Best and Worst Cities to Own Investment Property in 2016

Home prices are rising across the nation, and in some cities they’re reaching levels not seen since the before the financial crisis. But with wages remaining fairly steady, the rise in home prices is bad news for homebuyers — and good news for investors.

GOBankingRates.com surveyed 61 of the 100 most populous cities in the U.S. to determine which cities are the best and worst for owning investment property — that is, owning property to rent out to tenants. To evaluate each city, the study used four main factors:

• Employment growth: The percent change in the city’s number of employed people year-over-year.
• Population growth: The percent change in the city’s population year-over-year.
• Increase in home values: The percent change in the city’s median home value year-over-year.
• Years to pay off property: The number of years it would take for rental income to pay off the median home value.

If you’re wondering if investing in real estate is a good idea in your city, click through to find out where you’re likely to make money in a short amount of time — and where you’re not.

The cities that made the bottom of our list of the best and worst cities to own investment property have many factors in common. Whether it’s a falling city population, poor employment growth or stagnant home values, these 15 cities are the worst places to own rental property.

• Employment growth: 1.1%
• Population growth: 0.70%
• Increase in home values: 1.9%
• Years to pay off single-family home: 9.54

Winston-Salem just sneaks into the bottom 15 cities on our list. Employment growth in the city was a mere 1.1 percent from June 2015 to June 2016 (and 0.9 percent from July 2015 to July 2016). The city’s population growth isn’t the worst in the nation, but an increase of only 0.70 percent still puts the city toward the bottom for that category.

Home values in Winston-Salem have also barely budged, increasing only 1.9 percent from 2015. But, it will take you a little under 10 years to pay off the property’s value.

• Employment growth: 2.7%
• Population growth: -0.30%
• Increase in home values: 1.7%
• Years to pay off single-family home: 7.26

Like Winston-Salem, home values in Baltimore have grown very little at only 1.7 percent, far lower than other cities’ home values on this list. Baltimore also experienced a drop in population growth.

On the plus side, however, it will take only a little over seven years to make money from renting out a home in Baltimore.

• Employment growth: 1.4%
• Population growth: -0.11%
• Increase in home values: 9.2%
• Years to pay off single-family home: 6.61

The Memphis population dropped by 0.11 percent from 2014 to 2015, and employment has only grown by 1.4 percent in the city. Rental property owners can enjoy, however, the relatively short time it takes to make their money back from rent, thanks to having one of the lowest home values on our list.

• Employment growth: 1.7%
• Population growth: 0.17%
• Increase in home values: 3.4%
• Years to pay off single-family home: 9.71

Cincinnati is going through a rough patch. The city’s population grew by just 0.17 percent, and its employment growth was minor as well. At $110,700, the median home value in Cincinnati is one of the lowest on our list, and home values only increased by 3.4 percent in Cincinnati.

• Employment growth: 1.6%
• Population growth: 0.30%
• Increase in home values: 2.5%
• Years to pay off single-family home: 10.64

As with Cincinnati, Wichita home values have barely increased. Also nagging for property owners looking for tenants: The city’s population increased by a very modest 0.30 percent. Employment growth also isn’t one of Wichita’s strongest numbers, increasing by only 1.6 percent.

• Employment growth: 2%
• Population growth: 0.06%
• Increase in home values: -0.1%
• Years to pay off single-family home: 8.36

El Paso stands out as one of the worst cities to own investment property mainly because of its home values. The median home value in the city is $112,100, lower than Cincinnati and Wichita home values. Worse, however, is that home values have actually decreased since 2015.

• Employment growth: 1%
• Population growth: 0.35%
• Increase in home values: 4.7%
• Years to pay off single-family home: 9.45

Employment grew by only 1 percent in Omaha. This city also had one of the smallest population growths on our list. Meanwhile, Omaha home values have fared poorly compared to other cities, only increasing by 4.7 percent.

• Employment growth: -0.2%
• Population growth: 0.82%
• Increase in home values: 7.3%
• Years to pay off single-family home: 9.18

Property owners looking to rent their space in Tulsa will have to deal with negative employment growth. From June 2015 to June 2016, employment dropped by 0.2 percent. The median home value in Tulsa is also on the lower side at $109,600 — though its home values increased by more than the average.

• Employment growth: 2.1%
• Population growth: -0.46%
• Increase in home values: 3.6%
• Years to pay off single-family home: 4.13

Detroit has one of the lowest median home values — $37,200 — on our list. On top of that, home values increased by 3.6 percent since last year, which is among the smallest increases. Property owners also have to contend with a Detroit population that has fallen by 0.46 percent.

However, it’s not all bad news for investment property owners in Detroit. At fewer than five years, Detroit is the city where it takes the shortest amount of time for property owners to pay off the value of a single-family home from rent income.

