Are you looking for the best real estate investment opportunity? Then you should know that traditional rental properties remain a top strategy for making money in real estate. While Airbnb investment properties offer some benefits, the Covid-19 pandemic demonstrated once again that long-term rentals are the most resilient rental strategy which gets less affected by exogenous factors. After all, regardless of the political, economic, and health situation, people will always need homes for rent, even if they stop traveling temporarily. To help you figure out the most profitable locations for traditional rentals in the US housing market, we’ve put together this list of the 40 US cities which offer the highest cash on cash return for this strategy.
The Best Places to Invest in Traditional Rental Properties
Let’s dive right in and have a look at the 40 US housing markets which offer not only good cash on cash return but actually the absolutely best return on investment on long-term rentals.
In brief, the ranking of these locations has been done by Mashvisor, based on our nationwide real estate market analysis. But we will talk about the real estate data we’ve used and its accuracy in a bit.
1. Marion, Indianapolis Real Estate Market
The Marion real estate market offers the highest cash on cash return for traditional rental properties in 2021, according to Mashvisor’s data.
- Traditional Cash on Cash Return: 6.95%
- Traditional Rental Income: $799
- Median Property Price: $80,200
- Price per Square Foot: $48
- Price to Rent Ratio: 8
- Days on Market: 246
2. Toledo, Ohio Real Estate Market
- Traditional Cash on Cash Return: 6.49%
- Traditional Rental Income: $909
- Median Property Price: $101,667
- Price per Square Foot: $88
- Price to Rent Ratio: 9
- Days on Market: 3
3. Minot, North Dakota Real Estate Market
- Traditional Cash on Cash Return: 6.36%
- Traditional Rental Income: $1,041
- Median Property Price: $224,275
- Price per Square Foot: $149
- Price to Rent Ratio: 9
- Days on Market: 3
4. Gary, Indiana Real Estate Market
- Traditional Cash on Cash Return: 6.30%
- Traditional Rental Income: $969
- Median Property Price: $137,643
- Price per Square Foot: $90
- Price to Rent Ratio: 12
- Days on Market: 41
5. Camden, New Jersey Real Estate Market
- Traditional Cash on Cash Return: 6.26%
- Traditional Rental Income: $1,251
- Median Property Price: $150,086
- Price per Square Foot: $94
- Price to Rent Ratio: 10
- Days on Market: 103
6. Barre, Vermont Real Estate Market
- Traditional Cash on Cash Return: 6.16%
- Traditional Rental Income: $1,550
- Median Property Price: $172,000
- Price per Square Foot: $162
- Price to Rent Ratio: 9
- Days on Market: 1
7. Moss Point, Mississippi Real Estate Market
- Traditional Cash on Cash Return: 5.44%
- Traditional Rental Income: $982
- Median Property Price: $146,988
- Price per Square Foot: $96
- Price to Rent Ratio: 12
- Days on Market: 213
8. Irvington, Alabama Real Estate Market
- Traditional Cash on Cash Return: 5.31%
- Traditional Rental Income: $1,013
- Median Property Price: $162,350
- Price per Square Foot: $106
- Price to Rent Ratio: 13
- Days on Market: NA
9. Eight Mile, Alabama Real Estate Market
- Traditional Cash on Cash Return: 5.27%
- Traditional Rental Income: $1,158
- Median Property Price: $241,950
- Price per Square Foot: $106
- Price to Rent Ratio: 17
- Days on Market: 1
10. Rancho Cordova, California Real Estate Market
- Traditional Cash on Cash Return: 5.18%
- Traditional Rental Income: $2,313
- Median Property Price: $338,800
- Price per Square Foot: $213
- Price to Rent Ratio: 12
- Days on Market: 34
