The Best and Worst Cities To Own Investment Property

Across the United States, home prices are rising fast, especially because available inventory is low throughout the nation. In some cities, prices are reaching levels not seen since the before the financial crisis.

With wages remaining fairly steady, the rise in home prices is bad news for homebuyers -- but good news for investors. To determine which cities are the best and worst for owning investment property -- that is, owning property to rent out to tenants — GOBankingRates surveyed 67 of the 100 most populous cities in the U.S.

The study used four main factors to evaluate each city: employment growth, population growth, increase in home values and rental yield. It turns out that the country's biggest cities aren't necessarily the best places to own investment property.

The 20 Worst Cities To Own Investment Property

The cities that made the bottom of our list have many factors in common. Whether it's a falling population, poor employment growth or stagnant home values, these 20 cities are the worst cities to own real estate.

Conversely: Best Cities for First-Time Homebuyers

20. Portland, Oregon

• Population growth: 2.9%
• Employment growth: 2.3%
• Increase in home values: 1.1%
• Rental yield: 4.7%

Portland suffers from a mixed-bag of good and bad numbers for key factors, which help place it at No. 20 among the worst cities to own investment property. Property is relatively expensive, the average home listing price being $469,000. Based on a median rent of $1,848, it'd take over decades for rental income to pay off buy-in. Coincidentally, Portland is also one of the worst cities for millennial homeowners.

19. Corpus Christi, Texas

• Population growth: 0.8%
• Employment growth: -0.9%
• Increase in home values: 3.4%
• Rental yield: 7.6%

Texas is well-represented in this study, with three cities ranking among the best cities to own investment property. Unfortunately, in the case of Corpus Christi, it's being recognized for being home to one of the worst cities to own investment property.

The biggest drags on Corpus Christi are weak population growth, stagnating home values and employment that declined year-over-year. However, this city could be experiencing an improving local economy -- it's one of the U.S. cities that is getting richer, found a separate study.

18. San Diego

• Population growth: 2.2%
• Employment growth: 2.2%
• Increase in home values: 7.1%
• Rental yield: 4.4%

San Diego sneaks into the bottom of our list at No. 18. Although the city experienced healthy population growth, employment grew less than average. The very expensive cost of buying a home makes paying off the cost of owning property difficult. San Diego's 4.4 percent rental yield is one of the worst in the study, and it would take close to 23 years for rental income to pay off a property.

17. Cincinnati

• Population growth: 0.1%
• Employment growth: 1.1%
• Increase in home values: 7.5%
• Rental yield: 6.6%

Like many cities in America's "old Midwest," Cincinnati has had to deal with stagnating, if not outright declining, population and employment growth. On the bright side, Cincinnati is one the top U.S. cities where you can own a home for $1,000 a month or less.

16. San Francisco

• Population growth: 2.0%
• Employment growth: 1.8%
• Increase in home values: 9.8%
• Rental yield: 4.1%

The biggest drawback for San Francisco is your buy-in, aka the city's absurd $1.25 million median listing price. Even with a median rent of $4,219, the rental yield is small and it'd take close to 25 years to pay off.

15. Boston

• Population growth: 2.1%
• Employment growth: 1.6%
• Increase in home values: 7.5%
• Rental yield: 4.4%

Boston also has a steep buy-in, $725,000 being the median price for all homes. Even with fairly expensive median rent of $2,629, the rental yield is a mere 4.4%. At that rate, it'd take you 23 years for rental income to pay off.

However, the city's housing marketing has proven to be resilient in the past. In fact, it's one of the 10 cities that survived the last housing crash.

14. Wichita, Kansas

• Population growth: 0.4%
• Employment growth: 1.0%
• Increase in home values: 5.5%
• Rental yield: 6.1%

Although Wichita has been named one of the best cities for first-time homebuyers in a previous study, employment growth is sluggish, increasing by only 1% year-over-year. The median home value grew just 5.5% over the same period, which is quite low.

13. Baton Rouge, Louisiana

• Population growth: -0.5%
• Employment growth: 0.7%
• Increase in home values: 9.9%
• Rental yield: 7.1%

Baton Rouge is held back by less-than-average growth in home values and employment. Even worse, the city's population dropped in absolute terms year-over-year.

12. Virginia Beach, Virginia

• Population growth: 0.3%
• Employment growth: 0.7%
• Increase in home values: 1.6%
• Rental yield: 6.2%

Virginia Beach ranks among the worst cities to own investment property largely due to poor population numbers and less-than-1% employment growth, not to mention a meager 1.6% increase in home values.

