When investing in real estate, it’s always a great idea to invest in areas with high cap rates. Cap rate, short for capitalization rate, is an important return on investment metric for rental properties. So, what US housing markets have high cap rate properties for sale? Today, we’ll be looking at one such market: the Pittsburgh real estate market. We’ll briefly discuss the success of traditional and Airbnb rental strategies in Pittsburgh. In addition, we’ll provide the data of the best Pittsburgh neighborhoods for each rental strategy.
Related: What Is Cap Rate & How to Calculate It – Infographic
4 Best Pittsburgh Neighborhoods for the Traditional Rental Strategy
To keep it brief, traditional rental properties have been successful in the Pittsburgh housing market for many reasons. For starters, there is a high demand from renters for traditional Pittsburgh income properties. This is best seen through the market’s traditional price-to-rent ratio, which, according to Mashvisor’s data, is very high:
- Traditional Price-to-Rent Ratio: 21
So, what does the price-to-rent ratio indicate? For the average resident, renting a Pittsburgh investment property is more affordable than buying one. With such high demand, it’s no surprise that traditional rentals are profitable in Pittsburgh neighborhoods:
- Traditional Rental Income: $1,164
- Traditional Cap Rate / Cash on Cash Return: 1.1%
However, it is important to note one thing about the cap rate for a real estate market. Since the previously mentioned percentage is the city’s average, it is lower than those of the best Pittsburgh neighborhoods. As a result, you’ll see much higher averages in Pittburgh’s best traditional neighborhoods. Speaking of which, here are the 4 best neighborhoods in Pittsburgh for traditional rentals, according to Mashvisor’s real estate heatmap:
Sheraden
- Median Property Price: $84,523
- Price per Square Foot: $35
- Price-to-Rent Ratio: 6
- Traditional Rental Income: $1,210
- Traditional Cap Rate / Cash on Cash Return: 7.4%
Home to over five thousand residents, Sheraden is one of Pittsburgh’s largest neighborhoods. Not only is it the best of the traditional Pittsburgh neighborhoods, but it is also the most affordable. Sheraden is in no shortage of traditional tenants. Many families and young professionals reside in the suburb. With its high traditional rental potential, many more will move in for years to come.
East Liberty
- Median Property Price: $259,933
- Price-to-Rent Ratio: 11
- Traditional Rental Income: $2,061
- Traditional Cap Rate / Cash on Cash Return: 3.8%
One of the best up and coming neighborhoods in Pittsburgh, and Pennsylvania as a whole, is East Liberty. With a median property price of $259,933, it is below the city median of $291,000. Even with relatively affordable house prices, East Liberty has high rental demand. About 83% of its residents live in traditional rentals. It is also among the top high cap rate neighborhoods in the city.
South Shore
- Median Property Price: $518,000
- Price-to-Rent Ratio: 30
- Traditional Rental Income: $1,431
- Traditional Cap Rate / Cash on Cash Return: 3.6%
A riverfront neighborhood, South Shore is one of the most expensive Pittsburgh neighborhoods with a median property price of over $500,000. However, it is one of the most lucrative. South Shore is also in very high demand, as emphasized by its price-to-rent ratio. As a result, 100% of its residents reside in rental properties. Home to Station Square, a popular shopping and entertainment complex, South Shore also has one of the best neighborhood economies in Pittsburgh.
Related: Job Market Growth and Its Effects on the US Housing Market
Central Lawrenceville
- Median Property Price: $175,000
- Price per Square Foot: $911
- Price-to-Rent Ratio: 12
- Traditional Rental Income: $1,230
- Traditional Cap Rate / Cash on Cash Return: 3.3%
In many ways, Central Lawrenceville is the quintessential example of the best Pittsburgh neighborhoods. In other words, it shares many features of the previously listed neighborhoods. Like Sheraden, it is relatively affordable and still profitable. It is also one of the best places to live in Pittsburgh and PA overall, just like East Liberty. Finally, Central Lawrenceville has a high percentage of renting residents, like South Shore, at 59%. Due to these factors, Central Lawrenceville is one of the best places to invest in Pittsburgh for a high cap rate.