11. Wynnewood, Pennsylvania Real Estate Market
- Traditional Cash on Cash Return: 5.05%
- Traditional Rental Income: $2,172
- Median Property Price: $356,412
- Price per Square Foot: $194
- Price to Rent Ratio: 14
- Days on Market: 53
12. Council Bluffs, Iowa Real Estate Market
- Traditional Cash on Cash Return: 4.98%
- Traditional Rental Income: $1,155
- Median Property Price: $170,332
- Price per Square Foot: $108
- Price to Rent Ratio: 12
- Days on Market: 41
13. Bishop, California Real Estate Market
- Traditional Cash on Cash Return: 4.92%
- Traditional Rental Income: $2,350
- Median Property Price: $477,450
- Price per Square Foot: $264
- Price to Rent Ratio: 17
- Days on Market: 154
14. Waiana, Hawaii Real Estate Market
- Traditional Cash on Cash Return: 4.90%
- Traditional Rental Income: $1,518
- Median Property Price: $367,039
- Price per Square Foot: $373
- Price to Rent Ratio: 20
- Days on Market: 101
15. Federal Way, Washington Real Estate Market
- Traditional Cash on Cash Return: 4.71%
- Traditional Rental Income: $2,696
- Median Property Price: $443,966
- Price per Square Foot: $280
- Price to Rent Ratio: 14
- Days on Market: 28
16. Independence, Missouri Real Estate Market
- Traditional Cash on Cash Return: 4.64%
- Traditional Rental Income: $1,148
- Median Property Price: $200,923
- Price per Square Foot: $119
- Price to Rent Ratio: 15
- Days on Market: 67
17. Trenton, New Jersey Real Estate Market
- Traditional Cash on Cash Return: 4.62%
- Traditional Rental Income: $1,605
- Median Property Price: $216,585
- Price per Square Foot: $141
- Price to Rent Ratio: 11
- Days on Market: 74
18. Portsmouth, Virginia Real Estate Market
- Traditional Cash on Cash Return: 4.60%
- Traditional Rental Income: $1,335
- Median Property Price: $214,746
- Price per Square Foot: $140
- Price to Rent Ratio: 13
- Days on Market: 59
19. Inverness, Florida Real Estate Market
- Traditional Cash on Cash Return: 4.59%
- Traditional Rental Income: $1,275
- Median Property Price: $224,876
- Price per Square Foot: $135
- Price to Rent Ratio: 15
- Days on Market: 63
20. Shreveport, Louisiana Real Estate Market
- Traditional Cash on Cash Return: 4.59%
- Traditional Rental Income: $1,211
- Median Property Price: $240,795
- Price per Square Foot: $109
- Price to Rent Ratio: 17
- Days on Market: 53
21. Bartlett, Tennessee Real Estate Market
- Traditional Cash on Cash Return: 4.48%
- Traditional Rental Income: $1,744
- Median Property Price: $259,344
- Price per Square Foot: NA
- Price to Rent Ratio: 14
- Days on Market: 82
22. Real Estate Market
- Traditional Cash on Cash Return: 4.42%
- Traditional Rental Income: $1,823
- Median Property Price: $304,967
- Price per Square Foot: $242
- Price to Rent Ratio: 14
- Days on Market: 14
23. Jackson, Mississippi Real Estate Market
- Traditional Cash on Cash Return: 4.40%
- Traditional Rental Income: $1,397
- Median Property Price: $276,862
- Price per Square Foot: $63
- Price to Rent Ratio: 17
- Days on Market: 109
24. Greenville, North Carolina Real Estate Market
- Traditional Cash on Cash Return: 4.38%
- Traditional Rental Income: $1,564
- Median Property Price: $282,605
- Price per Square Foot: $118
- Price to Rent Ratio: 15
- Days on Market: 79
25. Apple Valley, Minnesota Real Estate Market
- Traditional Cash on Cash Return: 4.37%
- Traditional Rental Income: $1,984
- Median Property Price: $317,136
- Price per Square Foot: $165
- Price to Rent Ratio: 13
- Days on Market: 40
26. Redford, Missouri Real Estate Market
- Traditional Cash on Cash Return: 4.37%
- Traditional Rental Income: $957
- Median Property Price: $136,570
- Price per Square Foot: $118