11. Los Angeles

• Population growth: 1.4%
• Employment growth: 1.3%
• Increase in home values: 8.7%
• Rental yield: 4.3%

Los Angeles is a tough city for investment property because of the very steep buy-in. The median home price is approximately $800,000. Even with a median rent of $2,881, the city suffers from one of the lowest rental yields.

See: How I'm Surviving Living in California's Expensive Housing Market

10. Louisville, Kentucky

• Population growth: 0.5%
• Employment growth: 1.3%
• Increase in home values: 5.5%
• Rental yield: 5.6%

Louisville is held back by poor population growth and weak rental yield. Home values increased by a disappointing 5.5% year-over-year. Low rents will make it take nearly 18 years to pay off the price of the average property.

9. Pittsburgh

• Population growth: -0.16%
• Employment growth: 1.0%
• Increase in home values: 15.6%
• Rental yield: 5.9%

Pittsburgh made the worst list mainly because of its decline in population and weak rental yield. Home values increased significantly year-over-year, but Pittsburgh's median rent of $1,135 means the payoff is low. Home prices won't stay low, however, considering Pittsburgh is among the top 20 cities where home prices are rising fastest.

8. Buffalo, New York

• Population growth: -1.1%
• Employment growth: 1.6%
• Increase in home values: 15.2%
• Rental yield: 10.9%

Home prices in Buffalo are among the nation's most affordable. In fact, it's one of the 30 cities where you can buy a home for under $100,000.

But on the downside for property owners, rent is quite low too, the median being just $898. You could pay off your property in under 10 years, but with several consecutive years of declining population, the future doesn't look bright for Buffalo.

7. New Orleans

• Population growth: 0.9%
• Employment growth: 0.8%
• Increase in home values: 2.5%
• Rental yield: 5%

New Orleans's principal weaknesses are its paltry less-than-1-percent increase in employment and population over the years. Add to that a year-over-year increase of just 2.5% in home values and low rental yield. It's not coincidental that New Orleans is also one of America's cities most in danger of a housing crisis.

6. Anchorage, Alaska

• Employment growth: -0.1%
• Population growth: -0.3%
• Increase in home values: 0.5%
• Rental yield: 6.7%

Anchorage experienced the third-lowest increase in home values year-over-year. Anchorage has a better-than-average rental yield, and it would take just 13 1/2 years to pay off the property. But the city has seen very little employment growth, which could be related to the city's outright decline in population.

5. Chicago

• Population growth: -0.6%
• Employment growth: 0.8%
• Increase in home values: 3.0%
• Rental yield: 5.9%

The Windy City is one of the worst cities to own investment property for a few reasons: Unimpressive employment growth, a shrinking population and one of the worst year-over-year changes in home values. On top of all that, Chicago is high up on the list of cities most in danger of a housing crisis.

4. Honolulu

Home values increased very little year-over-year. In addition, Honolulu's expensive home prices compared to rents diminish rental yield significantly. As a result, it would take close to 23 years to pay off the property.

3. New York

• Population growth: 0.5%
• Employment growth: 1.2%
• Increase in home values: 7.8%
• Rental yield: 3.2%

Getting into the real estate market in the Big Apple is rather costly. You might want to avoid buying in New York, especially considering it's one of several U.S. cities where it's cheaper to rent.

With a median home price of $848,000, it'll take you quite a while to pay off your property with rental income. Based on a median rent of $2,279, it'd take more than three decades to pay off the price of the home.

2. Milwaukee

• Population growth: -1.5%
• Employment growth: 0.8%
• Increase in home values: 10.7%
• Rental yield: 9.3%

Milwaukee suffered an imbalance in key factors. Its 10.7% rental yield is actually very solid, but it's undermined by weak employment and population figures. Milwaukee has one of the worst year-over-year increases in employment, and its population shrank by thousands of people over the last two years.

1. St. Louis

• Population growth: -2.2%
• Employment growth: 0.9%
• Increase in home values: 6.0%
• Rental yield: 6.9%

St. Louis suffered from the biggest decline in population from 2016 to 2018. Employment growth year-over-year was also disappointing, less than 1%. Although St. Louis might not be ideal for a property owner looking to profit, it is one of the best cities for aspiring millennial homeowners.

The 20 Best Cities 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.

20. Atlanta

• Population growth: 4.0%
• Employment growth: 1.7%
• Increase in home values: 14.1%
• Rental yield: 5.1%

Atlanta has become a boomtown in America's southeast, home to Turner Broadcasting as well as a burgeoning tech scene. In fact, Atlanta has major potential of becoming the next Silicon Valley.

