The Best and Worst Cities to Own Investment Property

Home prices are rising across the nation. In some cities, they’re reaching levels not seen since the before the financial crisis.

With wages remaining fairly steady, the rise in home prices is bad news for home buyers — but good news for investors. In this study, 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. The study used four main factors to evaluate each city:

1. Employment growth: The percent change in the city’s number of employed people year-over-year.
2. Population growth: The percent change in the city’s population year-over-year.
3. Increase in home values: The percent change in the city’s median home value year-over-year.
4. Rental yield: The percentage value of rental income compared to the property’s market value

Click through to find out where you’re likely to make money in a short amount of time, and see if real estate investing is a good idea.

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 places to own property.

20. San Diego

• Employment growth: 1.9%
• Population growth: 1.13%
• Increase in home values: 8.4%
• Rental yield: 4.57%

San Diego sneaks into the bottom of our list. 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 4.57 percent rental yield is the worst in the study, and it would take close to 22 years for rental income to pay off a property.

19. Milwaukee

• Employment growth: 0.6%
• Population growth: -0.73%
• Increase in home values: 9.1%
• Rental yield: 10.88%

Milwaukee suffered an imbalance in key factors. Its 10.88 percent 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 0.73 percent.

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18. Wichita, Kan.

• Employment growth: 1.2%
• Population growth: 0.22%
• Increase in home values: 7.9%
• Rental yield: 7.42%

Low rents have a negative impact on Wichita investment property earnings. Demographic figures make it even less appealing. Population growth has stagnated, and the city’s 1.2 percent increase in employment is below average, as is the increase in home values.

17. Houston

• Employment growth: 1.9%
• Population growth: 0.82%
• Increase in home values: 4.6%
• Rental yield: 5.38%

Houston’s numbers are mediocre at best. Its employment and population growth are below average, and home values increased only slightly — and less than every other Texas city surveyed. Plus, comparatively cheap rents reduce the city’s rental yield so that it would take 18 and a half years to pay off the property.

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16. Los Angeles

• Employment growth: 1.7%
• Population growth: 0.69%
• Increase in home values: 7.6%
• Rental yield: 4.65%

The year-over-year increase in employment and home values in Los Angeles are below average. Rental yield in the city is also quite low. With a median rent of about $2,900 and listing price of close to $750,000, rental income would take approximately 21 and a half years to pay off a property.

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15. St. Louis

• Employment growth: 1.2%
• Population growth: -1.1%
• Increase in home values: 11.4%
• Rental yield: 7.67%

Employment growth in St. Louis is sluggish, increasing by only 1.2 percent. The median home value grew by over 11 percent, which is quite high. But St. Louis suffered from the largest decline in population in the entire study, largely negating any positive factors.

14. Baltimore

• Employment growth: 1.1%
• Population growth: -1.08%
• Increase in home values: 3.7%
• Rental yield: 11.12%

Baltimore nominally has a great rental yield, but, other key factors undermine this positive aspect. Employment growth is less than encouraging, and home values grew very little from July 2016 to July 2017. More alarming is Baltimore’s shrinking population, which dropped by nearly 1.1 percent.

13. Baton Rouge, La.

• Employment growth: 1.1%
• Population growth: -0.26%
• Increase in home values: 6.7%
• Rental yield: 7.94%

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. Santa Ana, Calif.

• Employment growth: 1%
• Population growth: 0.06%
• Increase in home values: 9.8%
• Rental yield: 5.95%

Home values in Santa Ana rose above the average rate, but other factors landed this city at No. 12. Santa Ana’s main problems are its 1 percent employment growth and its minuscule population growth. Despite high rents, the expensive price of residential properties makes it difficult to make a profit in the long-run.

11. Chicago

• Employment growth: 1.3%
• Population growth: -0.32%
• Increase in home values: 7.9%
• Rental yield: 6.74%

The Windy City is one of the worst cities to own investment property for a few reasons: Unimpressive employment growth, a shrinking population and a decline in rent growth from July 2016 to July 2017. However, Chicago is one of the cities where incomes are growing quickly.

