Best Cities for Rental Properties

[Vivian Pena]

Hi all,

I am new to BP and this is my first post. My goal is to buy a rental property (single family or multifamily) by the end of 2019.

I’ve been listening to the BP podcast diligently and reading Turner’s book on RE rental properties. My interest began after reading Rich Dad Poor Dad and being part of the financial independent community.

I am a Structural Engineer but recently became a mom and I now have a big drive to have more freedom with my time so I can spend more time with my family. Thus, my long-term goal is to replace my W2 income with passive income from rental properties.

I have enough savings to get started (outside of Los Angeles) and I could get a HELOC on my house to get started.

Now my question for you is what are some good cities to buy rental properties? I’ve downloaded data from Zillow to get the average home prices and compared it with rental values to see what locations fulfill the 1% rule but this is just data and I want to compare it to actual experience from investors.

Thank you in advance for your time!!!

[Mike D'Arrigo]

@Vivian Pena it depends on what your own investment goals and criteria are. What might be a good market for one person is not a good market for someone else. If your primary goal is cash flow, then you'll do best in the more affordable markets of the Midwest and Southeast. Don't get too hung up on the 1%  rule. It has nothing to do with your bottom line. Some markets can have widely different operating expenses like property taxes and insurance that can have a big impact on your cash flow. Start by looking at the macro level things like population growth, job growth, incomes and industries. Then drill down and look at prices, rents, taxes/insurance and landlord/tenancy laws. Personally, I like Indianapolis and Kansas City. The both cash flow well but also have strong economic and demographic trends and are landlord friendly. I'd be happy to share my insight on either if you want. The table below is the data that I use to evaluate markets. You might find it helpful. Click on it to expand it.