How to Find Places to Buy Rental Properties

Editor’s Note: This post was originally published in November 2019 and has been completely revamped and updated for accuracy and comprehensiveness. 

Have you ever wondered how some people can spot investment opportunities so easily? How'd they get on the inside track? Do they have a crystal ball? In reality, most people who "get lucky" in real estate rely on everything but luck to make things happen.

There is no magic trick to making money on investment properties other than hard work and research. Of course, location is one of the main factors in finding an ideal rental property.

Some of the best places to buy rental properties are hiding in under-the-radar cities across the country and corners of your own neighborhood. The good news is that there are still plenty of places with enormous potential that are affordable for real estate investors and have a strong rental market for tenants

Let's discuss some of the best strategies to find properties, some cities for rentals that might not be on your radar quite yet, and the most important things to keep an eye out for in terms of location in any city.

Two helpful strategies to find the best rental property

There are two basic ways to approach your hunt for the best real estate markets for your investment goals.

Look at local economies and high rents

Focus on established markets that offer solid local economies and high rents. This means looking at big cities or regional areas with strong and steady housing markets.

The obvious downside to this option is that you will need to make a more considerable investment if you want to enter an established, in-demand market. However, your making a bigger investment will mean you're likely to get a higher monthly return and have more rental demand for your property.

The predictability of knowing that you can enjoy steady cash flow from a rental located in an area where a shortage of tenants can also make a higher initial investment worth your while.

Identify up-and-coming cities

The second strategy is to try to identify up-and-coming cities that have the potential to demand high rents for multi-family and single-family homes.

The nice thing about going with an up-and-coming city is that you may be able to purchase multiple properties in a single neighborhood at a lower price if the market is untapped. If you’re willing to buy lower-priced properties and renovate them with some elbow grease, you could stand to make a lot of positive cash flow.

The main downside is that since the market could very well be outside your local market, you could have to hire a property manager and deal with the general inconveniences of distance.

Qualities to look for when investing in a rental property

Regardless of where you choose to invest, there are a few things to consider when choosing a rental property. Here's a checklist of factors that can help you analyze any city you're looking at as a launching point for your portfolio:

• Employment growth rate
• Population growth
• Year-over-year percentage increases in home values
• Rental yield

Of course, you should narrow things down to specific details once you have a handful of cities on your list. What can make or break a city regarding desirability for rental properties? Here's a quick checklist for determining if an area is hot:

• It has access to public transportation
• It contains or is located near a major university or research hospital
• The population is increasing
• Out-of-state transplants are showing up to live and work
• Corporations have been relocating to the area
• It is known for at least one industry
• It has a desirable school system

Don't forget that you should never make an offer on a home without looking at sale and rental prices for comparable properties in the same neighborhood! You'll then want to narrow your search to neighborhoods that have a proven track record for rental property investments.

Fast-growing rental markets in 2022

If you decide that exploring up-and-coming markets is your strategy for investing in rental properties, there are many hot markets out there to choose from that match your needs, budget, expectations, and risk tolerance. Remember, nobody expects you to be ready to invest in a penthouse in Manhattan if you're exploring the idea of making an income through real estate for the first time.

Get inspired—below are four fast-growing US cities that are prime examples of up-and-coming markets.

Orlando, Florida

Orlando is a pretty exciting place for a real estate investor to scoop up rental properties. With popular attractions like Walt Disney World and Universal Orlando, the city is ripe with opportunities for investors to make excellent profits in single-family and short-term vacation rentals.

Orlando is a great place to buy rental properties based on investment criteria such as cash flow, affordable property prices, and a growing population and job market. Here's a look at its scorecard:

• The Orlando area's labor force increased by 64,121 year-over-year in June 2022, an increase of 4.8%¹
• The population of Orlando is currently growing at a rate of 2.20% annually and has risen by 4.50% since 2020²
• The average sale price of a home in Orlando was $360K in August 2022, up 14.3% since 2021³
• The average monthly rent in Orlando is $1,937, and 63% of its households are renter-occupied⁴

San Antonio, TX

San Antonio, the second-largest city in Texas, is a historic place featuring a melting pot of cultures and an abundance of breathtaking scenery. Homebuyers have flocked to San Antonio over the last few years as high prices and mortgage rates have pushed them toward more affordable areas. Plus, as the home to one of the largest concentrations of military bases in the United States, rentals are in high demand.

