Searching for up-and-coming cities for your next buy and hold real estate investment?
Buy and hold has always been a favorite investment strategy for real estate investors simply because there are many perks that come with investing in buy and hold real estate. These include the steady stream of rental income, long-term benefits (appreciation), tax breaks, and protection from inflation. The key to succeeding with these investment properties is, of course, their location. So which are the up-and-coming cities in the US housing market for investment property in 2018?
Related: Buy and Hold Real Estate Is the Ultimate Investment Strategy: Here’s Why
How to Identify the Best Cities for Buy and Hold Real Estate
Before we start, I want to quickly mention the factors on which our list is based on. In the real estate industry, there are certain indicators or characteristics that property investors look for to say that a city is good for the buy and hold real estate investment strategy. These are:
1) Job Growth
This is probably the most important factor. If the city you’re looking at is not creating jobs, then don’t invest there! Job growth means a healthy economy, meaning a real estate investor can charge higher rents and tenants won’t have trouble paying. In addition, this factor is tied to the increase in population – cities with new job opportunities are those that attract new residents. So, look at the employment rate and projected job growth in the area and try to find investment properties to buy that are close to where new jobs are located.
2) Increase in Population
As we said, the increase in population comes as a result of job growth in the real estate market. This is an obvious indicator to invest in buy and hold real estate because when people move to a new place, they’ll be looking for places to live for the long term! Increasing population also means a larger pool of potential tenants, lower vacancy rates, and better performing rental properties. One important thing to understand is WHERE the increase is happening. Successful property investors follow their target tenant group and invest there.
3) New Buildings
Property investors should keep a close eye on new construction and buildings coming into the housing market. This is important because, with the increasing population, you want to be sure that the city can actually absorb these new residents. In other words, as demand for rental properties will increase, the supply of buy and hold real estate should be able to keep up. You also don’t want to invest where there are more units built than people coming into the housing market.
Furthermore, conduct a real estate market analysis and find out what types of properties the city is building (single-family, multi-family, etc.) and which rental property type is more in demand. Once you do that, use our property finder tool to search for and find the best properties in the city with the highest potential for a return on investment.
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Last, but not least, affordability is key to ensure picking the best city to buy and hold real estate. Housing affordability tells property investors they can raise rents. In locations where the economy is improving but buying a house is expensive, people will be fine with paying more in rent. Check the cost of living index and price-to-rent ratio in the city you’re investing in. These numbers will show you how affordable it is to buy a home vs rent one. Accordingly, they’ll tell you whether buying a rental property in a certain real estate market is a good investment decision or not.
These 4 factors guarantee that your investment property will generate good rental income and have good appreciation in the long-term future – which is the essence of the buy and hold real estate investment strategy.
Where to Invest in Buy and Hold Real Estate
After taking these indicators into consideration, doing a thorough research, and using Mashvisor’s investment property calculator, below is a list of the top 10 cities for buy and hold real estate investment – in no particular order.
The capital of Georgia is an economic center, transportation hub, and cultural heart of the Southeast. The Atlanta real estate market is consistently ranking high among the best cities for property investors to consider. Thanks to recent job growth in Atlanta, people are moving to the city in huge numbers!
- Median Property Price: $433,992
- Price Per Square Foot: $527.51
- Traditional Rental Income: $1,955
- Cash on Cash Return: 2.52%
- Population Growth: 3%
- Job Growth: 2.24%
- Cost of Living Index: 72.05
For more info, read: Atlanta Real Estate Market 2018: The Trends Investors Need to Know About
Washington has earned its place in this list because the government, non-profit, and legal sectors are providing new jobs for the young, well-educated, and ambitious coming to the city and staying for the long-term. As a result, Washington is an ideal housing market to buy and hold real estate, especially multi-family investment properties.
- Median Property Price: $646,168
- Price Per Square Foot: $521.08
- Traditional Rental Income: $2,662
- Cash on Cash Return: 2.14%
- Population Growth: 1.56%
- Job Growth: 1.58%
- Cost of Living Index: 88.50
The capital and most popular city in Tennessee, Nashville is a prospering city. An average of 100 new people move to the city and call it their new home every day. Forbes ranked Nashville in the Best Big Cities for Jobs. This makes it a great place to consider buying investment property.
