Best Cities To Invest In Real Estate For 2022
Thinking of investing in residential real estate? That can be challenging in 2022. But it can also be financially rewarding.
The key is to be realistic. Don't expect to buy a home one day and then sell it in 2 months for a big profit. Instead, you'll need to hold onto your investment. Historically, homeowners who keep their homes for 5 years or more have seen the value of their residences appreciate.
But which are the best cities in which to invest in real estate? That depends on a host of factors. Just remember: As with all investments, there‘s no guarantee that your investment home will appreciate in value after you buy it. Homes usually do, but this isn't a sure thing.
What Is An Investment Property?
An investment property is real estate you purchase with the goal of generating income. You buy an investment property – whether it's a single-family home, condo building or apartment property – because you want to earn a return on your investment (ROI).
You can do this either by renting out the property and collecting rents from your tenants or by selling your property after its value appreciates. You can invest as a single investor or with a group of investors.
When you are hunting for an investment property, you need to consider several factors. How will you maintain the property? What will you need to charge to make a profit? How long are you comfortable holding onto the property before selling?
You'll also need to consider the costs of investing in real estate. These include the purchase price of the property, of course, but also costs such as mortgage interest, taxes and homeowners insurance.
How Do You Find Real Estate Investment Opportunities?
You can find investment properties everywhere, in both small towns and large cities. You might think you can only find investment homes in affluent neighborhoods. But you can also find investment properties in neighborhoods that are up-and-coming. If you buy before that neighborhood becomes hot, you might nab a home for a low price that will sell at a much higher figure once you’re ready to sell.
You might even find an investment property in neighborhoods that are listed as opportunity zones. Investors receive tax breaks when they sink their dollars into opportunity zones – areas that have been identified as low-income areas – to attract new investment to neighborhoods often sorely in need of it.
But how do you find the right investment properties that will help you meet your goals?
You can do this by using a few different methods, including:
- Working with a REALTOR® or real estate agent to help you zone in on real estate that fits your budget and your other needs.
- Talking to a local wholesaler, who directly markets to potential sellers and negotiates the right to purchase each seller's property.
- Checking a multiple listing service (MLS), an online, home-selling database used by real estate brokers and agents to list and find local homes for sale.
- Finally, you can use Rocket Homes® to help you find investment homes for sale in the area where you want to make your next real estate investment purchase.
Where To Invest In Real Estate: Top 10 Best Places To Buy Investment Property In 2022
No one real estate market is right for every investor. Much of what makes a city the perfect place for your investment dollars depends on your long-term goals.
Are you interested in collecting monthly rent checks? Then a popular tourist destination might be best for you. Are you more concerned with watching your investment property increase in value over time? Then a major city with a growing population and rising property values might be the better choice. Are you limited on funds? You might choose a neighborhood that you think will grow in popularity soon but features more inexpensive homes today.
Aside from the property’s location, it’s also important to look at a few other key factors when evaluating rental returns and choosing where to invest. For example, you should be aware of the location’s rent as a percentage of income, vacancy rate, home prices, industry, population and growth rate.
When conducting the research for gathering the best cities for real estate investment, we analyzed data from the U.S. Census Bureau, RedFin’s Data Center, and Zillow Research. Key indicators from these sites helped us compile our top 10 list.
To help in your search, we've rounded up 10 of the best cities in which to buy an investment property in 2022.
1. Houston, Texas
Known for space exploration, the need for plenty of air conditioning, international energy and petroleum exploration, not to mention being home to more than 2.3 million people, the Houston area has a lot going for it. In addition to its economic strengths, Houston is well-known for its affordable housing. The median sales price of an existing home in Houston hit $324,881 in March of 2022, up 11.2% from 1 year earlier.
Its home prices, combined with its bustling business scene, make Houston an obvious location for real estate investors. It’s also a good market for rental income. Single-family home rentals rose 7.1% in 2021, while the average monthly rent increased 8.5% to $2,042. Townhome and condominium leases increased 5.1% with the average monthly rent up 3.8% to $1,737 – all good news for real estate investors.