4 Best Pittsburgh Neighborhoods for the Airbnb Rental Strategy
Clearly, the Pittsburgh real estate market is excellent when it comes to the cap rate for rental property. As you’ve seen, traditional Pittsburgh income properties are very lucrative. However, they pale in comparison with Airbnb Pittsburgh properties. Take a look at Mashvisor’s Airbnb Pittsburgh data to see why:
- Monthly Airbnb Rental Income: $2,635
- Average Airbnb Daily Rate: $97
- Airbnb Cap Rate / Cash on Cash Return: 4.6%
- Airbnb Occupancy Rate: 61%
These city averages are well-above their traditional counterparts. What’s even more impressive is that the 4 best Airbnb Pittsburgh neighborhoods are even higher than the city averages.
Related: Airbnb vs. Traditional Renting: Which Rental Strategy Yields Higher Rental Income?
Spring Garden
- Median Property Price: $58,900
- Monthly Airbnb Rental Income: $1,561
- Average Airbnb Daily Rate: $136
- Airbnb Cap Rate / Cash on Cash Return: 9.9%
- Airbnb Occupancy Rate: 48.4%
When buying rental property in Pittsburgh for Airbnb, Spring Garden is the best of the best. With a near 10% ROI average, it’s safe to say an Airbnb Pittsburgh real estate investment will be profitable in this area. Spring Garden’s house prices are also very cheap, beating out Sheraden’s median by almost $30,000. Property ownership is high in Spring Garden, at 80%. As a result, an Airbnb strategy works better than traditional investing.
Sheraden
- Median Property Price: $84,523
- Price per Square Foot: $35
- Monthly Airbnb Rental Income: $1,557
- Average Airbnb Daily Rate: $96
- Airbnb Cap Rate / Cash on Cash Return: 9.8%
- Airbnb Occupancy Rate: 50.9%
Sheraden makes another appearance on this list, this time as a top Airbnb location. With an average cap rate similar to Spring Garden’s, Sheraden Airbnb properties are money-making machines. Also, as mentioned previously, the neighborhood is among the most affordable in the Pittsburgh real estate market.
Mt Oliver
- Median Property Price: $69,999
- Monthly Airbnb Rental Income: $1,469
- Average Airbnb Daily Rate: $131
- Airbnb Cap Rate / Cash on Cash Return: 9.2%
- Airbnb Occupancy Rate: 42.7%
Another Pittsburgh neighborhood with a good cap rate for rental property is Mt Oliver. Like Spring Garden and Sheraden, Mt Oliver’s price tag immediately catches the eye. Of course, that isn’t the only thing notable about this neighborhood. With an average cap rate of 9.24%, a monthly rental income of $1,469, and a daily rate of $131, Mt Oliver offers a guaranteed Airbnb profit.
East Liberty
- Median Property Price: $259,933
- Monthly Airbnb Rental Income: $2,171
- Average Airbnb Daily Rate: $121
- Airbnb Cap Rate / Cash on Cash Return: 3.8%
- Airbnb Occupancy Rate: 55.3%
A tourist hotspot, East Liberty also deserves a spot on the best Pittsburgh neighborhoods list. The neighborhood is home to many visitor attractions, such as the Kelly Strayhorn Theater, Pittsburgh Glass Center, and the East Liberty Presbyterian Church. East Liberty’s tourism definitely pays off, especially when analyzing its cap rate and overall profitability.
Why You Need a Heatmap Analysis Tool to Succeed in Real Estate
When trying to figure out where to invest in Pittsburgh, or anywhere in the US real estate market, there’s only one tool you need. It’s also the one tool we used for gathering data for this blog: Mashvisor’s real estate heatmap. With a heatmap analysis tool, you can conduct a neighborhood analysis on any location in the US housing market. By doing so, you’ll learn where every profitable neighborhood is in a location and why they are profitable. Then, you can use Mashvisor’s investment property calculator to narrow down properties to the best cap rate investment property!
To start analyzing the Pittsburgh neighborhood map, CLICK HERE to start your FREE trial with Mashvisor’s heatmap!