Table of Contents
- What Is ROI in Real Estate?
- Top 10 Locations With the Highest ROI
- Mashvisor’s Investment Tools
- Summing Up
The popularity of specific locations across the US market is bound to change, and real estate investors should be aware and keep track of the fluctuations.
Return on investment stands for a financial metric that is often used in investment planning. It essentially indicates whether the investor will generate profit from their strategy. Naturally, real estate investors are on the lookout for locations with the highest real estate ROI.
How to know where to invest in 2022, though?
It comes down to following performance statistics of the potentially profitable cities in the US. It’s sometimes easier said than done—but we’ll get to that, as well.
If you are set on investing in real estate in 2022, we’ve identified the top 10 US locations you should have a look at this year, complete with all the key metrics that must be taken into consideration when investing in real estate.
With that in mind, you might want to scroll down for the latest updates on the US real estate market.
What Is ROI in Real Estate?
First and foremost, we would like to focus on the definition of ROI in investing.
Return on investment (ROI) is a type of financial metric—a formula—which acts as a helpful tool for investors when it comes to their strategic planning. In simple terms, it helps real estate investor plan for and predict the “financial outcome” of their investment.
As noted, by focusing on ROI real estate, the investor can view their potential profit margin if they choose to invest in real estate by buying property and renting it out or flipping houses—depending on their preferred strategy. With that in mind, ROI is a metric that is of crucial value to the investor—regardless of their previous experience in real estate.
Return on investment is realized in percentages, and it is closely related to Return on Assets (ROA) and Return on Equity (ROE). However, our focus today is mainly on helping investors maximize their ROI. So, we’ll leave the discussion about ROA and ROE for another time.
The Formula for Calculating ROI
Given our previous points, the next step will be using the real estate ROI formula in practice and seeing how it is calculated:
To calculate your return on investment, you essentially need to divide the amount of money you’ve earned from the investment—commonly known as your net profit—by the cost of the investment and then multiply that by a 100.
Here’s the formula outlined:
ROI = (Net Profit / Cost of Investment) x 100
It’s worth noting that there’s another way of calculating the ROI:
ROI = (Present Value – Cost of Investment / Cost of Investment) x 100
Now that you get the foundations of the formula, how do you use it?
The ROI calculator real estate is used by investors in order to evaluate their portfolios—or it can be applied to precisely assess different types of expenditures.
What’s also essential for investors to know is that the result of ROI is only as accurate as the numbers you put into the calculation. The return on investment formula alone can’t eliminate or take into account risk and uncertainty. So, if you’re using the real estate ROI for assessing your future investments, you will need to take into account the risk factor separately. You need not be too pessimistic or too optimistic here.
Is there an average ROI in real estate?
Bearing in mind the changing climate of the real estate market—especially a large-scale one like the US—there is no general overall average for ROI. Contrarily, it’s more about the nature of your investment property, be it rentals, luxury houses, or something else.
Related: How To Maximize Return on Investment When Buying a Rental Property
Pre-Calculation Thoughts
Before you go forward with the real estate ROI calculator, be sure to take a minute to think it through and ask yourself the following questions:
- How much risk am I able to take on at the moment?
- Is my financial situation strong enough? What will I do if I lose money?
- How much profit am I expecting from this investment?
- What else can I do with the money?
What Places in the US Offer the Highest ROI Real Estate?
It’s time to cut to the chase—and list down the ten most profitable locations for traditional and Airbnb real estate investments. Here’s an updated list with 2022 hotspots for investors based on Mashvisor’s data as of August 2022.
