Best Cities To Buy Rental Property In 2021

Best Cities To Buy Rental Property In 2021

November 27, 2023

Produced by:
Elizabeth Welgemoed

Elizabeth is a Senior Content Marketing Manager with over 10 years of experience in the field. Having authored or edited 1,000+ online articles, she is a prolific content producer with a focus on the real estate vertical.

Despite economic challenges faced in the past year, rental real estate is still a highly sought-after asset class for investors. The option to earn a steady monthly income from tenants while offsetting expenses is a highly-appealing feature of owning rental real estate. The question is more about where to buy for the best results.

The pandemic has created some favorable circumstances for the investors looking to buy and hold right now. Across the country interest rates are at an all-time low and there is a shortage of housing inventory that keeps the demand for rental properties consistently high. For individuals looking for housing today, the cost to purchase a home has become vastly inaccessible. The spiking annual price growth for homes in popular real estate markets has driven more towards renting. 

While there is an absence of affordable homes for sale, the demand for single-family rentals is spiking. There are strong indications that the rental property market will continue to perform well for the duration of 2021. 

Some markets around the country have experienced a renewed wave of demand due to renter migration. More individuals are working remotely than ever before, and the need for social distance has driven them from the cities to the safe havens of the suburbs. These locations can offer good opportunities to investors looking to get their foot in the door with a rental property at a lower price.

These factors and more are highlighting several cities as the best places to buy a rental property in 2021 – keep reading for our guide on where to invest in a buy and hold property next:

Table of Contents

What Makes A Good Rental Location?

If you’re planning to invest in a rental property this year, you’ll want to be sure to be extra selective as to the location you decide to buy into. While some markets are proving to be more popular than others, not all investments will have the same potential. You’ll have to sit down and take all the different factors into account before making an offer on a home.

The ideal rental investment property will be in an area that offers a solid ROI, which is usually dictated by the following elements:

  • High occupancy rates. You don’t want to buy into a neighborhood where all the rentals are standing vacant.
  • Average rental prices. The amount you ask for the rental of the property will need to be enough to cover your expenses.
  • Low default rates. You’ll want to do your research and make sure that the tenants you accept can pay the rent consistently.

A lot of in-depth preparation will go into finding the right rental property to buy. You’ll need to do your due diligence on the neighborhood, financial details, rental income potential, and more before deciding to make an offer. 

Every city has a unique rental market of its own. They may have incredible rental income potential, but no inventory of available rental properties. This can make it more difficult to find a property that suits your criteria. At the same time, now is not the time to act impulsively and buy the first property that comes your way. 

Uninformed buying is the top way to tank your investment before it even has a chance to succeed. You need to ensure that you are closely familiar with the fundamentals of the market you are planning on buying into. Ask yourself, what are your goals for a rental property? Are you planning to rent it out long or short term?

With that said, there are a few markets that have stood out as strong investment spaces in 2021. Here are our top picks:

The Best Cities To Buy Rental Property This Year

#1 Dallas, Texas

Dallas is a city that often makes the list of best places to buy rental real estate, and 2021 will be no exception. Since 2019, there has been a distinctive shift in the number of buyers versus renters in the Dallas area.

This cosmopolitan city has become well known for its foodie scene, nightlife options, and growing music and arts sector. Dallas is also home to a strong local economy but has one of the lowest rates of homeownership in the nation. 

In terms of real estate, the city has good availability of housing paired with good rental rates when compared to home prices. Renting continues to be more affordable than buying in Dallas, meaning there is a large community of renters with solid employment  – this means lower rental default rates as a whole. 

Some of the other key reasons why rental investors need to consider Dallas when buying include that the population is expected to grow significantly in the next decade while remaining one of the employment powerhouses of the country. The majority of the population are renters, and the average property price comes in at $244,403. Rental prices per month for an average of 850 square feet amount to $1250.

#2  Atlanta, Georgia

Next on the list of cities to buy rental properties this year is Atlanta, Georgia. Atlanta boasts many different museums and spaces for creatives. 

It also happens to be one of the best cities for purchasing a buy-and-hold investment. The population in Atlanta has grown significantly in recent years and employment rates have remained positive. As the economic center of the state, the city of Atlanta is predicted to experience another boom in the next few years. 

Atlanta is one of the most popular rental markets in the country and has a decent supply of newly rehabbed properties. Homes in Atlanta cost an average of $405,000, and rental prices are a median of $1500. In recent times, Atlanta has become the home of multiple Fortune 500 companies, and the city boasts some top-level schools.

#3 Orlando, Florida

Orlando is a holiday destination favorite, which makes it no surprise that the city holds the potential for great real estate investments. There are options abound for both long and short-term rentals, with both approaches providing good ROIs for investors. Orlando is one of Florida’s largest cities and was ranked by Forbes as one of the fastest-growing cities in America.

The biggest draw for renters in Orlando goes beyond the happiest place on earth. The city is also a major center of employment, particularly in the industrial and tech sectors. Low unemployment rates and a strong rental market make this a good place to buy a rental property. 

An average property in Orlando will set you back $277,218, with the average rental price being set at just under $1400. With tourism slowly set to resume with the introduction of the vaccination and other measures, you can expect demand for rentals to spike here as borders reopen. 

#4 Chicago, Illinois

One of the top three biggest metropolitan areas in the country, Chicago is another strong addition to this list. Chicago is home to a diverse population with a large economy and stable rental market.

Chicago is again a city that is favored by Fortune 500 companies, many of which have their headquarters located there. The private sector provides significant employment opportunities, and the majority of people in the city are currently renters. 

The high demand for rental real estate in Chicago means you’ll see higher monthly rental prices. 

The average rental will see renters in the windy city pay up to $1900. A full property is priced at a median cost of $276,992.

Some of the other reasons buy and hold investors are getting excited about Chicago are that the city has a good supply of renovated single-family homes which make it easier to break into the market. 

#5 Spokane, Washington

Finally, there is Spokane, Washington. One of the smaller cities on the list, it’s not worth skipping over Spokane. Compared to the other locations in this guide, Spokane has more affordable real estate on average.

This smaller city is growing in popularity and has become known for its small-town feeling, but with all the amenities of the big city. A good school district, buzzing nightlife and a strong culture scene are all part of the draw for those that call Spokane their home. Spokane is the second-largest city in Washington and features tons of parks, revitalized neighborhoods, and a diversified local economy. The major hiring sectors in Spokane include mining, forestry, agribusiness, and tech to name a few. 

An average property in Spokane costs just over $300,000, while rental prices sit at an average of just over $1000. If you can find a solid investment opportunity, you’ll need to act on it quickly – property in this area is starting to appreciate in price and what’s here today may be gone tomorrow. 

The Bottom Line

When investing in rental real estate in 2021, the markets listed above are the best place to launch your search. On the other hand, these are not the only markets showing potential for the next year. 

Any market could be a potentially profitable one if you take the right approach. As long as you have done your due diligence, crunched the numbers, and made sure the investment makes sense for you then you can be assured that you have made the right decision.

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