The Top 6 U.S. Cities With The Best Rental Markets For Investors

Despite a shortage of labor, an unprecedented spike in lumber and materials prices, and a housing shortage the likes of which we’ve never seen, the U.S. real estate market continues to thrive—especially when it comes to single-family homes.

The COVID-19 pandemic and its aftermath have created a housing market that is prime for real estate investing. As more people trade in big cities for life in suburban areas, the country’s housing shortage and increasing home prices have driven many to seek single-family rentals and thus created a more attractive rental market.

The single-family rental market has thrived over the past year because older millennials have traded in big city apartment life for larger dwellings in the suburbs. Because so many people suddenly needed space in their homes for an office or classroom, COVID-19 created a demand for more space in less densely populated suburban areas.

At the same time, the surging price to purchase a home has left many who prefer a single-family home lifestyle opting to rent until the market turns becomes more buyer-friendly. Major metropolitan cities across the country have become hotbeds for single-family and multifamily rental investments, but some markets are especially scorching. These six cities are currently several of the best rental markets in the U.S. and show great potential for real estate investors.

6. Las Vegas, NV

The Las Vegas rental market is currently one of them in the U.S., showing signs of strength despite the hit that the hospitality and tourism industry has taken in the last 12 months.

Even though a global pandemic ravaged the city’s economy, housing demand is high, rental occupancy has increased and construction permits have skyrocketed in Sin City. If you’re wondering where to invest in real estate this year, experts would tell you Las Vegas is a prime place.

Las Vegas Real Estate Market Stats:

  • Population (metro area): 2,772,000
  • Occupancy rate: 94.2
  • Percentage of renters: 49%
  • Las Vegas average monthly rent: $501 – $2,000
  • Nevada average monthly rent: $621 – $1,468
  • U.S. average monthly rent: $1,603 – $2,036

What Does This Means for Real Estate Investors?

Las Vegas is ranked 15 out of 100 for cities with the best housing markets in 2021. The city’s unemployment rate is much higher than the national average due to the impact of shutdowns on its tourist-centric economy. Despite that, Las Vegas is experiencing an increase in rent prices and record-low rental vacancy rates.

The Las Vegas rental market is experiencing increased rent prices and record-low vacancy rates – despite an unemployment rate much higher than the national average. It’s a positive sign for real estate investors in the area as it demonstrates a growing demand for rentals. Nationally, build to rent single-family properties increased 27% from 2019 to 2020. Las Vegas is one of the biggest build to rent markets in the nation and ranked 14th in metros with the most single-family rentals.

By the way, Las Vegas is also a great market for fix and flip investors. In Q4 of 2020, 5% of all Las Vegas area sales were flips. A typical flip in Vegas took 148 days compared to the national average of 176. Fix and flip investors made an average gross healthy profit of $65,000 – an increase from $27,300 a year ago. The Las Vegas price-to-rent ratio is 21.8%, ranking 16th of the 50 largest metros. This indicates that the best advantage is to rent versus own in the Las Vegas area, making Las Vegas one of the best rental markets in the U.S. Vegas’ housing market statistics are a positive sign for real estate investors considering investments in the area as they demonstrate a growing demand for rental properties.

Denver, CO cityscape

5. Denver, CO

The Denver, Colorado metro area has been hugely popular among top real estate investors for several years, which is a major reason Denver annually ranks among the hottest for housing growth. A growing economy, strong job market, diverse and exciting lifestyle, and beautiful surroundings are just a few reasons why Denver continues to see increased population growth.

The residential real estate market in Denver continued to churn unimpeded by the pandemic. The rest of the country has been experiencing a shrinking housing inventory for the past year, but Denver is unique in that its housing crunch and tight inventory began before the pandemic.

When COVID-19 rocked the country’s real estate markets, Denver was already experiencing an average home supply of six weeks and an average of 38 days on the market. Post-COVID, Denver’s average home supply has dropped even lower, making the Mile High City one of the tightest and most competitive markets in the nation—causing real estate investors to be extremely aggressive when they find a property to invest in and driving many residents toward renting.

Denver Real Estate Market Stats:

  • Population (metro area): 2,862,000
  • Occupancy rate: 94%
  • Percentage of renters: 50%
  • Denver average monthly rent: $701 – $2,000+
  • Colorado average monthly rent: $814 – $1,699
  • U.S. average monthly rent: $1,603 – $2,036

What Does This Mean for Real Estate Investors?

Denver is ranked 9 out of 100 for best housing markets positioned for growth in 2021. It is also ranked 40 of 182 markets in rent affordability. The city is also one of the top emerging markets for build to rent investors looking to invest in real estate.

