Investing in Long Term Rentals 2021: Best Cities

As the world continues to recover from the Coronavirus pandemic, StorageCafe has done a deep dive into the top destinations for renters in 2020, which respectively comprise the best US cities for investing in long term rentals in 2021. But the results will surprise analysts and enthusiasts of real estate investing. Mostly because there is no mass exodus to suburban towns that many people expected.

Truly, some people are moving to suburbs for long term rentals, especially as a reaction to the emergence of COVID-19, which was more prevalent in more populated, bigger cities. So, people who sought long term rentals in the suburbs did so to reduce the risk of getting infected with the virus. Also, throw in the fact that most people could now work from home and didn’t need to be present at the office.

However, recent numbers suggest that such migrations are less likely now for people thinking of renting a house. For instance, a survey by PropertyNest showed that just 13.8% of respondents intended to move out of state or city into a new home. In fact, according to the StorageCafe report, the percentage of people moving from bigger cities to suburbs went down by 8% in 2020 compared to 2016 when it was 40%.

So, what might be the reason for these trends? Well, we’ve noticed quite a few things.

The income realities are different from city to city

Remote work comes with a lot of benefits for employees in most companies. But it also has its downsides. The best example of this is Facebook. The company, like many others, announced within the next five to ten years about half of its staff will work remotely. However, there’s a caveat. Pay will be commensurate with the employee’s city of residence.

This means a pay cut automatically for, say, an employee who is moving from a bigger, more expensive state like California to a smaller, more affordable, suburban real estate market like Idaho. For most people, this is a difficult decision despite the appeal that suburbs may hold. So, it is not surprising that a large percentage of city residents are choosing to remain in their city.

Big cities remain the primary markets

Ever since the pandemic started, it has been a choice of primary vs secondary market for renters. But at the end of the day, big cities hold a bulk of the opportunities out there, which is very appealing to millennials who make up the majority of the current renting population in America. So, despite the higher cost of living, people generally don’t mind staying back and instead focus on increasing their income till they can finally afford the lifestyle they want. For instance, according to the same StorageCafe research, only 25% of renters whose income falls between $100,000 and $2 million wanted to move into traditional rental properties in the suburbs.

And while most times, investing in the bigger real estate markets means investors have to pay more to purchase homes for rent, the demand for an apartment rental is usually higher in these locations. They end up being the best cities for value for money, especially when you know how to do your real estate market analysis.

In which cities are renters seeking houses for rent?

According to the data from Storage Cafe’s research, bigger urban metros are currently seeing the most inflow of people looking for monthly rentals. As such, they make up the top 20 destinations for long term rentals in 2021. This analysis is based on roughly 1.7 million applications that suggested relocation from one city to the other, whether inter-state or intra-state.

Top destinations for long term renters

In this article, we will also be leveraging real estate data from Mashvisor to show you the numbers for each of these cities so that you can know what to expect should you decide to invest in rental homes, whether it’s a condo or single family homes for sale.

First, which are the top 5 for buying rental property in 2021?

1. Los Angeles, CA

For many years now, the Los Angeles housing market, in specific, and the California real estate market, in general, have been a hot one and a seller’s market as of March 2021. Despite being the least affordable housing market on this list for apartments for sale, Los Angeles can be a profitable investment if you can afford the cash. This is especially because Los Angeles is a strong rental market with homeownership rates on a decline for years now. For context, one-third of LA residents who earn over $100,000 prefer traditional rentals rather than homeownership. This is also driving the demand for luxury apartments like condos.

Median Property Price: $1,190,958
Average Price per Square Foot: $928
Traditional Rental Income: $3,787
Traditional Cash on Cash Return: 2.00%
Price to Rent Ratio: 26

2. New York City, NY

Compared to many housing markets, the New York real estate market was greatly affected by the pandemic. However, it remains the dream city for many people in the U.S. as it has a diverse economy, including both the affluent and middle-class residents. So, there are lots of people looking for cheap houses for rent. Also worthy of note for real estate investors is the fact that there are more renters in New York than there are owners – a whopping 76.8% of local resident rent homes.

Median Property Price: $1,092,371
Average Price per Square Foot: $629
Traditional Rental Income: $2,666
Traditional Cash on Cash Return: 1.16%
Price to Rent Ratio: 34

3. Chicago, IL

This is again another strong market for long term rentals, where more than 50% of the population rents homes rather than owning. This is even more impressive when you consider the fact that it is the most populous city in the mid-western part of the U.S. As of 2018, it was the second-most visited city in the country. The metropolis also boasts of 32 of America’s Fortune 500 companies. All of these make the Chicago real estate market 2021 a worthy investment destination for month to month rentals.

Median Property Price: $479,347
Average Price per Square Foot: $349
Traditional Rental Income: $2,046
Traditional Cash on Cash Return: 1.55%
Price to Rent Ratio: 20

4. Phoenix, AZ

With the Phoenix real estate market, you’re looking at one of the highest-appreciating cities in the Arizona housing market. The population in Phoenix is also growing at a fast rate. According to the U.S. Census Bureau, Phoenix’s population has increased by almost 15% in the last 10 years, which places it above the national average. And as we all know, population growth is a determining factor for housing demand, for both outright purchases and long term rental properties.