- Price to Rent Ratio: 12
- Days on Market: 63
27. Sumter, South Carolina Real Estate Market
- Traditional Cash on Cash Return: 4.37%
- Traditional Rental Income: $1,189
- Median Property Price: $212,020
- Price per Square Foot: $101
- Price to Rent Ratio: 15
- Days on Market: 163
28. Lake Worth, Florida Real Estate Market
- Traditional Cash on Cash Return: 4.36%
- Traditional Rental Income: $1,729
- Median Property Price: $274,037
- Price per Square Foot: NA
- Price to Rent Ratio: 13
- Days on Market: 60
29. Rio Rico, Arizona Real Estate Market
- Traditional Cash on Cash Return: 4.35%
- Traditional Rental Income: $1,487
- Median Property Price: $267,037
- Price per Square Foot: $143
- Price to Rent Ratio: 15
- Days on Market: 54
30. Livonia, Missouri Real Estate Market
- Traditional Cash on Cash Return: 4.26%
- Traditional Rental Income: $1,554
- Median Property Price: $245,169
- Price per Square Foot: $171
- Price to Rent Ratio: 13
- Days on Market: 45
31. Sinton, Texas Real Estate Market
- Traditional Cash on Cash Return: 4.26%
- Traditional Rental Income: $1,317
- Median Property Price: $217,705
- Price per Square Foot: $126
- Price to Rent Ratio: 14
- Days on Market: 78
32. Cumberland, Maryland Real Estate Market
- Traditional Cash on Cash Return: 4.23%
- Traditional Rental Income: $945
- Median Property Price: $187,851
- Price per Square Foot: $96
- Price to Rent Ratio: 17
- Days on Market: 100
33. Arlington, Washington Real Estate Market
- Traditional Cash on Cash Return: 4.21%
- Traditional Rental Income: $2,530
- Median Property Price: $508,061
- Price per Square Foot: $298
- Price to Rent Ratio: 17
- Days on Market: 56
34. Elkhart, Indiana Real Estate Market
- Traditional Cash on Cash Return: 4.20%
- Traditional Rental Income: $981
- Median Property Price: $183,949
- Price per Square Foot: $103
- Price to Rent Ratio: 16
- Days on Market: 63
35. Scranton, Pennsylvania Real Estate Market
- Traditional Cash on Cash Return: 4.19%
- Traditional Rental Income: $986
- Median Property Price: $141,081
- Price per Square Foot: $75
- Price to Rent Ratio: 12
- Days on Market: 160
36. Midwest City, Oklahoma Real Estate Market
- Traditional Cash on Cash Return: 4.17%
- Traditional Rental Income: $1,045
- Median Property Price: $181,323
- Price per Square Foot: $113
- Price to Rent Ratio: 14
- Days on Market: 5
37. Anchor, Arkansas Real Estate Market
- Traditional Cash on Cash Return: 4.16%
- Traditional Rental Income: $1,555
- Median Property Price: $252,900
- Price per Square Foot: $179
- Price to Rent Ratio: 14
- Days on Market: 8
38. Quincy, California Real Estate Market
- Traditional Cash on Cash Return: 4.15%
- Traditional Rental Income: $1,885
- Median Property Price: $351,850
- Price per Square Foot: $197
- Price to Rent Ratio: 16
- Days on Market: 262
39. Detroit, Michigan Real Estate Market
- Traditional Cash on Cash Return: 4.13%
- Traditional Rental Income: $1,015
- Median Property Price: $191,534
- Price per Square Foot: $123
- Price to Rent Ratio: 15
- Days on Market: 123
40. Mesquite, Texas Real Estate Market
- Traditional Cash on Cash Return: 4.08%
- Traditional Rental Income: $1,516
- Median Property Price: $239,045
- Price per Square Foot: $138
- Price to Rent Ratio: 13
- Days on Market: 18
Real Estate and Rental Data Sources
Smart real estate investors know that data is power and that profitable investment decisions are based on reliable information and analysis. That’s why, as an aspiring investor, you must be wondering about the source of the real estate data that we’ve used for ranking the most profitable locations for traditional rental properties .
