You’ve worked hard to save up some money, and now you want to make it grow. Real estate sounds like a smart move, but there’s one big question holding you back: Where should I buy?
We’ve managed hundreds of units across different markets, and can tell you this: the property itself matters, but the location makes or breaks your return.
We’ve seen beautiful homes sit empty in the wrong neighborhood, and average ones stay filled with great tenants because they were in the best place to buy a rental property.
So if you’re thinking about expanding your portfolio this year, don’t just chase the hot zip codes or the cheapest deals. Learn how to read a market like an investor who plans to win long term.
In this guide, we’re breaking down what actually makes a location profitable and the top cities to keep your eyes on.
What Makes The Best Place to Buy A Rental Property
Anyone can Google “best cities to invest in.” But that’s just the first step. To be a successful investor, it’s important to look past the headlines and learn how to spot what others miss. That’s where the real opportunities are.
Before you can pick the right place, you need to train your eye. Your investor lens. That’s how you build the ability to make decisions with confidence, not guesswork.
Here’s what experienced investors look for when choosing a rental market:
Supply and Demand
The best real estate markets have low vacancy and high demand. If homes are sitting empty or rents are dropping, that’s a red flag. Look for places where good rentals get snapped up quickly.
The Right Neighborhood for the Right Tenant
Families want good schools and safe streets. Students care about being close to campus. Young professionals want easy commutes and walkable areas. Know who you’re trying to attract, then match your property to their needs.
Moreover, renters love convenience. Properties near grocery stores, hospitals, schools, and public transportation usually stay occupied. Walk the area or use a map to see what’s nearby.
Safety and Crime Rates
Nobody wants to live where they don’t feel safe. Use local crime data to get a clear picture of the area. If you wouldn’t live there, chances are your ideal tenant wouldn’t either.
That said, if you live in a high-crime area and still want to invest locally, don’t write it off just yet. Look for micro-neighborhoods that are improving:
- Places with community investment
- New businesses
- Rising homeownership
Talk to local property managers or realtors who understand the street-by-street differences. Sometimes, the block next to a tough one is where the real opportunity is.
Job Market and Economic Growth
Areas with steady job growth attract people. And people need places to live. Check out local industries and major employers. A strong local economy supports strong rental demand.
However, even with a strong local economy, high property taxes and tough rental laws can cut into your profits. Make sure you understand the local rules and costs before you buy.
Appreciation Potential and Average Rents
Some markets offer better long-term growth. Look at trends over the past few years. Are home values going up? Is the area improving? That can tell you a lot about future value.
A great deal on paper doesn’t always mean positive cash flow. Check rental rates in the area and run the numbers carefully. Your goal is a rental property investment that covers its expenses – and then some.
How The Experts Research and Analyze Markets
Once you understand what makes a strong rental location, the next step is knowing how to find one. This is where smart investors separate themselves from the pack.
They don’t guess. They don’t hope. They follow the data, trust their process, and connect with the people who know the market best.
1. Start With Population and Job Growth
When more people move into a city-and jobs are growing to support them, that’s a good sign. It means more renters and more stability for you. Look at:
- Census data
- Local government sites
- Economic development reports
2. Use the Price-to-Rent Ratio
This ratio helps you compare what it costs to buy a home versus what you can charge for rent. In simple terms: if it’s too expensive to buy and rents aren’t keeping up, your returns might suffer. A lower price-to-rent ratio often means better cash flow opportunities.
3. Watch for Affordability
Everyone’s talking about the hot markets, but that’s not always where the smart money goes. Some of the best returns come from up-and-coming cities where prices are still reasonable and rents are rising. Think long-term potential, not just short-term buzz.
4. Lean on Local Knowledge
There’s only so much you can learn from spreadsheets. Talk to real estate agents or property managers who work in the area. They’ll give you the real story about what’s happening on the ground. They know which neighborhoods are picking up and which ones to avoid.
5. Compare More Than One Market
Lastly, if you want to successfully invest in top rental property locations, don’t get tunnel vision. Line up a few different cities or neighborhoods and stack them side by side. Once you have your list, look at all of the following:
- Population trends
- Job growth
- Rent prices
- Property taxes
- Vacancy rates
Top Cities to Buy Rental Property
Now that you know what to look for and how to analyze a market, let’s talk about where to start. These are the cities investors have been watching closely over the years. Each one offers a healthy mix of strong demand and solid rental returns.