Median Property Price: $523,779
Average Price per Square Foot: $268
Traditional Rental Income: $1,588
Traditional Cash on Cash Return: 2.08%
Price to Rent Ratio: 27

5. Houston, TX

Say hello to the 4th largest city in the U.S. and the number one market for job creation. A perfect combo for people looking to invest in real estate. Only New York has more Fortune 500 companies than Houston, while it is also one of the hot spots for the booming oil and gas industry in America. This means lots of people are moving in and asking, “Where can I find long term rentals near me?”

Median Property Price: $427,998
Average Price per Square Foot: $192
Traditional Rental Income: $1,849
Traditional Cash on Cash Return: 2.58%
Price to Rent Ratio: 19

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Which cities complete the top 20 destinations for long term rentals?

A common trend with the next 15 destinations in the list of the best US cities for long term rental properties is the presence of more locations within the Texas housing market than in any other state. That includes the Austin, San Antonio, Fort Worth, Arlington, and Dallas housing market. For investors, this may mean that Texas has the most opportunities for long term rentals investment, that is – month to month apartments, than any other state in the country since more renters are moving there.

6. San Diego, CA

Median Property Price: $890,992
Average Price per Square Foot: $595
Traditional Rental Income: $2,737
Traditional Cash on Cash Return: 1.74%
Price to Rent Ratio: 27

7. Dallas, TX

Median Property Price: $493,041
Average Price per Square Foot: $233
Traditional Rental Income: $1,910
Traditional Cash on Cash Return: 1.90%
Price to Rent Ratio: 22

8. Philadelphia, PA

Median Property Price: $405,639
Average Price per Square Foot: $267
Traditional Rental Income: $1,545
Traditional Cash on Cash Return: 3.10%
Price to Rent Ratio: 22

9. Denver, CO

Median Property Price: $519,660
Average Price per Square Foot: $350
Traditional Rental Income: $1,872
Traditional Cash on Cash Return: 2.38%
Price to Rent Ratio: 23

10. Charlotte, NC

Median Property Price: $499,199
Average Price per Square Foot: $250
Traditional Rental Income: $1,765
Traditional Cash on Cash Return: 2.16%
Price to Rent Ratio: 24

11. Austin, TX

Median Property Price: $733,314
Average Price per Square Foot: $349
Traditional Rental Income: $2,005
Traditional Cash on Cash Return: 0.95%
Price to Rent Ratio: 30

12. San Antonio, TX

Median Property Price: $311,446
Average Price per Square Foot: $307
Traditional Rental Income: $1,447
Traditional Cash on Cash Return: 2.02%
Price to Rent Ratio: 18

13. Fort Worth, TX

Median Property Price: $352,512
Average Price per Square Foot: $169
Traditional Rental Income: $1,652
Traditional Cash on Cash Return: 2.50%
Price to Rent Ratio: 18

14. Arlington, TX

Median Property Price: $320,306
Average Price per Square Foot: $156
Traditional Rental Income: $1,568
Traditional Cash on Cash Return: 2.58%
Price to Rent Ratio: 17

15. Milwaukee, WI

Median Property Price: $243,193
Average Price per Square Foot: $158
Traditional Rental Income: $1,163
Traditional Cash on Cash Return: 2.85%
Price to Rent Ratio: 17

16. Columbus, OH

Median Property Price: $234,893
Average Price per Square Foot: $119
Traditional Rental Income: $1,006
Traditional Cash on Cash Return: 3.01%
Price to Rent Ratio: 19

17. Atlanta, GA

Median Property Price: $511,673
Average Price per Square Foot: $290
Traditional Rental Income: $2,154
Traditional Cash on Cash Return: 2.68%
Price to Rent Ratio: 20

18. Oklahoma City, OK

Median Property Price: $213,222
Average Price per Square Foot: $135
Traditional Rental Income: $1,050
Traditional Cash on Cash Return: 4.50%
Price to Rent Ratio: N/A

19. Seattle, WA

Median Property Price: $736,745
Average Price per Square Foot: $551
Traditional Rental Income: $2,403
Traditional Cash on Cash Return: 1.99%
Price to Rent Ratio: 26

20. Mesa, AZ

Median Property Price: $408,673
Average Price per Square Foot: $223
Traditional Rental Income: $1,495
Traditional Cash on Cash Return: 2.55%
Price to Rent Ratio: 23

Finding the most profitable properties for long term rentals

Now that you know the best cities with the most renter interest for traditional rentals, the next thing to do will be to find the best places to invest in real estate based on your specific budget and preferences. And you can’t achieve that through mere hearsay or solely relying on rental websites. This is why tools like Mashvisor exist to help you analyze the best long term rentals as well as the top short term rentals for investment across different locations in the U.S., based on key metrics like average rental income, cash on cash return, and cap rate.

To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.

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20 Best US Cities for Investing in Long Term Rentals in 2021: Where Renters Are Moving