10. San Jose, Calif.

• Employment growth: 1.6%
• Population growth: 0.27%
• Increase in home values: 7.3%
• Rental yield: 4.89%

High real estate prices in San Jose make it difficult to earn money back on your investment. Based on a median list price of $825,000 and rent of $3,361, it would take over 20 years to pay off a property.

9. Bakersfield, Calif.

• Employment growth: 1%
• Population growth: 1.05%
• Increase in home values: 3.2%
• Rental yield: 6.13%

Bakersfield’s principal weaknesses are a paltry 1 percent increase in employment and the fourth-smallest increase in home values in the study.

8. Pittsburgh

• Employment growth: 1.3%
• Population growth: -0.08%
• Increase in home values: 4.9%
• Rental yield: 6.95%

Pittsburgh made the list mainly because of its home values. The city’s median home value is $124,100, which is among the lowest in the study, and it experienced only 4.9 percent growth, the ninth-lowest rated overall.

7. Winston-Salem, N.C.

• Employment growth: 0.2%
• Population growth: 0.7%
• Increase in home values: 5.8%
• Rental yield: 7.67%

Winston-Salem is the only North Carolina city to make the worst half of the list. Home values are on par with Pittsburgh’s and experienced little increase in year-over-year. The city’s 0.2 percent increase in employment is tied for the lowest amount of growth of any city.

6. Anaheim, Calif.

• Employment growth: 1%
• Population growth: 0.5%
• Increase in home values: 5.7%
• Rental yield: 5.59%

Anaheim ranks poorly despite having the third-highest monthly rent ($2,701) of the cities in our survey. Employment barely increased year-over-year, and home values were sluggish, too. With an average rental yield of 5.59, it would take almost 18 years for rent to pay for the price of a property.

5. Honolulu

• Employment growth: 1.3%
• Population growth: -0.07%
• Increase in home values: 4.8%
• Rental yield: 4.6%

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 22 years to pay off the property.

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4. Anchorage, Ala.

• Employment growth: 0.7%
• Population growth: -0.04%
• Increase in home values: 0.8%
• Rental yield: 7.41%

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.

3. Virginia Beach, Va.

• Employment growth: 0.2%
• Population growth: 0.17%
• Increase in home values: 3.8%
• Rental yield: 6.56%

With a year-over-year increase of 3.8 percent, Virginia Beach’s growth in home values is the seventh-lowest in the study. The city’s 6.56 percent rental yield is around the overall average, but weak employment and population growth make Virginia Beach less-than-promising for investors.

2. Tulsa, Okla.

• Employment growth: 0.3%
• Population growth: 0%
• Increase in home values: 0.6%
• Rental yield: 6.66%

Home values in Tulsa are on the low side at $108,400, and they saw the smallest growth of any surveyed city except New Orleans. Tulsa also suffers from a sluggish 0.3 percent employment growth and stagnated population growth. And though the median list price in Tulsa is only $175,000, cheap rents lead to a 6.66 percent rental yield, which would make it take roughly 15 years to pay off the property.

1. New Orleans

• Employment growth: 0.7%
• Population growth: 0.45%
• Increase in home values: -1.9%
• Rental yield: 5.73%

New Orleans suffered from an outright decline in median home value year-over-year, which hurt its ranking. Employment growth was tied with Anchorage for the fourth-lowest increase. Its rental yield of 5.73 percent was also below average, making it take about 17 1/2 years to pay off the property.

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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. So, you might want to consider owning a home in these locations.

20. Columbus, Ohio

• Employment growth: 2.3%
• Population growth: 1.18%
• Increase in home values: 8.7%
• Rental yield: 8.51%

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 $163,840 and median rent of $1,162, Columbus has the fourth-highest rental yield and takes less than 12 years to pay off the property.

19. Minneapolis

• Employment growth: 3.2%
• Population growth: 0.86%
• Increase in home values: 8.2%
• Rental yield: 7.25%

The Twin Cities both rank among the best cities to invest in real estate. Minneapolis’ economy is healthy, with employment growing by 3.2 percent since last year.

Home values rose roughly 7.7 percent from 2015 to 2016 and 8.2 percent from 2016 to 2017. And with a median rent of $1,630 and a median list price of $269,900, the rental yield means you can pay off the property in under 14 years, two years less than the average.