2. Charlotte, North Carolina
A city with a population of more than 874,000 according to the 2020 census, Charlotte, nicknamed the "Queen City," ranks among the best cities in the United States for businesses and careers. Charlotte is home to more than 10 Fortune 1000 companies, including Bank of America, Lowe's and Wachovia Corp., and features numerous institutions of higher learning, cultural centers and health care facilities.
The median sales price of an existing home in Charlotte stood at $350,019 in March of 2022. That's up 18.8% and $55,451 from the same month 1j year earlier. This makes Charlotte one of the hottest real estate locations in the United States. The average rent for a one-bedroom apartment in Charlotte in late April was $1,433, a 19% increase compared to last year's statistics, according to Zumper.
3. Orlando, Florida
Orlando's sunny landscapes mean plenty of opportunities for real estate investors across its greater metropolitan area. This might be the top tourist city in the United States. But the Orlando area also has a full-time population of more than 2.03 million people, an increase of 1.8% from a year earlier. The city is expected to topple the 2.9 million resident mark in 2025.
Orlando is also known for job growth, particularly in its tourism and leisure and hospitality industries. Florida's lack of state income tax and warm weather encourages millions of people and businesses to switch locations from other urban areas that aren't so tax lenient and where the cost of living is higher.
The median sales price of an existing home in Orlando was $296,193 in March of 2022, up 10% from the same month in 2021.The average rent for a one-bedroom apartment in Orlando was $1,679 in late April, a 35% increase compared to the same time last year, according to Zumper.
4. Portland, Maine
When you think of Maine, you might picture rocky coasts, lighthouses and lobster. But you might want to think about investment properties, too. Real estate investment might make sense in the smallish but quaint town of Portland, Maine.
With more than 66,000 residents, you'll find creative food, a booming agriculture industry and seas of maritime history in Portland, Maine. It's also a popular landing destination for home buyers and prospective buyers looking for a more spacious secondary city. This means that this city is also a good source for monthly rental income.
In March of 2022, home prices in Portland, Maine, increased 19.9% compared to last year, with homes here selling for a median price of $523,000. Homes in Portland were also selling in 6 days on average in March, a big drop from the 41 days on average it took for homes to sell here last March. Also as of March of 2022, the average rent for an apartment in Portland was $1,607, according to data from RentCafe.
5. Atlanta, Georgia
With its population nearing half a million as of the 2020 census, Atlanta is one of the faster-growing cities in the United State. This Georgia city is known for its rich history, creative minds– it's one of two cities in the world to have housed two Nobel Peace Prize winners – and many tourist attractions.
Atlanta’s population growth, and the demand for homes in this market, make this city a good choice for investors, whether they are relying on monthly rent or interested in holding onto a property while its value increases.
The median sold price for an Atlanta home rose to $374,249 in March, up 13.6% from a year earlier. How strong is demand for housing here? Of the 1,146 homes sold in March of 2022, an impressive 504 were sold over asking price. According to Zumper, the average monthly rent for a one-bedroom apartment in Atlanta was $1,700 as mid-April of this year. That's up 16% from a year earlier.
6. Phoenix, Arizona
With more than 1.6 million residents, the aptly nicknamed "Valley of the Sun," otherwise known as Phoenix, Arizona, offers year-round warmth, beautiful vistas, historical sights, plenty of entertainment and nightlife and a growing number of business opportunities. As more people seek to move to this warm-weather city, both Phoenix’s housing values and apartment rents have been growing rapidly.
The numbers tell the story of a particularly hot housing market in Phoenix: In March, the median sales price of a Phoenix home was $400,005, a solid increase of 25% from the same month in 2021. Buyers are grabbing these homes quickly, with 2,300 selling in March, a jump of 18.7%. Buyers often pay more than listing price here, with 59% of homes selling for more than what their sellers asked for in March.
The average monthly rent for an apartment in Phoenix was $1,547 in March, according to RentCafe.
