The price to rent ratio helps determine whether renting a residential property is more financially practical than owning one. Real estate investors should use the price to rent ratio by city to identify the best locations for investing in rental properties. If you invest in cities where there is a strong demand for rental properties, you’ll have more opportunities to earn higher returns from a traditional rental property than investing in areas where more people can afford to buy a house rather than rent one.

What is a Good Price to Ratio for Traditional Rentals?

The price-to-rent ratio is calculated by dividing the median home price by the median annual rent. This is one of the important factors to consider when making an investment property analysis.

In general, a high price to rent ratio means that it is more expensive to buy a house than to rent one. So if the price to rent ratio in a certain city is high, it could mean that the market in that area may be good for investing in rental properties.

Generally speaking, a price-to-rent ratio of 21 or more is considered high. If the price to rent ratio by city is 21 or higher, it makes financially more sense to rent a home than buy one. This means there is a high demand for rental properties. However, if the price to rent ratio by city is 15 or lower, it means that property prices are low compared to rental rates, so people find it better to buy a house instead of renting.

A price to rent ratio from 16 to 20 is considered medium, which means that property prices are neither low nor high compared to rental rates. In areas with a medium price to rent ratio, there is a moderate rental demand and profitability is also moderate.

When investing in rental properties, make sure to know the cities with best rent to price ratio to help you maximize your profits. To help you find a profitable real estate investment opportunity in the 2022 housing market, we made a nationwide real estate market analysis to provide you with the most recent price to rent ratio by city.

Related: How to Conduct Neighborhood Research Before Buying Rental Property

US Cities with the Highest Price to Rent Ratio 2022

According to Mashvisor’s real estate data and analytics, the US cities with the highest rent to price ratio of 21 or more include the following:

  • Okemah, OK: 59
  • Williston, SC: 55
  • Olney, TX: 50
  • Arkdale, WI: 50
  • Buchanan, TN: 49
  • Linn Creek, MO: 48
  • Sturgeon Bay, WI: 48
  • Blythe, CA: 45
  • White Cloud, MI: 43
  • Abernathy, TX: 43
  • Powell, WY: 40
  • Vinemont, AL: 39
  • Sparta, WI: 39
  • New Ringgold, PA: 38
  • Harwich Port, MA: 37
  • Maple Park, IL: 37
  • Bridgeton, NJ: 36
  • Okmulgee, OK: 36
  • Mimbres, NM: 36
  • Schenevus, NY: 35
  • Manchester, MI: 35
  • Greybull, WY: 34
  • North Webster, IN: 33
  • Green Lake, WI: 32
  • Colfax, LA: 32
  • Taft, TX: 32
  • Gainesville, AL: 32
  • Clinton, AR: 31
  • Levant, ME: 31
  • Mena, AR: 31
  • Rome City, IN: 31
  • Robertsville, MO: 31
  • Bassett, VA: 30
  • Halls, TN: 30
  • Harrison, MI: 30
  • Crescent, OK: 30
  • Yorktown, TX: 30
  • Ada, MI: 30
  • El Reno, OK: 30
  • Mammoth Spring, AR: 29
  • Schriever, LA: 29
  • Henryetta, OK: 29
  • Vero Beach, FL: 29
  • Penns Grove, NJ: 29
  • Coatesville, IN: 29
  • Kahului, HI: 29
  • Chattahoochee, FL: 28
  • Belle Center, OK: 28
  • Roxbury, CT: 28
  • Fort Davis, TX: 28
  • Malone, NY: 28
  • Fairland, IN: 28
  • Bradford, OH: 28
  • Hinton, OK: 27
  • Bolton, MS: 27
  • Wellington, FL: 27
  • Mancelona, MA: 27
  • Umatilla, FL: 27
  • Glen Arm, MD: 27
  • Englewood, FL: 27
  • Ashdown, AR: 27
  • White Springs, FL: 26
  • Tazewell, TN: 26
  • Oakland, TN: 26
  • Easton, CT: 26
  • Monticello, AR: 26
  • Blackwood, NJ: 26
  • Santa Fe, NM: 26
  • Groveland, CA: 26
  • Cave Creek, AZ: 25
  • Sunbright, TN: 25
  • Weed, CA: 25
  • Dayton, KY: 25
  • Union, MO: 25
  • Purcell, OK: 25
  • Lady Lake, FL: 25
  • Sheridan, OR: 25
  • Splendora, TX: 25
  • Orange, TX: 25
  • Seligman, AZ: 24
  • Weldon, CA: 24
  • Huddleston, VA: 24
  • Surgoinsville, TN: 24
  • Waianae, HI: 24
  • Pine Hill, NJ: 24
  • Semmes, AL: 24
  • Clanton, AL: 24
  • Lafayette, LA: 24
  • Plant City, FL: 24
  • Elkin, NC: 24
  • Suwannee, FL: 24
  • Neosho, MO: 24
  • Maysville, KY: 24
  • Cumberland, VA: 24
  • Kingsville, MO: 24
  • Locust Grove, OK: 24
  • Fountain Hills, AZ: 24
  • Wolcottville, IN: 24
  • Silverhill, AL: 23
  • Larose, LA: 23
  • Stuart, FL: 23
  • Manchester, GA: 23
  • Wartburg, TN: 23
  • Arcadia, FL: 23
  • Seaford, VA: 23
  • Opelika, AL: 23
  • Clarkston, WA: 23
  • Hellertown, PA: 23
  • Cloverdale, IN: 23
  • Zavalla, TX: 23
  • Soddy Daisy, TN: 23
  • Athens, TN: 23
  • Waverly, NY: 23
  • Carefree, AZ: 23
  • Snowflake, AZ: 23
  • Madison, WV: 23
  • Quitman, GA: 23
  • Dublin, TX: 23
  • Mulberry, FL: 23
  • Galena, OH: 23
  • Gate City, VA: 23
  • Haskell, OK: 23
  • Clovis, NM: 23
  • Wilmer, AL: 23
  • Beech Bluff, TN: 23
  • Pikeville, KY: 23
  • Somerville, TN: 23
  • Glenpool, OK: 23
  • Wellsville, KS: 22
  • Venice, FL: 22
  • Chickamauga, GA: 22
  • Owings Mills, MD: 22
  • Paris, KY: 22
  • Eloy, AZ: 22
  • Beggs, OK: 22
  • Brookville, IN: 22
  • Bealeton, VA: 22
  • Darien, CT: 22
  • Rockville, VA: 22
  • Lutz, FL: 22
  • South Yarmouth, MA: 22
  • Piqua, OK: 22
  • Chaska, MN: 22
  • Arivaca, AZ: 22
  • Covington, TN: 22
  • Shady Side, MD: 22
  • North Branch Twp, MN: 22
  • Somerset, NJ: 22
  • Huntington, WV: 22
  • Oak Harbor, WA: 22
  • Saltville, VA: 22
  • Vancleave, MA: 22
  • Telford, TN: 22
  • Cadiz, OH: 22
  • Aiea, HI: 22
  • Georgetown, FL: 21
  • Mansfield, AR: 21

