attractions and activities, especially for people looking to start a family.
- Median Property Price: $355,000
- Average Price per Square Foot: $208
- Average Rental Income: $1,741
- Average Cash on Cash Return: 3.87%
- Price to Rent Ratio: N/A
3. Virginia Beach, Virginia
One interesting fact about Virginia Beach is that over 50% of its residents are millennials and baby boomers, which makes it an ideal location for rental investors looking for where to invest in real estate. According to WalletHub, Virginia Beach is a top 25 market for renters due to its affordability and quality of life.
- Median Property Price: $441,011
- Average Price per Square Foot: $230
- Average Rental Income: $1,617
- Average Cash on Cash Return: 2.57%
- Price to Rent Ratio: 23
4. Salt Lake City, Utah
The Salt Lake City real estate market is especially a good place for investing in rental properties as more people are looking to rent houses due to the housing supply shortage. As a result of this, Salt Lake City has one of the fastest growing rents in the U.S. housing market. But the best thing from an investor’s point of view is the presence of a population that can afford it.
- Median Property Price: $556,230
- Average Price per Square Foot: $485
- Average Rental Income: $1,427
- Average Cash on Cash Return: 1.03%
- Price to Rent Ratio: 32
5. Boise, Idaho
A lot of things make the Boise housing market appealing to investors and renters alike, coupled with its strong job market. For instance, it is ranked as number 4 in terms of low property taxes, making it a hot spot for business owners looking for tax incentives. There’s also a migration trend into the city related to the Coronavirus, and this trend is here to stay as a result of the quality of jobs available, which will, in turn, drive the prices of rent and value of homes.
- Median Property Price: $732,586
- Average Price per Square Foot: $329
- Average Rental Income: $1,389
- Average Cash on Cash Return: 0.93%
- Price to Rent Ratio: 44
6. Scottsdale, Arizona
In 2014, Scottsdale was voted the top city for raising a family in the nation. Together with its strong job market, it is also safe and filled with outdoor activities and nearby travel destinations. The safety of a location should be one of the factors to consider when looking for investment properties for sale, especially if you’re considering targeting families.
- Median Property Price: $1,977,955
- Average Price per Square Foot: $395
- Average Rental Income: $3,356
- Average Cash on Cash Return: 2.72%
- Price to Rent Ratio: 27
Learn More: Arizona Housing Market Predictions for 2021
7. Chesapeake, Virginia
Chesapeake is the third-largest city in the State of Virginia and is one of seven cities that make up Virginia’s Hampton Roads section. The real estate market there has an appreciation rate of 5.57%, which is just a little above the national average. Based on real estate data from Mashvisor, it is also one of the cheap real estate investments right now, with an average property price of $330,395. It is also the most profitable location for traditional rental properties on this list of the 10 best job markets 2021.
- Median Property Price: $330,395
- Average Price per Square Foot: $173
- Average Rental Income: $1,658
- Average Cash on Cash Return: 3.59%
- Price to Rent Ratio: 17
8. Seattle, Washington
The Seattle real estate market is the largest in Washington and in the Pacific Northwest, catering to about 4 million people in the metropolitan area. It also has the fastest growing population in the U.S. A lot of this growth can be attributed to the city’s strong tech ecosystem which includes Amazon, F5, and Boeing. As a result, investors are increasingly considering Seattle when buying rental property, whether it’s single family homes or other types of traditional rental properties.
- Median Property Price: $736,745
- Average Price per Square Foot: $551
- Average Rental Income: $2,403
- Average Cash on Cash Return: 1.99%
- Price to Rent Ratio: 26
9. Colorado Springs, Colorado
Many people consider Colorado Springs a less expensive alternative to the Denver real estate market. It is also known for being a strong rental market, thanks to the large student population in schools like the University of Colorado Springs, Colorado College, Remington College, and so on.
- Median Property Price: $495,842
- Average Price per Square Foot: $216
- Average Rental Income: $1,665
- Average Cash on Cash Return: 2.61%
- Price to Rent Ratio: 25
Learn More: Colorado Housing Market Forecast for 2021
10. Plano, Texas
Plano has seen some of the highest home appreciation rates in the last 10 years at 73.79%. This puts it in the top 10% across the country for real estate appreciation as well as one of the fastest appreciating cities in the Texas housing market. This may be a good indicator if you’re looking for where to invest in real estate in 2021 with the goal of making money not only in the short term but also in the long run.
- Median Property Price: $415,000
- Average Price per Square Foot: $192
- Average Rental Income: $1,592
- Average Cash on Cash Return: 2.06%
- Price to Rent Ratio: N/A
For investors asking, “Where is the best place to invest in real estate?” or generally just wanting to learn how to invest in real estate, job markets like the ones above with really good employment opportunities can be a great place to start real estate investing for beginners. Becoming a landlord in a city like those listed above generally means dealing with good tenants, not having late rent payments, being able to charge a good rental rate, and running a profitable real estate investing business.
Looking for Where to Invest in Real Estate in 2021
While booming job markets offer a great opportunity for investing in rental properties, the profit potential for each neighborhood is different. To find the best locations for where to invest in real estate, you need to get full access to the important numbers. This includes details like rental income, rental expenses, occupancy rate, cash flow, cash on cash return, and cap rate. Mashvisor’s investment property calculator is the leading tool for real estate market analysis and unlocking key data to help you make the best investment decisions.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.