Denver’s multifamily rental market remained stable and high during the pandemic. Unlike many peer cities that saw permit increases for only single-family rental properties, Denver had high increases in multifamily and single-family new construction permits. In addition to build to rent properties, real estate investors should also consider multifamily bridge financing given the strength of Denver’s housing market.

The ROI for fix and flip properties is lower in Denver than in peer cities, but the gross profit is higher than most. The average gross profit on a fix and flip is $79,950 – a 47% increase from 2020. Nearly 6% of all Denver area sales in Q4 2020 came from flips. Experts believe that Denver’s tight inventory and increase in demand for homes will push prices higher over the next year. If mortgage rates remain low, it will continue to bolster the home buying activity and pull the home prices up.

Real estate investors need to move aggressively when they find a single-family rental property that makes the numbers work—with a certainty of financing behind them. Knowing their exposure through Lima One Capital’s line of credit is one way to do this, and some investors may choose to pay cash on properties and then cash-out refinance after closing.

4. Tampa, FL

Florida’s greater Tampa Bay area has consistently ranked as one of the top 10 real estate markets in the U.S. over the past few years. Experts believe Tampa’s real estate market will meet or exceed the performance of the national housing market during 2021.

The greater Tampa Bay market encompasses three distinct cities — Tampa, St. Petersburg, and Clearwater — scattered across two counties: Hillsborough, and Pinellas. Each city offers a variety of real estate investment opportunities including suburban residential neighborhoods, the revitalization of historic districts, or long-term residential and commercial rentals in high-density downtowns.

Tampa Real Estate Market Stats:

  • Population (metro area): 2,911,000
  • Occupancy rate: 92.3%
  • Percentage of renters: 44%
  • Tampa average monthly rent : $501 – $2,000+
  • Florida average monthly rent: $771 – $1,610
  • U.S. average monthly rent: $1,603 – $2,036

What Does This Mean for Real Estate Investors?

Tampa is experiencing steady job growth created by higher-paying professions and business services that are spurring the city’s economic growth. The result is a rapidly rising demand for rental housing in Tampa and the surrounding areas of St. Petersburg and Clearwater, leaving rental inventory low.

Markets across the nation are experiencing a tight housing inventory, but Tampa’s supply is even less than the national average. Right now, Tampa, Florida has just over one month’s supply of housing inventory, which has driven median home prices up 14.3% YOY. Thankfully, the Tampa market wasn’t as adversely affected by COVID-19 as other major metros like New York City, San Francisco, or Seattle. Its smaller population, affordability, and vast geographic area mean fewer residents are inclined to search elsewhere for housing despite continued shutdowns from the pandemic.

Florida was also quicker to loosen COVID-19 restrictions compared to other states like New York or California. Businesses have returned to full operating status, laws relating to eviction moratoriums are in place, and popular area tourist attractions and nightlife have resumed to pre-pandemic norms, which has helped fuel economic recovery for the state to some degree. The housing market in Tampa is forecast to be one of the most active real estate markets in 2021, and a top city for investors to consider while creating their rental property investment strategy.

According to the Tampa Bay Business Journal, home sales in Tampa are expected to increase 8.7% while home prices are expected to grow 7.5% YOY. This is a recipe for investors to profit with cash-flowing rentals and a strong pool of potential tenants. Tampa shouldn’t be overlooked when it comes to making a rental property investment. Tampa’s real estate market presents ample opportunity for real estate investors.

3. San Diego, CA

Southern California’s housing market is steadily booming, and San Diego is no exception. The San Diego real estate market weathered the COVID-19 pandemic successfully and continues to see tight availability in both single-family and multifamily housing.

San Diego Real Estate Market Stats:

  • Population (metro area): 3,272,000
  • Occupancy rate: 96%
  • Percentage of renters: 39%
  • San Diego average monthly rent: $701 – $2,000+
  • California average monthly rent: $1,061 – $2,437
  • U.S. average monthly rent range: $1,603 – $2,036

What Does This Mean for Real Estate Investors?

The San Diego metro area real estate market has weathered the pandemic with a shrinking inventory in both single-family and multifamily housing. Rental prices have remained largely unchanged, apartment occupancy is very strong, and multifamily permits have risen while single-family lot availability and issued permits have decreased. The combinations of these statistics have created a high demand for rental housing.