Pros & Cons of Buying a Rental Property in a City with a High Price to Rent Ratio

The US markets with the highest price to rent ratio by city are listed above; however, we only included the cities with traditional cash on cash return of 3% and more. Before investing in any income property, it is important to understand the pros and cons of buying a rental property in areas with high price to rent ratios.

Pros

  • Most of the cities listed above see more job opportunities, strong economies, and fast-growing populations. It means that investors can expect a high demand for rental properties.
  • A high price to rent ratio means that property prices in the cities are relatively high compared to monthly rental rates. As a result, the majority of people would choose to rent rather than buy a house, which will boost the demand for traditional rentals.
  • They are considered among the best price to rent ratio cities because of the high demand for long-term rentals. Additionally, the traditional rental income in most of these locations generates an above-average return on investment.

Cons

  • Since the price to rent ratios in the above cities are high, it means that the median home prices are high, making them unaffordable, especially for beginner real estate investors.
  • Real estate investors need to do proper strategic planning to ensure they get their return on investment fast.
Price to Rent Ratio by City: 2022 US Housing Market

Strategic Planning is Important in Investment Planning

US Cities with Moderate Price to Rent Ratio 2022

Listed below are US housing markets with moderate price to rent ratios from 16 to 20:

  • Elm Grove, LA: 20
  • Yadkinville, NC: 20
  • Lehighton, PA: 20
  • Jensen Beach, FL: 20
  • Old Forge, PA: 20
  • Erskine, MN: 20
  • Thermal, CA: 20
  • Afton, TN: 19
  • Morristown, AZ: 19
  • Harrah, OK: 19
  • Kansas, OK: 19
  • Vernon, FL: 19
  • Pearce, AZ: 19
  • DeQuincy, LA: 19
  • Keyser, WV: 19
  • Valley, AL: 19
  • Brackettville, TX: 19
  • Espanola, NM: 19
  • Baltimore, OH: 19
  • Columbia, MS: 19
  • Rossville, IN: 19
  • Canton, PA: 19
  • England, AR: 18
  • North Street, MI: 18
  • Howe, OK: 18
  • Godfrey, IL: 18
  • Minden, LA: 18
  • Dunnsville, VA: 18
  • Federalsburg, MD: 18
  • Blythewood, SC: 18
  • Hazard, KY: 18
  • Greenwood, MS: 18
  • Providence Forge, VA: 18
  • Jacksboro, TX: 18
  • Kearneysville, WV: 18
  • Marianna, FL: 18
  • Belle Isle, FL: 18
  • Nowata, OK: 18
  • Decatur, IN: 17
  • Brooks, GA: 17
  • Huntington, IN: 17
  • Hazlehurst, MS: 17
  • Booneville, AR: 17
  • Stamping Ground, KY: 17
  • Middlesex, NC: 17
  • Wakefield, NH: 17
  • Wallace, NC: 17
  • Cazenovia, NY: 17
  • Yavapai, AZ: 17
  • Richmond, MO: 17
  • Greers Ferry, AR: 17
  • Hutchinson, KS: 17
  • Stanley, WI: 17
  • Moyock, NC: 17
  • Palm Desert, CA: 17
  • Boaz, AL: 17
  • Scott Depot, WV: 17
  • Spiro, OK: 17
  • Carriere, MS: 16
  • Brown City, MI: 16
  • Sayre, OK: 16
  • Palm Beach, FL: 16
  • Bloomfield, IN: 16
  • Marietta, OK: 16
  • Harrison, TN: 16
  • Keego Harbor, MI: 16
  • Stillwater, OK: 16
  • Grayson, KY: 16
  • Crab Orchard, WV: 16
  • Albion, PA: 16
  • Midland, GA: 16
  • Holly Hill, FA: 16
  • Ruskin, FL: 16
  • Waverly Hall, GA: 16
  • Climax, MI: 16