7. Salt Lake City, Utah
Salt Lake City's rich religious culture, historical sites and natural landmarks – especially that famously salty lake and the mountains surrounding the city – cannot be ignored. They draw both tourists and new residents to this slice of the country. There are a lot of perks to investing in the Salt Lake City real estate market, including Utah's upward-trending job growth, low unemployment rate and low state and local taxes.
Salt Lake City also offers high occupancy rates, which means that since rental properties are in high demand, tenants may be more apt to stay in your rental property for the long term.
Salt Lake City ranked among the top five of 51 metropolitan areas in the United States this February in terms of sales price growth, according to a RE/MAX report. The company's national housing report for February said that Salt Lake City homes sold for a median price of $516,759 that month. That's a jump of 26% from the median price of $410,000 in February of 2021.
RentCafe reported in late April that the median monthly apartment rent for Salt Lake City was a solid $1,562.
8. Minneapolis-St. Paul, Minnesota
If you're familiar with the Midwest, you already know that the region is dotted with relatively cheap single-family rental homes and small multifamily buildings, which makes this part of the country a smart choice for real estate investors. And the Twin Cities of Minneapolis and St. Paul are a good example of what Midwest markets have to offer investors.
The Twin Cities area not only boasts plenty of affordable housing options, but also offers culture, a bustling food scene, professional sports and plenty of Fortune 500 businesses.
The Twin Cities area, with more than 3 million residents in the cities themselves and their suburbs, is one of the most populated metro areas in the Midwest and one of the more affordable places in which to live. That translates to overall cheaper real estate purchase and holding costs for you. The area also offers high employment rates, jobs in a variety of industries, excellent universities and schools and a demand for rental housing.
The median sales price of homes sold in Minneapolis in March hit $318,165, an increase of 4% from a year earlier. In St. Paul, that number was $265,609, a jump of 10% from a year earlier. The average rent for a one-bedroom apartment in St. Paul in April was $1,110, according to Zumper, a jump of 6% when compared to the previous year. In Minneapolis, that figure was $1,175, a decrease of 3% from a year earlier.
9. Indianapolis, Indiana
While Indianapolis is best known for the famed Indianapolis 500, the world's largest single-day sporting event, the Indiana city has more to offer than this famous auto race. There are major-league sports franchises, highly ranked museums, universities, shops, restaurants and family-friendly activities for those with young children.
The Indianapolis housing market attracts many out-of-state investors because of its low housing prices compared to many other areas in the country, like the east and west coasts. These lower prices mean that investors don’t need their properties to appreciate as much as they do in higher-cost markets.
The current median sales price of homes in Indianapolis was $216,964 in March of this year, an increase of 17.3% from the same month a year ago. The average monthly apartment rent for Indianapolis was $1,055 in February.
10. Birmingham, Alabama
The second-largest city in Alabama might not come to mind when you first consider buying real estate in the deep South. However, Birmingham's affordable housing and low cost of living can make investing in real estate a less costly proposition. And housing prices here are on the rise.
In March of 2022, the median sales price of homes in Birmingham came in at $197,000. That's affordable. At the same time, home values here have been rising, with March's figure up 16.3% when compared to the same month a year earlier. This means that investors don't have to come up with as much money upfront when buying real estate here but can still reasonably expect the value of their purchases to increase. Remember, though, as in all markets, this isn't guaranteed.
Young professionals and families find that Birmingham has a great job market, particularly for health care, manufacturing and government employment. Tipping the scales at more than 330,000 residents, according to the U.S. Census Bureau’s 2020 numbers, Birmingham offers more for property owners than meets the eye.
Zumper reports that the average rent for a one-bedroom apartment in Birmingham stood at $1,000 in April. That is a jump of 11% when compared to the same month a year earlier.
The Bottom Line: The Best Places To Invest In Real Estate Could Be Closer Than You Think
Cities with strong housing markets and investment potential are spread across the country, and there are plenty of additional markets not included in this list that would also make a good home for your real estate investment dollars. If you are ready to invest in real estate, speak with a Rocket Mortgage® Home Loan Expert who can offer you advice on the best way to finance an investment property. In the meantime, don't forget to check out the hottest real estate markets for 2022.