18. San Antonio

• Employment growth: 2.4%
• Population growth: 1.67%
• Increase in home values: 11.7%
• Rental yield: 6.28%

A booming economy and solid population growth make San Antonio an attractive city in which to own real estate. Home values increased by 11.7 percent year-over-year, the eighth-highest rate of growth in the study.

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17. Charlotte, N.C.

• Employment growth: 2.9%
• Population growth: 1.89%
• Increase in home values: 9%
• Rental yield: 5.82%

Charlotte experienced 1.89 percent population growth and has grown year-over-year since 2010. Even better, employment in Charlotte grew by 2.9 percent from July 2016 to July 2017. Though the rental yield is less than average, rents have increased by 3.3 percent since last year and seem poised to continue.

16. Arlington, Texas

• Employment growth: 2.9%
• Population growth: 1.09%
• Increase in home values: 7.8%
• Rental yield: 8.33%

Its population might not have grown as much as San Antonio’s, but Arlington ranks higher overall thanks to stronger employment growth and a higher rental yield. Arlington real estate owners can pay off their properties in only 12 years.

15. Reno, Nev.

• Employment growth: 3.6%
• Population growth: 1.91%
• Increase in home values: 7.9%
• Rental yield: 4.91%

Reno made our list of the best cities to invest in real estate 2016 and ranks again this year. Though its rental yield is low, it likely won’t stay that way based on the trajectory of rents, which rose by an impressive 6.1 percent between 2016 and 2017. As Reno’s population has increased so has its employment rate, which grew 3.6 percent since 2016 and gave Reno one of the highest rates in the study.

14. Richmond, Va.

• Employment growth: 2.2%
• Population growth: 1.61%
• Increase in home values: 14.9%
• Rental yield: 6.02%

Richmond has improved since last year, moving up one spot to No. 14. Population growth beat the average, but the best thing for property owners is the rise in home values. From July 2016 to 2017, the median home value jumped by almost 15 percent, the second-highest behind only Seattle.

13. Phoenix

• Employment growth: 3%
• Population growth: 2.03%
• Increase in home values: 9.5%
• Rental yield: 5.73%

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. The median home value in Phoenix increased by a solid 9.5 percent.

12. Durham, N.C.

• Employment growth: 3%
• Population growth: 2.13%
• Increase in home values: 8.9%
• Rental yield: 5.98%

Durham is the second North Carolina city to make our list of the best cities to buy investment property. The city’s 2.13 percent growth in population is one of the highest rates, and its employment growth is excellent, too. Home values rose 8.9 percent year-over-year and are expected to rise another 4.3 percent within the year.

11. St. Paul, Minn.

• Employment growth: 3.2%
• Population growth: 0.96%
• Increase in home values: 9.9%
• Rental yield: 8.37%

St. Paul is the other half of the Twin Cities, and it managed to beat out Minneapolis. Home values increased by nearly 10 percent year-over-year, and employment rose 3.2 percent, both figures beating the average. St. Paul’s rental yield of 8.37 percent lets you pay off your property in just under 12 years.

10. Las Vegas

• Employment growth: 3.7%
• Population growth: 1.68%
• Increase in home values: 10.1%
• Rental yield: 5.47%

Sin City saw healthy growth across the board. The city’s 3.7 percent employment growth is the third-highest overall, and population growth is better-than-average. Another win for Las Vegas is its double-digit percentage growth in home values year-over-year.

9. Nashville, Tenn.

• Employment growth: 3.6%
• Population growth: 0.96%
• Increase in home values: 13.7%
• Rental yield: 5.71%

Nashville ranked No. 11 in last year’s best cities to invest in real estate 2016. This year it moved up the list due to job growth and home values. Nashville ranks among the top cities, with its 3.6 percent increase in employment. Even more impressive, Nashville’s home values rose close to 14 percent, the second consecutive year of double-digit growth.