Mashvisor gathers data from over a dozen publicly available sources such as the MLS, Zillow, Redfin, and public offices. After that, we apply our machine-learning algorithms to this big data to analyze the performance of traditional (as well as Airbnb) investment properties at the city and the neighborhood level. This means that our rental market analysis is based on the performance of actual rental properties over the past few months. That’s what makes us the most trusted source of residential real estate data and analytics in the US market.
When you decide on the best US city for owning a rental property for your particular situation, you can use the real estate investment tools available on the Mashvisor platform to conduct neighborhood analysis. This will help you find the areas which combine affordable home values and high rental income – the two most important factors for a good rate of return on a rental property.
Factors That Make a Market a Top Location for Buying a Long-Term Rental
Analysis of the 40 most profitable locations for traditional rentals – as well as general real estate knowledge – allows us to discern the most important factors which make for a top-performing real estate investing market. They include:
1. Reasonable Property Prices
All cities listed above constitute some of the most affordable real estate markets. Especially for beginner investors, it is crucially important to buy a rental property within your budget. This makes access to real estate investment loans easier and minimizes the risk of ending up in a foreclosure. Moreover, most metrics of return on investment – including the CoC return and the cap rate – consider the home value. The lower the price of your income property, the lower the down payment, and the higher the profitability.
2. Low Price to Rent Ratios
Generally speaking, there isn’t a consensus among real estate experts on the best price to rent ratio for investing in real estate. Both high and low price to rent ratios bring certain advantages – and disadvantages – to landlords.
The truth of the matter is, however, that the best places to invest in real estate to rent out on a long-term basis – as ranked by Mashvisor – have a low to medium price to rent ratio. This means that rental rates are high enough compared to average property prices to bring a good return on investment to landlords.
3. Strong Rental Demand
Another very important factor to consider when looking for the best US housing market for traditional rental properties is the demand for such rentals. To evaluate this, it’s a good idea to look at the share of renters vs. homeowners in the local market. If more than half of the population rents, rental demand is likely to be high, which means that you will be able to generate a good rate of return, as long as you manage and market your property well.
4. Landlord-Friendly Legislation
In general long-term rentals face significantly less legal issues and restrictions than short-term rental properties. Nevertheless, some states such as West Virginia, Georgia, and Idaho are notorious for their landlord-unfriendly laws.
If you are a beginner real estate investor, you should consider staying away from these states and leaning towards landlord-friendly states. This means that you will have your rights as an investor in rental properties well protected and well taken care of.
5. Low Rental Expenses
In addition to the property price, another factor which affects profitability in real estate investing negatively is the costs associated with buying and owning a rental property. These include both one-time startup costs and recurring monthly expenses.
The lower your rental expenses, the higher your return on investment. Thus, you should look for housing markets with low property taxes, low mortgage rates, and low property management fees.
If you’re not sure how to estimate your costs as an investor and how to factor them into your calculations of return, you can use Mashvisor’s investment property calculator. This tool will provide you with readily available estimates of the rental expenses of any property in the US market and include it in the calculations of cash flow, cash on cash return, and cap rate.
6. High Return on Investment
The most profitable locations for traditional rental properties are these markets which offer the highest rate of return on this rental strategy. And the best measure of return on investment in rental property investing is the cash on cash return.
Unlike the cap rate, this metric incorporates the method of financing, which makes it very comprehensive. However, it becomes time- and effort-consuming to calculate the CoC return on multiple investment properties for sale to choose the best one for your particular investment needs. So, if you want to conduct rental property analysis quickly and easily, you should sign up for a 7-day free trial of the Mashvisor real estate investment software. You will be able to analyze dozens of income properties for sale with a few clicks of a button.
7. High Home Value Appreciation
One of the most important benefits of investing in rental properties is that you get to make money not only in the short run (through monthly rental income) but also in the long term (through real estate appreciation). Property prices increase over time in all locations because of the scarcity of land set against the ever-growing population. Nonetheless, the best places for buying a traditional rental property experience above-average appreciation.