- Median Property Price: $412,926
- Price Per Square Foot: $4,163
- Traditional Rental Income: $1,735
- Cash on Cash Return: 1.92%
- Population Growth: 2.15%
- Job Growth: 2.05%
- Cost of Living Index: 68.78
They call it Mile High City for a reason – almost everything in Denver is running on a higher level! Due to the strong economy and educated workforce, people want to live in Denver and they’re finding jobs. If you’re investing in buy and hold real estate in the city, you can expect low vacancy rates and high rents.
- Median Property Price: $476,418
- Price Per Square Foot: $276.37
- Traditional Rental Income: $1,935
- Cash on Cash Return: 1.8%
- Population Growth: 85%
- Job Growth: 1.92%
- Cost of Living Index: 72.02
Kansas City, MO
Since 2010, Kansas City has been experiencing a consistent increase in population. Moreover, Kansas City real estate is very affordable. For this reason, many property investors have chosen to invest in the city – especially in multi-family homes.
- Median Property Price: $196,174
- Price Per Square Foot: $126.83
- Traditional Rental Income: $1,084
- Cash on Cash Return: 1.78%
- Population Growth: 1.34%
- Job Growth: 1.55%
- Cost of Living Index: 65.74
Home to Mickey and Minnie, Orlando is known as one of the best cities for Airbnb investments and short-term rentals. Nonetheless, the city has an impressive job growth and ranks 8th nationally for population growth. Here’s the data on why Orlando also works for buy and hold real estate.
- Median Property Price: $334,055
- Price Per Square Foot: $173.38
- Traditional Rental Income: $1,591
- Cash on Cash Return: 1.67%
- Population Growth: 93%
- Job Growth: 2.12%
- Cost of Living Index: 70.18
Columbus is the most populous city in the state of Ohio and the second biggest city in the Midwest. In 2016, it was ranked by Money magazine as one of the 6 best big cities with an excellent potential for job growth thanks to its highly educated workforce.
- Median Property Price: $253,940
- Price Per Square Foot: $130.14
- Traditional Rental Income: $1,292
- Cash on Cash Return: 1.54%
- Population Growth: 1.2%
- Job Growth: 1.84%
- Cost of Living Index: 66.90
North Carolina supports a strong buy and hold real estate market, with Raleigh as the best in the state. The city is delivering new constriction to house the increasing population coming to the city to find jobs in research, healthcare, and information technology.
- Median Property Price: $427,731
- Price Per Square Foot: $170.72
- Traditional Rental Income: $1,572
- Cash on Cash Return: 1.48%
- Population Growth: 2.6%
- Job Growth: 2.74%
- Cost of Living Index: 69.18
Investing in Jacksonville in 2018 is a smart investment decision; like the cities on our list, it’s affordable, growing in population, and has a strong job market. If you’re wondering about where exactly to invest in the city, read this: Best Places to Invest in Real Estate in 2018 in Jacksonville.
- Median Property Price: $317,364
- Price Per Square Foot: $154.31
- Traditional Rental Income: $1,348
- Cash on Cash Return: 1.3%
- Population Growth: 76%
- Job Growth: 2.55%
- Cost of Living Index: 70.62
Minneapolis is a hidden gem in the US housing market. With one of the lowest vacancy rates for apartments across the country, the headquarters of 18 Fortune 500 companies, and robust job growth in industries like healthcare and technology, Minneapolis has rightfully earned its place on our list.
- Median Property Price: $358,341
- Price Per Square Foot: $221.76
- Traditional Rental Income: $1,746
- Cash on Cash Return: 1.25%
- Population Growth: 61%
- Job Growth: 1.2%
- Cost of Living Index: 72.93
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
The Bottom Line
Want to invest in buy and hold real estate this year? These are the best up-and-coming cities which you should consider looking further into. Please keep in mind that even if a city is not performing as well as you’d expect, you can still find profitable investment opportunities in some of its neighborhoods which you can capitalize on. Thus, I suggest doing more research and digging deeper in order to make an informed investment decision. Our real estate investment tools can help you with that!
Mashvisor helps real estate investors turn their property search into 15 minutes! Our tools allow you to find the most profitable rental properties in the best cities and neighborhoods across the US housing market. To learn more about our product, click here.
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