The city's population has risen 4% over the last two years. And home values surged 14.1% year-over-year, one of the biggest jumps in the study.

19. Denver

• Population growth: 3.8%
• Employment growth: 2.8%
• Increase in home values: 7.3%
• Rental yield: 5.2%

From 2016 to 2018, Denver's population grew close to 4%, while employment grew 2.8% from 2017 to 2018. Both rates are better-than-average, as is Denver's median rent of $2,060, the 11th-highest rent in the study.

18. Kansas City, Missouri

• Population growth: 2.7%
• Employment growth: 1.5%
• Increase in home values: 11.5%
• Rental yield: 6.5%

Kansas City makes it onto the top-20 list thanks to above-average population growth and rental yield. The median home price is an affordable $200,000. Though rents could be higher, based on the median rent, you could pay off your property in just over 15 years.

17. Boise, Idaho

• Population growth: 2.6%
• Employment growth: 3.6%
• Increase in home values: 13.3%
• Rental yield: 5.2%

Boise boasts the largest growth in employment year-over-year, as well as healthy population growth. Appreciation in home values is encouraging, but rental yields remain on the low side in Boise, contributing to its No. 17 spot overall.

16. Fort Wayne, Indiana

• Population growth: 1.3%
• Employment growth: 1.8%
• Increase in home values: 9%
• Rental yield: 7.6%

Fort Wayne made our list of the best cities to invest in real estate for 2016, 2017 and 2018. Lucky for prospective buyers, it's one of the principal cities where home prices are falling.

With a median home price of $159,900, property is quite affordable in Fort Wayne. Even with a rent of only $1,018 a month, you'd still pay off your property in a little over 13 years, faster than in most cities.

15. Durham, North Carolina

• Population growth: 4.2%
• Employment growth: 1.4%
• Increase in home values: 11.7%
• Rental yield: 5.6%

Durham is one of two North Carolina cities to make our list of the best cities to buy investment property. The city's 4.2% growth in population is one of the highest rates. Home values rose 11.7% year-over-year and are expected to rise another 5.4% within the year.

14. Madison, Wisconsin

• Population growth: 3.1%
• Employment growth: 1.1%
• Increase in home values: 9.6%
• Rental yield: 6.6%

Wisconsin's capital city fared much better than Milwaukee in our study of the best cities to own investment property. Where Milwaukee's population fell, Madison's grew more than 3% in the last two years. Plus, affordable home prices yet higher rents make for solid rental yield, and it'll take only 15 years to pay off your property.

13. Austin, Texas

• Population growth: 3.7%
• Employment growth: 3.3%
• Increase in home values: 7.8%
• Rental yield: 5.3%

Austin's population growth exceeded fellow Texan city San Antonio's, but Austin ranks slightly lower overall due to weaker home value appreciation and lower rental yield. If you're a potential homebuyer, Austin is one of the few cities where homes are getting cheaper.

12. San Antonio

• Population growth: 3.3%
• Employment growth: 2.2%
• Increase in home values: 8%
• Rental yield: 6.4%

A booming economy and solid population growth make San Antonio an attractive city in which to own real estate. From 2016 to 2018, its population grew at a rate of 3.3%, which is better-than-average, as is its year-over-year employment growth.

11. Las Vegas

• Population growth: 3.3%
• Employment growth: 2.8%
• Increase in home values: 15.9%
• Rental yield: 5.3%

Sin City saw healthy growth across the board. The city's 3.3% population growth over two years is the biggest, and its employment growth is better-than-average.

Another huge win for Las Vegas is its home value appreciation year-over-year, which is almost 16%. However, you'll need to act quickly and buy because part of the city is where home prices are increasing in America.

10. St. Petersburg, Florida

• Population growth: 3.3%
• Employment growth: 2.3%
• Increase in home values: 14.6%
• Rental yield: 5.6%

Like Tampa, St. Petersburg employment grew 2.3%, and its population growth was very solid as well. But St. Petersburg edged out Tampa with a 14.6% rise in home values, one of the best in the study. And if you're looking to act fast and buy in, St. Petersburg is one of the top U.S. cities where home prices are getting slashed.

9. Tampa, Florida

• Population growth: 4.6%
• Employment growth: 2.3%
• Increase in home values: 13%
• Rental yield: 5.1%

Tampa finished among the best cities to invest in real estate for the third year in a row. The population grew by more than 4.6% over the last two years, and its 2.3% employment growth is better-than-average.