8. Atlanta

• Employment growth: 3.5%
• Population growth: 2.06%
• Increase in home values: 9.5%
• Rental yield: 5.59%

From 2015 to 2016, Atlanta’s population grew by 2.06 percent, and it grew 12 percent from 2010 to 2016. Employment growth in Atlanta is also excellent at 3.5 percent. Home values increased by a better-than-average 9.5 percent. Though the current rental yield is on the low side — if the trajectory of rental growth continues — the city saw a nearly 6 percent increase from July 2016 to July 2017 — this could change for the better.

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7. Boise, Idaho

• Employment growth: 4.5%
• Population growth: 1.3%
• Increase in home values: 8.7%
• Rental yield: 5.7%

Boise boasts the largest growth in employment year-over-year, as well as healthy population growth.

6. Seattle

• Employment growth: 2.5%
• Population growth: 3.05%
• Increase in home values: 15.5%
• Rental yield: 4.63%

A leading factor making Seattle one of best cities for real estate investment is its surging population. With an increase of 3.05 percent, Seattle has the highest rate of growth overall. Seattle also boasts the greatest year-over-year increase in home values — 15.5 percent since last year and forecasted to rise another 5.9 percent.

5. Jacksonville, Fla.

• Employment growth: 3.6%
• Population growth: 1.55%
• Increase in home values: 10.8%
• Rental yield: 7.43%

Florida seems to be where to invest in housing in 2017. Jacksonville is one of four cities making it into the top 20. It came in at No. 5 due to a 3.6 percent employment growth and 10.8 increase in home values. Though median rent is on the low side, rental yield is still high enough to pay off a property in only 13 ½ years.

4. Cleveland

• Employment growth: 2.1%
• Population growth: -0.52%
• Increase in home values: 13.3%
• Rental yield: 14.67%

Home values and rental yield make Cleveland one of the best cities to buy real estate. Despite a declining population, home values rose significantly year-over-year. Its 14.67 percent rental yield is the highest overall and means the median rent would pay off a property in under 7 years.

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3. Tampa, Fla.

• Employment growth: 3.6%
• Population growth: 2.35%
• Increase in home values: 12.9%
• Rental yield: 5.86%

Tampa finished among the best cities to invest in real estate for the second year in a row. The population grew by more than 2 percent two years in a row, and its 3.6 percent employment growth increase easily ranks among the survey’s biggest. Lastly, property owners benefit from soaring home values, which increased by almost 13 percent year-over-year.

2. St. Petersburg, Fla.

• Employment growth: 3.6%
• Population growth: 1.68%
• Increase in home values: 14.5%
• Rental yield: 6.59%

Like Tampa, St. Petersburg employment grew 3.6 percent, and its population growth was very solid as well. But St. Petersburg edged out Tampa with a 14.5 percent rise in home values, the third best in the study. On top of that, the city’s rental yield means you could pay off your property in just over 15 years, which is less time than the average.

1. Orlando, Fla.

• Employment growth: 4%
• Population growth: 2.47%
• Increase in home values: 11.9%
• Rental yield: 5.97%

For the second year in a row, Orlando is No. 1 best place to invest in property. Orlando’s 2.47 percent increase in population is beaten only by Seattle’s, and employment growth is second behind Boise. Home values in Orlando rose by nearly 12 percent since July 2016.

Survey Synopsis

There are several unique locations on this list of the worst cities to invest in real estate. These places include non-mainland cities of Honolulu and Anchorage, the hurricane-scarred city of New Orleans and the vastly-populated LA. However, there was a noticeable trend of major Midwest cities that made the cut for the worst cities to own investment property in:

• Chicago, Ill.
• Milwaukee, Wis.
• St. Louis, Mo.
• Wichita, Kan.

Midwest cities were also included in the list of the best cities to own investment property in, suggesting that the housing market discrepancies are large from one city to another across the Midwest. Here are the Midwest cities on the list of the best places to own investment property in:

• Columbus, Ohio
• Cleveland, Ohio
• Minneapolis, Minn.
• St. Paul, Minn.

All things considered, this survey showed Florida as the superior market for owning investment property. “The Sunshine State” is home to 4 of the top 5 best cities to own investment property in, as suggested also by the absence of any Florida destinations on the list of worst cities.

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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.