• Employment growth: 2.2%
• Population growth: 0.65%
• Increase in home values: 1.3%
• Years to pay off single-family home: 36.29

Hawaii is home to the second-highest home value, $979,800, behind only San Francisco’s $1 million-plus median value. With Honolulu’s expensive houses, home values have grown by a mere 1.3 percent. And to make matters worse for property owners, it would take over 35 years for your rental income to pay off the value of a single-family home.

• Employment growth: 1.7%
• Population growth: -0.46%
• Increase in home values: 0%
• Years to pay off single-family home: 4.54

Cleveland ranks behind only Detroit for having the lowest median home value, at $51,800. And in terms of rises in home value, Cleveland experiences a zero percent increase. To add insult to injury, Cleveland rental property owners face a city population that has declined by 0.46 percent, which is as bad as Detroit’s population loss.

• Employment growth: 0.60%
• Population growth: 0.41%
• Increase in home values: 1.5%
• Years to pay off single-family home: 14.81

Employment growth in Virginia Beach is very sluggish, increasing by only 0.6 percent. The median home value is a high $283,500 but has only grown by 1.5 percent — which is among the smallest increases on the list.

• Employment growth: 1.3%
• Population growth: -0.11%
• Increase in home values: 0.40%
• Years to pay off single-family home: 10.08

The Windy City is one of the worst cities to own investment property for a few reasons: It experienced one of the smallest employment growths, as well as population growths. Plus, it would take a little over 10 years of rent to pay off a property’s value in Chicago.

• Employment growth: 0.60%
• Population growth: -0.45%
• Increase in home values: 9.9%
• Years to pay off single-family home: 7.21

Home values in Pittsburgh are on the low side at $110,200. The city also suffers from a sluggish 0.6 percent employment growth while its population has shrunk by 0.45 percent. Fortunately, for owners in Pittsburgh, it takes less time than the average to pay off a single-family home value.

• Employment growth: 0.50%
• Population growth: -0.55%
• Increase in home values: 2.3%
• Years to pay off single-family home: 13.81

Anchorage has one of the highest home values on our list at $314,800. However, the city has also seen very little employment growth, which could be related to the fact that Anchorage has suffered the biggest drop in population of the cities on our list.

Based on home values and the median rent of a single-family residence in Anchorage, it would take nearly 14 years to pay off owning the property’s value, making it the worst city to own investment property.

There are some common themes when it comes to finding the best city to own investment property. Notably, Florida and Texas both have multiple cities that rank among the best places to own property for rent. So you might want to consider owning a home in these states. Click through, and find out why these 15 cities are ripe for renting out homes.

• Employment growth: 3.7%
• Population growth: 1.56%
• Increase in home values: 4.4%
• Years to pay off single-family home: 9.50

Richmond rides its way into the No. 15 spot thanks to solid employment numbers. From June 2015 to June 2016, the city’s population by 3.7 percent, well above the national increase in employment. Though home values only increased by 4.4 percent since 2015, rental property owners in Richmond can pay off the median home value in fewer years than most major U.S. cities.

• Employment growth: 2.7%
• Population growth: 2.19%
• Increase in home values: 6.9%
• Years to pay off single-family home: 11.43

If you’re a rental property owner in Charlotte, you can enjoy a city population that has increased by 2.19 percent and has grown year-over-year since 2010. Employment in Charlotte grew by 2.7 percent from June 2015 to June 2016, though the increase in home values is just average.

• Employment growth: 3.6%
• Population growth: 1.53%
• Increase in home values: 8.8%
• Years to pay off single-family home: 10.13

Florida fared very well in our study of the best cities to own investment property, with four cities making it into the top 15. Jacksonville came in at No. 13 thanks largely to its employment figures. Since last year, Jacksonville experienced nearly a 4 percent increase in employment — one of the highest percentages on our list.

• Employment growth: 3.6%
• Population growth: 1.60%
• Increase in home values: 10.1%
• Years to pay off single-family home: 13.42

Rental property owners in Phoenix will find a city where the population has grown by about 7.77 percent from 2010 to 2015. The median home value in Phoenix increased by a solid 10.1 percent. Also key for increasing the number of renters: Employment growth in the city is a solid 3.6 percent.

• Employment growth: 3.1%
• Population growth: 1.53%
• Increase in home values: 14.3%
• Years to pay off single-family home: 10.88

Nashville provides fertile ground for investment property owners. Employment is growing in the city, as is the population, in general. But Nashville’s best stat for property owners is its increase in home values. From June 2015 to June 2016, home values increased 14.3 percent, one of the biggest increases on our list.

• Employment growth: 2.7%
• Population growth: 2.23%
• Increase in home values: 6.1%
• Years to pay off single-family home: 9.09

Miami’s population is growing pretty quickly: From 2014 to 2015, it grew by 2.23 percent, and from 2010 to 2015, close to 10 percent. Employment growth in Miami could be higher, but property owners won’t have to wait as long to afford to pay off the building they own. With Miami’s median rent of $2,600, it would take only nine years of rental income for an owner to make their money back.