Pros & Cons of Buying a Rental Property in a City with a Moderate Price to Rent Ratio

The list above shows the moderate price to rent ratio by city with traditional cash on cash return of 4% and more. When deciding which areas to add to your real estate portfolio, the cities with moderate price to rent ratios are among the best locations.

Here are the pros and cons of buying an investment property in a location with a moderate price to rent ratio:

Pros

  • Most of the cities with moderate price to rent ratios are secondary markets with above-average economic, employment, and population growth rates. It means that investors can expect a moderate demand for rental properties.
  • A moderate price to rent ratio by city of 16 to 20 means that the average home prices are on a level with the average rental prices. It means that there is a stable rental demand with general price affordability.
  • A moderate price to rent ratio by city indicates that beginner investors can find affordable properties to invest in. Such markets usually show strong rental demand, leading to low vacancy rates, high occupancy rates, steady rental income, and positive cash flow.

Cons

  • While most investors can find a great deal in moderate price to rent ratio areas, the competition can also be challenging.
  • As investors, you should conduct real estate market analysis on each location to find one that’s a good fit for your budget, investment goals, and expected return on investment.

Related: 2022 Real Estate Market Forecast: Top 10 Predictions

US Cities with Low Price to Rent Ratio 2022

Here are the cities where the average home values are cheapest and traditional rental rates are the most expensive:

  • Owatonna, MN: 13
  • Exira, IA: 13
  • Sylacauga, AL: 12
  • Fort Madison, IA: 12
  • Smith, PA: 12
  • Rotonda West, FL: 11
  • Saint Albans, WV: 11
  • Woodburn, IN: 11
  • Dunkirk, IN: 11
  • Elkview, WV: 11
  • Gallipolis, OH: 11
  • Prentiss, MS: 10
  • Harrisburg, AR: 10
  • Newton, KS: 10
  • Britton, MI: 10
  • Colerain Twp, OH: 10
  • Colfax, IA: 10
  • Brownsville, PA: 10
  • Winslow, AZ: 10
  • Philippi, WV: 10
  • Hobbs, NM: 10
  • Thousand Palms, CA: 10
  • Emporia, VA: 10
  • Robinson Twp – NWA, PA: 10
  • Crestline, OK: 10
  • Whitesboro, NJ: 10
  • Eight Mile, AL: 10
  • Forest Hills, KY: 10
  • Marion, OH: 10
  • St Gabriel, LA: 10

Pros & Cons of Buying a Rental Property in a City with a Low Price to Rent Ratio

The list above includes cities with low price to rent ratios and traditional cash on cash return of 6% and higher. A low price to rent ratio by city indicates that investors can find really affordable homes to buy and earn more because rental prices are typically high. While it is a common strategy to invest in markets with a low price to rent ratio, investing in areas with the lowest values comes with both advantages and disadvantages.

Pros

  • Home prices are low. It means that rental property investors can find more affordable real estate investment opportunities.
  • Since rental prices are high and home values are low, you’ll see greater potential for profits and high return on investment.

Cons

  • Since home values are cheap, most people prefer to buy a home than rent. It means that rental demand is relatively low and getting your rental property occupied for a long duration can be challenging.
  • Since the demand for housing is high, it can be challenging to find the best property to invest in because of the competition.

Related: Rental Comps: What Are They and Where Can I Find Them? 

Key Takeaways

The price to rent ratio by city can help you find out whether the market conditions in a particular location favor renting or buying. It can help you decide where to invest, especially if you consider out of state investing. However, it should not be the only factor that should be considered when making investing decisions.

Using in-depth market data analysis, we can help you make an informed decision. Use our Mashvisor tools to help you find the right property for your investment goals. Click here to start searching for the best investment properties in your chosen city and neighborhood.




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