Rental properties give you, the investor, the power to determine your profits.
Let’s be clear: Buying a home doesn’t always give you the biggest return on your money.
But there is a way to earn similar, or even greater, investment returns in real estate: owning a rental property.
In this case, you’re getting paid to own something, rather than paying to own it. The mortgage is often covered by rental income, and if you play your cards right you’ll profit after covering insurance, taxes, and maintenance costs.
That’s different from expecting a big return when it comes time to sell a home you’ve been living in long-term. Owning a rental property is also different than buying a fixer upper you hope to sell for a profit, which isn’t always the cash cow it’s chalked up to be.
But like anything in real estate — whether you’re buying or renting — it’s all about location. HomeUnion, an online residential real estate investment management firm, recently released a list of the top markets for single-family rentals based on how they’re expected to perform through 2017.
To compile the ranking, HomeUnion analyzed 30 rental markets to determine which have the best local economies, the highest annual investment returns after operating costs (including insurance, taxes, and maintenance), and the strongest real estate market conditions considering rent increases, rent-to-income ratios, turnover times, and supply of new construction.
Below are the 13 best places to buy a rental property right now. Based on the median investment home price, we’ve also included the average mortgage payment, assuming a 30-year fixed mortgage with a 20% down payment and a 5% interest rate.
Median investment home price: $145,000
Mortgage payment: $623
Median rent: $1,431
Annual return after operating costs: 6.7%
Median investment home price: $166,300
Mortgage payment: $714
Median rent: $1,437
Annual return after operating costs: 5.4%
Median investment home price: $235,000
Mortgage payment: $1,009
Median rent: $1,798
Annual return after operating costs: 5.2%