8. Buyer’s Markets
Buying a profitable investment property in a seller’s market is feasible but less likely and less easy than in a buyer’s market. The data on the most profitable locations for traditional rental properties presented above points out to the majority of them being buyer’s markets. This means that there are enough good real estate listings for investors to choose from and to buy, without engaging in a bidding war with other property buyers. You are much more likely to land a good deal in a buyer’s market, where you have the upper hand and can negotiate favorable terms.
9. Good Airbnb Markets
Last but not least, even if you are interested in long-term rental properties in specific, it is a smart investment decision to go for a market which offers a good return on Airbnb rental properties as well. In this way, if market conditions ever change or if you decide to switch your rental strategy, you will end up with a profitable vacation home rental.
How to Find a Profitable Traditional Rental Property
Knowing the best markets for long-term rentals is the first step towards making a smart and profitable real estate investment decision. But it’s not enough. Here are the rest of the steps you need to follow to become a successful real estate investor:
1. Choose a Rental Market
You should use the list of the 40 most profitable locations for traditional rentals to select the market which suits your investor needs and requirements in the best possible way. Consider your budget, consider the rental income that you’d expect, and consider whether you’d like to go for out of state real estate investing or you’d prefer to invest in real estate locally.
2. Research the Location
As soon as you’ve shortlisted a couple of markets, it’s time to conduct detailed real estate market analysis of each. You should look into the local legislation governing rental properties as well as at the property taxes, income tax rates, home insurance fees, and other factors which will determine your return. Make sure that you invest in a state and a city which favors landlords or at least does not have legislation against them.
3. Decide on the Best Neighborhood
After you are confident that you’ve selected the right market, you need to find the most profitable area for long-term rental properties within your budget. Mashvisor’s real estate heatmap will help you figure out neighborhoods with low listing prices and high traditional rental income as well as good traditional cash on cash return.
Mashvisor’s heatmap helps you find the most profitable neighborhoods for traditional cash on cash return in any city.
Moreover, Mashvisor’s neighborhood analysis pages will provide you with in-depth neighborhood analysis of the investment potential of any US city or town. You will learn the median property price, the average price per square foot, the average monthly traditional rental income, and the average traditional cash on cash return.
In addition, you will be provided with the optimal property type and the optimal number of bedrooms for rental properties in this neighborhood to ensure high profitability.
Last but not least, you will gain access to real estate comps so that you know what the current fair market value of income properties for sale is.
4. Conduct Thorough Investment Property Search
Next, you should look for rental properties for sale in a number of different sources such as local newspapers, MLS listings (if you hire an agent), “For Sale” signs, and others. If you’d like to include rental property analysis within your investment property search, check out the Mashvisor platform. You will be able to search through half a million MLS listings, foreclosures, and off market properties to find the right fit for your real estate investment strategy.
Related: How to Get Access to the MLS Database Without a License
5. Analyze the Investment Potential of Your Shortlisted Properties
Savvy investors analyze a few different real estate listings instead of going for the first income property for sale which seems to meet their expectations. Performing investment property analysis on multiple properties can become very confusing and extremely time-consuming. That’s why you should consider using Mashvisor’s investment property calculator. This tool will provide you with all the estimates that you need including one-time startup costs, recurring monthly expenses, rental income, occupancy rate, cash flow, cash on cash return, and cap rate. You can adjust any number to fit your particular situation – for example, whether you are buying in cash or using a mortgage loan – and Mashvisor’s rental property calculator will redo all calculations for you, within a couple of seconds.
6. Buy the Investment Property
Last but not least, you should move forward with buying rental property before another investor grabs it. The traditional rental industry is very competitive, so you want to make sure that you don’t miss on a good deal.
If you’re new to the world of real estate investments, it’s a good idea to hire a real estate agent who will be able to help you throughout the purchase process.
You can find the top-performing agents in all the most profitable locations for traditional rentals here.
Now that you know which US markets offer the highest cash on cash return for long-term rental properties, you are one step closer to becoming the proud owner of a lucrative investment property. To complete the rest of the steps, simply sign up for Mashvisor today. Your money-making traditional rental property is a few clicks away.