• Employment growth: 3.1%
• Population growth: 2.42%
• Increase in home values: 5.6%
• Years to pay off single-family home: 13.38

Population and employment are both on the move in Raleigh — and in the right direction. The city had a large percentage increase in population, and employment seems to be on the rise. The main drawback for rental property owners: Low rents and high home values mean it would take more than 13 years to afford the median home value.

• Employment growth: 3%
• Population growth: 1.92%
• Increase in home values: 20%
• Years to pay off single-family home: 18.19

Employment growth in Portland is a strong 3 percent, and the population grew by roughly 12,000 people from 2014 to 2015.

Portland homes have a median value of $403,800, and it appears it will only go higher in the near future. From June 2015 to June 2016, Portland home values increased by 20 percent, the biggest jump year-over-year out of all the cities listed.

• Employment growth: 3.3%
• Population growth: 1.53%
• Increase in home values: 17.6%
• Years to pay off single-family home: 7.97

Like Portland, Dallas is seeing record-level rises in its home values. From last June, Dallas home values increased by 17.6 percent, the largest increase behind only Portland. Luckily, the median home value in Dallas is below the national median, meaning property owners can pay off the median home value in under eight years.

In more good news, the Dallas economy seems to be booming with employment growing by a healthy 3.3 percent.

• Employment growth: 3.8%
• Population growth: 1.84%
• Increase in home values: 13.9%
• Years to pay off single-family home: 17.15

As Reno’s population increases, so has its employment rate, growing by 3.8 percent since 2016. Plus, property owners can take advantage of Reno’s 13.9 percent increase in home values — one of the highest on our lists.

• Employment growth: 4%
• Population growth: 2.09%
• Increase in home values: 9.3%
• Years to pay off single-family home: 18.81

Austin, too, is seeing its population expand, growing by 14.2 percent on average from 2010 to 2015. Like other major Texas cities, Austin’s economy is on a roll and employment grew by 4 percent since last year.

• Employment growth: 3.5%
• Population growth: 2.29%
• Increase in home values: 16.7%
• Years to pay off single-family home: 19.81

Seattle boasts a large population increase, as well as a big employment increase. The median home value in Seattle ranks among the top five highest cities on our list — and they continue to rise. From June 2015 to June 2016, Seattle home values rose by 16.7 percent, one of the biggest jumps among cities on our list.

• Employment growth: 3.2%
• Population growth: 2.80%
• Increase in home values: 10.5%
• Years to pay off single-family home: 15.11

The median home value in Denver is $380,800, and values continue to rise.

One drawback, though: Denver’s median rent hasn’t kept up the pace, so property owners would have to wait about 15 years for their rental income to pay off the property’s value. But Denver’s positive factors, including its strong employment growth, make it the third best city to own investment property.

• Employment growth: 3.5%
• Population growth: 2.51%
• Increase in home values: 11.6%
• Years to pay off single-family home: 9.66

Tampa might have one of the hottest real estate markets nowadays, and the numbers show. The population grew by 2.51 percent from 2014 to 2015, and Tampa also shines in employment growth.

Along with employment, Tampa home values are also on the rise, increasing by a whopping 11.6 percent since last year. The good thing is Tampa’s median home value falls below the national median, and combined with a median rent of $1,400, it would take fewer years to pay off owning the property from tenants’ rent.

• Employment growth: 4.5%
• Population growth: 2.99%
• Increase in home values: 11%
• Years to pay off single-family home: 12.40

And finally, the No. 1 best state to own investment property: Orlando. Property owners will find much to like in this Florida city.

For starters, Orlando’s 2.99 percent increase in population is the biggest percentage increase on the list. And, employment growth in Orlando takes first place. Home values in Orlando rose by 11 percent since June 2015, but it will only take about 12 years to pay off.

Methodology: GOBankingRates.com surveyed 61 of the 100 most populous U.S. cities, based on 2015 Census estimates, and evaluated each city by four main factors. (1) employment growth, sourced from the Bureau of Labor Statistics Economic Summaries in August 2016, with the percentage representing the employment change from June 2015 to June 2016 in each city; (2) population growth, based on and sourced from the 2014 and 2015 Census, with the percentage representing the change in population from 2014 to 2015; (3) increase in home values, based on Zillow Home Value, with the percentage representing the change in median home values for single-family homes from June 2015 to June 2016, sourced August 2016; (4) years to pay off property, which was based using the median home value for July 2016 and the median rent for a single family residence for July 2016, both sourced from Zillow; median rent was multiplied by 12 to obtain yearly rent and then home value was divided by yearly rent to determine how many years it would take for the home to be paid off from rental income using current home values and rent prices for each city.