The Best Rental Real Estate Markets in 2020

Key Takeaways


If you’re considering buying a rental property, familiarizing yourself with the best rental markets in the country could go a long way in preparing you to invest in your first buy-and-hold asset. Aside from being great places to invest themselves, today’s best rental markets can teach us a lot about how to invest in specific locations.

The location in which you choose to invest will ultimately determine the viability and success of any assets you acquire. After all, those who know how to read and interpret market indicators will know where the best rental markets reside. Keep reading to learn why people are so excited about the year’s best rental markets.

Top Factors That Affect A Rental Property Investment

There are countless factors that play into a location’s rental viability. The sheer number of variables that have even the slightest impact on an area’s rental property performance is staggering. That said, not all indicators are created equal; there are some factors that affect a rental property investment inherently more than others, not the least of which include:

  • Location

  • Economy

  • Vacancies & Listings

  • Future Development


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best rental markets

Location

First and foremost, the golden rule of real estate investing is still alive and well: location, location, location. Investing in a rental property with at least some degree of success is always contingent on the area in which it is located. It is the location of the respective property that’ll determine everything else I’ll discuss henceforth.

Before you even consider looking at a subject property, you need to pick a location that facilitates a healthy rental market. Specifically, pay special considerations to the health of the economy, demand, job opportunities, new home construction, unemployment rates, household income, affordability and anything else that could potentially influence a renter’s decision to live in the area. When all is said and done, even the best rental property in a poor location doesn’t stand a chance. You need to invest in an area that people want to call home and where demand will persist for the foreseeable future.

Economy

The local economy will play an integral role in determining the viability of a respective rental property. Here’s a list of some of the most important economic factors you’ll need to consider when looking at the location in which a rental property is situated:

  • The number of sales of existing homes

  • The prices of existing homes

  • The volume of new construction

  • The local economy

  • Population trends

  • Unemployment rates

  • Job growth

  • Median household incomes

  • Affordability

While this list is not exhaustive, each oft these indicators will play an essential part in determining whether or not an area is worth investing in. Positive trends in each would likely suggest the location is ready to be invested in, but economic indicators are not mutually exclusive. While it’s better to have everything working in an area’s favor, it’s entirely possible for a rental market to thrive with just a few of these factors on its side.

Vacancies & Listings

Mind due diligence and pay close attention to the ratio of vacancies relative to the number of listings in a particular area. An unusually high number of listings, for example, could represent one of two scenarios: either the neighborhood is currently in the middle of a seasonal cycle or it is trending downwards. It is in your best interest to discern what the listing ratio in a particular area means for an impending investment.

Take note of the area’s vacancy rate, too. At the very least, vacancy rates will give you an idea of what sort of demand to expect. Low vacancy rates could be a good sign, as demand appears intact and active. High vacancy rates, however, could suggest poor conditions. Additionally, lower demand could force landlords, not unlike yourself, to lower rates in order to attract tenants.

Future Development

Areas with future development projects in the pipeline are typically representative of a healthy market. Most likely, projects have broken ground because the area has shown promise, which bodes well for rental property investors. Conversely, a distinct lack of development suggests there is reason to avoid the area. Therefore, you’ll want to contact the local municipal planning department to gather information on all the new projects that are either currently underway, or will be sometime in the near future.

Best Rental Markets 2020

Three of the best places to buy rental properties in 2020 have seen exceptional job growth, population growth, and affordability. Homeseekers are finding career opportunities and a higher quality of living at an affordable price in areas like Orlando, Huntsville, and Dallas.

Two of the best real estate markets of 2020 have one big thing in common: tech. In recent years, the rise of the technology sector has begun to reach well beyond San Jose and Seattle. As well-known companies and growing start-ups search for new cities to lay down roots, The Austin and Raleigh-Durham real estate markets begin shifting radically.