Overall, San Diego’s best investment opportunities remain in the multifamily and single-family rental markets. San Diego boasts some of the highest gross profits in the nation when flipping a home. So, while a good fix and flip opportunity might be rare, it could reap huge benefits. The ROI for a fix-and-flip rental property in San Diego increased 20% during the pandemic – leading to an average gross profit of $149,500 for fix and flip investors. It also has a price-to-rent ratio of 26% indicating it’s more affordable to rent in San Diego. Additionally, San Diego is ranked 29 out of 98 nationwide markets in overall multifamily development activity.

Market experts predict that San Diego’s real estate market will continue to be weighted for sellers. Based on the forecast for 2021, investors can expect to see many of the same factors impacting the market as this year continues. Experts expect there will be few homes for sale, low mortgage rates, and a very limited number of distressed sales. So, while investors will have to work to find rental properties, they can profit significantly when they do, making San Diego a prime city for rental investments.

2. Atlanta, GA

Atlanta metro’s home prices rebounded quickly during COVID-19 and have continued to do so post-COVID. Comparatively, it took the capital of Georgia and its real estate market nearly eight years to rebound after the Great Recession of 2008. Home prices in Atlanta have surged since the summer of 2020. The number of homes being listed on the market has dropped, and the average number of days on the market has decreased as well.

Atlanta has long been a popular real estate investment market, and it remains in high demand heading in 2021. Atlanta’s real estate market is limited, but new home buyers are flooding the market and a decrease in homes for sale has caused prices to surge.

Atlanta Real Estate Market Stats:

  • Population (metro area): 5,911,000
  • Occupancy rate: 94.7%
  • Percentage of renters: 57%
  • Atlanta average monthly rent: $501 – $2,000+
  • Georgia average monthly rent: $632 – $1,229
  • U.S. average monthly rent: $1,603 – $2,036

What Does This Mean for Real Estate Investors?

Atlanta is mirroring the same national trend of families wanting to move to less-dense suburbs and into larger homes. The Atlanta metro area real estate market experienced some dramatic changes during COVID. The median home price increased, the number of homes listed plummeted, and the average days on the market fell.

While rent and rental occupancy initially dropped at the beginning of the pandemic, they are both back on the rise once again. Rental occupancy is currently stable and strong. Single-family new construction permits have increased, while multifamily new construction permits have decreased. The combination of these statistics has created a high housing demand overall and caused many investors to turn toward Atlanta when searching for rental investment opportunities.

Market experts predict that Atlanta’s housing market will remain hot in 2021. Single-family rental purchases and single-family new construction are currently the best investments in the Atlanta area as a whole.

Miami, Florida beach and cityscape

1. Miami, FL

Miami’s real estate market is unique compared to the rest of the markets. Right now, many U.S. cities are battling shrinking inventory which has pushed home values through the roof and resulted in sellers getting top value in a short amount of time. Miami, however, doesn’t have that problem. With a housing inventory more than five times the national average, Miami is one of the few major U.S. metros with a balanced market, meaning the housing market is keeping up with the demand from buyers.

Miami Real Estate Market Stats:

  • Population: 6,167,000
  • Occupancy rate: 94.2%
  • Percentage of renters: 45%
  • Miami average monthly rent: $701 – $2,000+
  • Florida average monthly rent: $771 – $1,610
  • U.S. average monthly rent: $1,603 – $2,036

What Does This Mean for Real Estate Investors?

Miami’s housing market is unique compared to the rest of the country’s real estate markets. Right now, many U.S. cities are battling a tight housing inventory which has pushed home values through the roof and resulted in sellers getting top value in a short amount of time. Miami, however, doesn’t have that problem.

It should come as no surprise that Miami’s housing prices and rental rates are higher than the national average. Miami and its surrounding cities are expensive to live in, but the high cost of living doesn’t seem to dampen demand. Rental vacancies have steadily decreased while the price of rent has slowly risen over time, showing a long-term trend of increased demand for rental property.

Considering the overall state of the housing and rental market in Miami, the city presents an opportunity for long-term rental investors to purchase cash-flowing properties. If you’re wondering where to invest in real estate, Miami should be high on your list.

Prepared in Any Market

While inventory might be harder to find, investors with strong real estate investment strategies can still profit. It’s now more important than ever to have a lender capable of helping you:

  • Secure a loan with the best price and maximum leverage for your next rental investment
  • Close properties quickly and certainly
  • Run your home construction and rehab projects smoothly

Lima One Capital offers that and much more for real estate investors across the nation. We are experts in financing rental properties and portfolios and helping you develop your rental property investment strategy. Our team of experienced professionals will help guide you through our rental loan programs regardless of your experience level.

If you’re interested in obtaining a loan for a rental property or looking for financing for another real estate investment project, call us to learn more. Get started today and scale your rental property portfolio with Lima One, the nation’s premier lender for real estate investors.