In fact, according to data from the US Census Bureau, so many people are relocating to San Antonio that it was ranked as the fastest-growing US city in terms of numeric population growth. Here's a look at its scorecard:

• San Antonio's future job growth over the next ten years is predicted to be 39.6%—higher than the US average of 33.5%⁵
• According to the US Census Bureau, San Antonio, TX, had the highest numeric gain of 13,626 people since 2020⁶
• The median listing home price in San Antonio, TX was $319.9K in August 2022, up 16.4% year-over-year⁷
• The average single-family rent in San Antonio is $1,965, and 46% of its households are renter-occupied as of June 2022⁸

Boise, ID

People are flocking to Boise, Idaho, like never before. This gem, full of pristine forests, rushing rivers, and friendly vibes, attracts many transplants from the country's coasts.

Any place experiencing ultra-healthy population growth is bound to attract people looking for rental options before they make the full leap into purchasing a property. Here's a look at Boise's scorecard:

• Boise is the fastest-growing job market in the United States, with job postings increasing a whopping 94.8% year-over-year in 2021⁹
• Boise is currently growing at a rate of 1.26% annually, and its population has increased by 2.55% since the most recent census¹⁰
• The median listing home price in Boise, ID, was $485K in August 2022, up 5.2% year-over-year¹¹
• The average single-family rent in Boise is $2,645, and 38% of its households are renter-occupied as of June 2022¹²

Raleigh, North Carolina

Because the Raleigh-Durham communities are home to several universities like Duke, North Carolina State, and the University of North Carolina at Chapel Hill, rentals are constantly in high demand. It's no surprise to seasoned real estate investors that Raleigh is constantly on lists of solid rental markets. Here's a look at their scorecard:

• Raleigh's job growth has seen an increase of 17.5% over the last 10 years¹³
• Raleigh is currently growing at an annual rate of 1.35%, and its population has increased by 2.28% since the most recent census¹⁴
• The median listing home price in Raleigh, NC, was $408K in August 2022, up 11.9% year-over-year¹⁵
• The average single-family rent in Raleigh is $2,370, and 49% of its households are renter-occupied as of June 2022¹⁶

Final thoughts

There are plenty of rental properties and several strategies to find the best places to buy rental properties. Plus, there are more than a few markets to keep on your radar.

The most important thing to do is research and learn as much as possible about potential markets — looking for areas with substantial employment, rapid growth and the highest rental appreciation so you can make a profitable investment. As always, be diligent: read, visit neighborhoods, and network with other investors—you'll figure out what's right for you.

Ready to discover financing options for your rental property? Get started with Kiavi.

Sources
¹ "Deo Press Releases." Florida Department of Economic Opportunity, July 22, 2022.
²"Orlando, Florida Population 2022." Orlando, Florida Population 2022 (Demographics, Maps, Graphs). Accessed October 4, 2022.
³ Redfin. "Orlando Housing Market: House Prices & Trends." Accessed October 4, 2022.
⁴"Orlando, FL Rental Market Trends." RentCafe. Accessed October 4, 2022.
⁵"Economy in San Antonio, Texas." Best Places. Accessed October 4, 2022.
⁶US Census, Bureau. "Fastest-Growing Cities Are Still in the West and South." Census.gov, May 26, 2022. 
⁷"San Antonio, TX: Realtor.com®." realtor.com. Accessed October 4, 2022.
⁸"San Antonio, Texas Rental Market Trends." Point2. Accessed October 4, 2022.
⁹Baertlein, Andrew. "'Name a Position and We're Short:' Local Trade Workers in High Demand." ktvb.com, January 20, 2022.
¹⁰"Boise, Idaho Population 2022." Boise, Idaho Population 2022 (Demographics, Maps, Graphs). Accessed October 4, 2022.
¹¹"Idaho Housing Market." Redfin, October 14, 2020.
¹²"Boise City, Idaho Rental Market Trends." Point2. Accessed October 4, 2022.
¹³2022 compare cities job market: Charlotte, NC vs Raleigh, NC. Accessed October 4, 2022.
¹⁴"Raleigh, North Carolina Population 2022." Raleigh, North Carolina Population 2022 (Demographics, Maps, Graphs). Accessed October 4, 2022.
¹⁵"Raleigh Housing Market: House Prices & Trends | Redfin." Accessed October 4, 2022.
¹⁶"Raleigh, North Carolina Rental Market Trends.” Point2. Accessed October 4, 2022.