If you are considering expanding your real estate investment portfolio this year, take a moment to familiarize yourself with the best rental markets in 2020:

  • Orlando, Florida

  • Huntsville, Alabama

  • Dallas, Texas

  • Austin, Texas

  • Raleigh-Durham, North Carolina

Orlando, Florida

The Sunshine State has made the list as one of the best places to buy rental property in 2020. A large demand for single-family homes has been on a steady rise in Orlando, Florida. In spite of this, it is common for you to find a fully renovated property in a desirable area for $193,000 or below.

While these incredibly low housing prices can be found statewide, a large portion of those seeking a home still prefer to rent rather than to buy. As a result, rental rates have risen by about 6% in the past year. This is expected to continue in 2020 making Orlando one of the best rental markets to invest in. The value of properties in Orlando is expected to have a continued rise as inventory levels continue to decrease.

Taxes and property insurance are also incredibly low in Orlando. Also, there is no state income tax. More and more people are deciding to retire in Orlando for its warm weather and excellent healthcare. The 2.5 million population of Orlando rises every day as retirees, career seekers, and students are all taking advantage of these benefits of higher quality living for an affordable cost.

Orlando’s employment growth is now one of the best in America with over 45,000 new jobs created in one year. Up to a 35% increase in housing prices is projected for 2021, rent has grown by 3.44% in the past year alone, and the population has grown by 20% since 2010 making Orlando the best rental market in 2020.

Huntsville, Alabama

Huntsville is the fourth largest city in Alabama and is known for its technology, defense, and space industries. The job growth in these industries is immense in Huntsville as the military and the NASA Marshell Space Flight Center are the two top employers in the area. This accompanied by several technology start-up companies have attributed to more and more enticing opportunities in Huntsville.

Among the benefits of living in Huntsville are low tax rates and a competitive rental market. Some neighborhoods have a 0.97% purchase-to-rent ratio effectively increasing ROI. On average, a single-family home costs around $158,000. This is almost 30% lower than the national average home cost.

Huntsville’s population has increased 10% over the last decade. In that same time, the U.S. population grew by about 6%. It is clear that many are moving to Huntsville at a much higher rate than many other cites in the U.S. With so many affordable real estate opportunities, Huntsville has become one of the best rental markets in 2020.

Dallas, Texas

Affordability in a growing job opportunity area cannot be overlooked as a prime factor for the best rental markets in the U.S. On average, a single-family home in Dallas costs about 3.5% less than the national average. If you are an investor looking for a good area to produce passive income, Dallas may be the area to look into.

In recent years, many companies have relocated from California to Dallas for its lower cost of business, lower taxes, fewer business regulations, and a significantly lower cost of living to employees. As a result, Dallas has seen incredible job growth with a 2.7% increase in this past year. The population has seen a growth of about 17%. This compiled with attractive affordability has made Dallas one of the best rental markets to invest in.

Austin, Texas

The capital of Texas has seen some big changes over the last year, most notably being Apple’s decision to build a $1 billion campus in the area. This announcement, along with several other developments in the city, have set Austin up to be one of the biggest real estate markets of 2020. According to a study from the Urban Land Institute, Austin has the highest projected population growth over the next five years among the top 80 markets in the U.S.

For real estate investors, both single family and multifamily properties in Austin could make great investments if managed correctly. The same study even found home building prospects to be promising within the city. The median home price is currently hovering around $296,000.

One important factor to note, however, is that Austin also ranks high in investor demand. The rising popularity of this market suggests that those interested may want to buy sooner rather than later. A recent market report by Mashvisor estimates a higher than average appreciation rate in the area.

Raleigh-Durham, North Carolina

Raleigh-Durham, known as the “Research Triangle,” is another one of the year’s most promising real estate markets. As I mentioned above, this projection is due in large part to the technology industry. Raleigh-Durham not only has a variety of tech companies and start ups, but it is also known as an education and research hub in the region. Each of these factors has positively impacted employment in the area, thus boosting demand for real estate.

A large portion of land in Raleigh-Durham has been zoned for residential use, which has helped the area remain more affordable when compared to other rapidly growing housing markets. The Urban Land Institute also found the area to be promising for home building prospects. The median home price is currently around $238,000.