8. Charlotte, North Carolina

• Population growth: 3.7%
• Employment growth: 2.7%
• Increase in home values: 11.9%
• Rental yield: 5.5%

Charlotte is another hot spot in the U.S. South, experiencing a solid 3.7% population growth over the last two years. Even better, employment in Charlotte grew by 2.7% from 2017 to 2018. Though the rental yield is less than average, home values rose nearly 12% since last year.

Check Out: 20 Cities Where Small-Business Owners Are Thriving

7. Phoenix

• Population growth: 4%
• Employment growth: 3.1%
• Increase in home values: 9.6%
• Rental yield: 5.5%

Rental property owners in Phoenix will find favorable conditions such as one of the highest rates of population growth and better-than-average employment growth too. The city has been experiencing a major boom in recent years, but success has consequences.

6. Seattle

• Population growth: 5.9%
• Employment growth: 3.3%
• Increase in home values: 11.3%
• Rental yield: 4.1%

A leading factor making Seattle one of best cities for real estate investment is its surging population. With an increase of 5.9% from 2016 to 2018, Seattle has the highest rate of growth overall. Seattle also boasts one of the greatest year-over-year increases in employment.

5. Columbus, Ohio

• Population growth: 2.3%
• Employment growth: 1.2%
• Increase in home values: 9.2%
• Rental yield: 7.9%

Columbus home values experienced better-than-average growth year-over-year. Another key benefit for property owners is comparatively high rent prices versus the cost to buy the property. With a median list price of $179,900 and median rent of $1,184, Columbus has the sixth-highest rental yield and takes less than 13 years to pay off the property.

4. Colorado Springs, Colorado

• Population growth: 4.1%
• Employment growth: 3%
• Increase in home values: 10.3%
• Rental yield: 5.6%

Colorado Springs is buoyed by big population growth, an impressive 4.1% from 2016 to 2018. This bodes well for an enterprising property owner, not to mention the city's solid year-over-year increase in employment. However, you'll have to hurry and buy in because Colorado Springs is one of 20 cities where cost of living is rising fastest.

3. Jacksonville, Florida

• Population growth: 3.1%
• Employment growth: 3.2%
• Increase in home values: 10.1%
• Rental yield: 6.8%

Florida seems to be where to invest in real estate in 2018 and beyond. Jacksonville is one of five cities making it into the top 20.

With a 3.2% growth in employment in one year and 3.1% increase in population over two years, Jacksonville is conducive to prospective property owners. Its rental yield is better-than-average as well.

2. Orlando, Florida

• Population growth: 4.8%
• Employment growth: 3.5%
• Increase in home values: 10.7%
• Rental yield: 5.7%

For the third year in a row, Orlando is among the top five best cities to own investment property. But for the first time, it's no longer the No. 1 best place to invest in property.

Orlando's 4.8% increase in population is beaten only by Seattle and Miami's growth. And, Orlando's employment growth is second behind only Seattle, making it the runner-up for the best cities to own investment property.

1. Arlington, Texas

• Population growth: 2.2%
• Employment growth: 3.4%
• Increase in home values: 10.3%
• Rental yield: 7.5%

Arlington takes the No. 1 spot in our study of where to buy investment property in the U.S. Over the last two years, the city has sustained healthy population growth. Plus, its 3.4% year-over-year rise in employment is among the best.

In addition, Arlington's median home price of $240,000 is on the affordable side, yet rents are comparatively high at $1,498. This makes for a strong rental yield and the ability to pay off your property in a little over 13 years. Altogether, this makes Arlington the best city to own investment property.

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Methodology: GOBankingRates.com surveyed 67 of the 100 most populous U.S. cities, based on 2016 Census estimates, and evaluated each city by four main factors. (1) employment growth, sourced from the Bureau of Labor Statistics Economic Summaries in July 2018, with the percentage representing the employment change from May 2017 to May 2018 in each city; (2) population growth, based on changed from 2016 to 2018; (3) increase in home values, based on Zillow index, with the percentage representing the change in median home values for all homes from June 2017 to June 2018, sourced August 2018; (4) rental yield, the percentage value of rental income compared to the property's market price, based on data from Zillow.

About the Author

Andrew DePietro

Andrew DePietro is a finance writer with years of experience covering topics such as taxation, Social Security, entrepreneurship, investing, real estate and housing markets. His work has appeared on MSN, Yahoo Finance, Fortune, Forbes, CBS and U.S. News. Before writing for GOBankingRates, Andrew worked as a research assistant and graduated from the University of Pennsylvania with a degree in History.

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