Top 5 Cities for Traditional Rentals
The following are the top 5 cities for real estate investment, arranged in descending order in terms of traditional cash on cash return:
1. Camden, NJ
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Median Property Price: $185,611
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Average Price per Square Foot: $138
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Days on Market: 67
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Number of Traditional Listings: 159
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Monthly Traditional Rental Income: $1,314
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Traditional Cash on Cash Return: 6.54%
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Traditional Cap Rate: 6.96%
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Price to Rent Ratio: 12
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Walk Score: 62
Related: How to Easily Find Rental Properties for Sale in New Jersey
2. Chester, PA
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Median Property Price: $204,580
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Average Price per Square Foot: $161
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Days on Market: 72
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Number of Traditional Listings: 192
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Monthly Traditional Rental Income: $1,458
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Traditional Cash on Cash Return: 5.50%
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Traditional Cap Rate: 5.72%
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Price to Rent Ratio: 12
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Walk Score: 66
3. Miami Gardens, FL
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Median Property Price: $307,519
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Average Price per Square Foot: $253
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Days on Market: 83
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Number of Traditional Listings: 243
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Monthly Traditional Rental Income: $1,955
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Traditional Cash on Cash Return: 4.67%
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Traditional Cap Rate: 4.90%
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Price to Rent Ratio: 13
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Walk Score: 30
4. Springfield, MA
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Median Property Price: $207,408
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Average Price per Square Foot: $165
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Days on Market: 150
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Number of Traditional Listings: 121
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Monthly Traditional Rental Income: $1,433
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Traditional Cash on Cash Return: 4.62%
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Traditional Cap Rate: 4.83%
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Price to Rent Ratio: 12
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Walk Score: 55
5. Hialeah, FL
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Median Property Price: $358,552
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Average Price per Square Foot: $287
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Days on Market: 107
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Number of Traditional Listings: 557
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Monthly Traditional Rental Income: $2,252
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Traditional Cash on Cash Return: 4.46%
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Traditional Cap Rate: 4.58%
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Price to Rent Ratio: 13
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Walk Score: 73
Top 5 Cities for Airbnb Rentals
Listed below are the top 5 cities for investing in Airbnb rentals, arranged from the highest to the lowest Airbnb cash on cash return:
1. Delhi Twp, OH
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Median Property Price: $235,156
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Average Price per Square Foot: $148
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Days on Market: 27
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Number of Airbnb Listings: 129
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Monthly Airbnb Rental Income: $3,142
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Airbnb Cash on Cash Return: 8.09%
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Airbnb Cap Rate: 8.37%
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Airbnb Daily Rate: $115
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Walk Score: 57
2. Rio Grande, NJ
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Median Property Price: $318,900
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Average Price per Square Foot: $245
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Days on Market: 52
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Number of Airbnb Listings: 603
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Monthly Airbnb Rental Income: $3,965
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Airbnb Cash on Cash Return: 8.00%
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Airbnb Cap Rate: 8.21%
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Airbnb Daily Rate: $301
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Airbnb Occupancy Rate: 52%
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Walk Score: 52
Related: The Complete Guide to Buying a House in NJ
3. Geneva, OH
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Median Property Price: $253,996
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Average Price per Square Foot: $164
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Days on Market: 225
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Number of Airbnb Listings: 112
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Monthly Airbnb Rental Income: $3,129
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Airbnb Cash on Cash Return: 7.87%
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Airbnb Cap Rate: 8.18%
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Airbnb Daily Rate: $226
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Airbnb Occupancy Rate: 48%
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Walk Score: 66
4. Pleasantville, NJ
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Median Property Price: $218,639
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Average Price per Square Foot: $161
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Days on Market: 102
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Number of Airbnb Listings: 384
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Monthly Airbnb Rental Income: $3,089
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Airbnb Cash on Cash Return: 7.85%
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Airbnb Cap Rate: 8.15%
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Airbnb Daily Rate: $342
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Airbnb Occupancy Rate: 42%
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Walk Score: 82
5. Warr Acres, OK
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Median Property Price: $123,574
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Average Price per Square Foot: $90
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Days on Market: 36
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Number of Airbnb Listings: 368
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Monthly Airbnb Rental Income: $1,751
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Airbnb Cash on Cash Return: 7.68%
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Airbnb Cap Rate: 8.47%
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Airbnb Daily Rate: $111
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Airbnb Occupancy Rate: 55%
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Walk Score: 56
Mashvisor’s Investment Tools
Making the most out of your ROI real estate calculator—and investment—is ten times easier when you have Mashvisor’s investment tool at your disposal.
First and foremost, our real estate blog helps you stay up-to-date with what is currently trending in the real estate market, provides you with some additional knowledge on real estate, and shares tips from experts.
As for the more advanced tools, real estate investors can access Mashvisor’s Heatmap tool, which allows them to conduct thorough neighborhood research on the desired property. It is color-coded, showing the average values for listing price, traditional and Airbnb rental income, cash on cash return, etc.
Mashvisor’s Heatmap tool allows investors to conduct thorough neighborhood research on their desired property and obtain the average values for listing price, traditional and Airbnb rental income, cash on cash return, etc.
On a related note, our Property Finder helps investors search through investment properties faster and more accurately. You get the opportunity to explore multiple housing markets—all at the same time.
Summing Up
We’ve successfully gone through a list of locations where investors can achieve higher real estate ROI. Let’s just briefly go over the most crucial facts one more time.
Before deciding on a location, any investor should be armed with ROI knowledge and how and when to use the ROI formula. Even more so, we would recommend answering several vital questions before proceeding with the investment.
Once they’ve decided on the type of real estate they want to invest in, it’s time to go through the possible options—and decide which one suits their needs and budget.
Of course, Mashvisor’s Rental Property Calculator is there to help you pick the best place to invest in real estate for the highest real estate ROI.
To get access to the Rental Property Calculator and other Mashvisor tools, sign up for a 7-day free trial today, followed by 15% off from your quarterly or annual subscription.