In addition to being one of the best rental markets of 2020 in terms of residential properties, Raleigh-Durham is also a great market for commercial and multifamily investments. Investors considering office or retail spaces may find it beneficial to look into the Triangle as an option.

Best Rental Markets 2019

There are a number of real estate markets that currently have everything investors should look for in a promising rental market: strong economies, an influx of new residents, affordability, new home construction, solid unemployment rates, relatively high household incomes and other factors. However, there are two—in particular—that have already started to demonstrate an increased propensity towards a very promising 2019:

  • Lakeland, FL

  • Grand Rapids, MI

Let’s take a look at why these two cities are poised to be amongst the best markets for rental property investors.

Lakeland, Fl

Lakeland, Florida appears ready to become the primary beneficiary of a perfect storm in 2019, which looks more and more likely to benefit well-positioned rental property investors in the coming year. Due primarily to a unique combination of affordability and a centralized location, savvy buy-and-hold investors may cater to an exponentially increasing pool of cost-conscious commuters who can’t afford to live in some of Florida’s most desirable locations. Located directly between three of Florida’s most popular destinations (Tampa, Orlando and the famed Walt Disney World Resort), Lakeland has become the perfect transplant city where residents can retain a lower cost of living without giving up access to amenities in their larger, more established neighbors.

Meanwhile, renters tired of the exorbitant prices associated with Tampa and Orlando are finding refuge in Lakeland, driving up demand at an incredible rate. It is worth noting, however, that even while demand is increasing, affordability remains intact—at least for now. As Realtor.com is quick to point out, prices are expected to grow 7.4 percent, which means rental property investors that get in now could benefit from appreciation and high levels of demand—that’s coming off a year in which median home values already increased 9.4 percent

  • Median Home Price Forecast: $161,757

  • Sales Growth Forecast: 5%

  • Price Growth Forecast: 7.4%

Grand Rapids, MI

Not to be outdone, the Grand Rapids real estate market is doing everything it can to attract more renters. In addition to remaining relatively affordable (the median home value is $157,900, according to Zillow), there appears to be plenty of room for appreciation. What’s more, the number of higher-end job opportunities continues to increase. Once an old factory town dedicated almost entirely to the furniture manufacturing industry, Grand Rapids is quickly becoming a hotbed for world-class research and educational facilities. Not only that, but Amazon recently announced it would be opening an 850,000-square-foot fulfillment center in Gaines Towns, which will surely attract more renters. Consequently, Grand Rapids has already started to attract an influx of new homebuyers and renters, but the area’s bustling economy appears ready to support growth for years to come. Not unlike Lakeland, rental property owners that get in on the ground floor may be able to benefit from both appreciation and increased levels of demand.

  • Median Home Price Forecast: $187,319

  • Sales Growth Forecast: 4%

  • Price Growth Forecast: 8.2%

Best Real Estate Markets 2018

The best rental markets of 2019 are indicative of trends that are carrying over from the previous year—namely affordability. If for nothing else, both buyers and renters are tired of the latest bout of appreciation rates, and are more willing to forego the high cost of living in primary cities in exchange for the lower prices associated with secondary markets. Let’s take a look at some of the best real estate markets of 2018 in order to better understand where things are headed:

  • Orlando, FL

  • St. Petersburg, FL

  • Tampa, FL

  • Cleveland, OH

  • Jacksonville, FL

  • Seattle, WA

  • Boise, ID

  • Atlanta, GA

  • Nashville, TN

  • Las Vegas, NV

For a more in-depth look at some of the best real estate markets of 2018, please feel free to reference the following infographic:

best rental markets in us

Summary

Whether you are purchasing your first or your fourth buy and hold property, finding the right real estate market is essential. Luckily, there are several indicators that can help you choose an optimal location. These factors range from local economic markers to average vacancy rates and population trends. A great place to start is always by taking a look at the year’s best rental markets. Although, these cities are just the beginning. Pay attention to the factors defining these emerging real estate markets and allow them to guide your search for the best location for your investment.

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