Boise, Idaho
Boise has been on the rise for a while now, and it’s showing no signs of slowing down. The city has experienced rapid appreciation, with home values steadily increasing. Strong rental demand is driven by a growing population and a quality of life that attracts families and young professionals alike.
Tampa and Orlando, Florida
The Tampa-St. Pete area is booming as well, with population growth and rising rents. The area benefits from a business-friendly climate that attracts employers. Its proximity to beaches and a vibrant downtown adds to its appeal. It’s an ideal place for investors looking for strong returns and consistent rental demand.
Part of the renowned Research Triangle, these cities are packed with:
- Tech jobs
- Research opportunities
- Steady demand
Known for its top-tier universities and healthcare sector, Durham and Raleigh offer long-term stability and plenty of potential for rental property investors.
Sitting just an hour outside of Tampa is the Orlando market. Orlando is more than just a vacation hotspot. It’s also becoming a growing tech hub. The city’s strong tourism market drives short-term rental demand, while its expanding tech sector adds to long-term rental stability. The combination of tourism and high rental yields makes it a prime target for investors.
Austin, Texas
Austin has exploded in popularity with its tech boom and population surge. The city offers high rental yields, driven by a steady influx of tech workers and entrepreneurs. Known for its vibrant culture and growing housing demand, Austin remains one of the top markets for real estate investors.
Nashville, Tennessee
With a diverse economy, a booming healthcare industry, and a thriving music scene, Nashville has become a top choice for investors. The city’s low vacancy rates and steady rental demand make it a solid pick for long-term, reliable cash flow.
Oklahoma City, Oklahoma
Lastly, we have Oklahoma City (OKC). OKC is a hidden gem, offering affordability and long-term growth potential. The city’s stable economy, low cost of living, and increasing job opportunities create a market where investors can find great deals without overpaying. It’s a smart choice for those looking for consistent cash flow with less competition.
Choosing the Best Location for Your Investment Goals
Now that we’ve covered some of the top cities to consider, the next step is choosing one that best aligns with your investment strategy. Every investor has different goals, and it’s important to choose a location that fits your specific needs.
First things first:
- What are you looking for?
- Do you want immediate cash flow?
- Or are you betting on property appreciation over time?
Some investors focus on one or the other, while others go for a hybrid approach, balancing cash flow with long-term growth. Your strategy will determine which locations make sense, so decide where you want your returns to come from.
Every market has its risk profile. Rapidly appreciating areas can offer big rewards, but they come with higher risk. On the other hand, markets with steady, predictable rental income offer stability and lower risk.
It’s important to be clear about your own risk tolerance before you invest. What can you handle, and how soon do you need to see returns? Your timeline and comfort level with risk will help you narrow down your best options.
Special Considerations For Out-of-State Investing
Following up from earlier, investing locally does come with the advantage of hands-on control. But it also means more competition. Out-of-state investing opens up more opportunities, but it comes with challenges if you’re not familiar with the area.
The question is: can you handle the logistics of managing properties from afar, or do you prefer to stay closer to home? It all depends on your investment style and what resources you have.
If you take one thing away from all this, let it be this: never skip the research. You can analyze data all day long, but nothing beats a site visit.
Get boots on the ground. Walk the neighborhoods and get an in-person feel for the area. The better your understanding of your options, the more confident your investment decisions will be.
How Much Should I Budget for My First Rental Property?
One of the most common questions we get is how much you should actually budget for your first rental property. The answer depends on a few factors, but we’ll break it down in simple terms.
First, you need to factor in the cost of the property itself. This will obviously vary depending on the location and type of property you’re looking at. Be sure to include:
- The price of the home
- Closing costs
- Any immediate repairs
- Upgrades that might be needed
You don’t want to walk into a property without a clear idea of the upfront costs involved. Even a move-in-ready property will require ongoing maintenance. So set aside funds for routine repairs and unexpected issues that might pop up.
A solid rule of thumb is to save around 1% of the property’s value per year for maintenance costs. This will also help to cover any license fees that come up as well.
If you’re not planning to manage the property yourself, you’ll need to budget for property management services. On average, property management companies charge between 8% and 12% of the monthly rental income.
While this is an added expense, it’s worth every penny. A professional property management company handles:
- Tenant screening
- Rent collection
- Maintenance
- All the little headaches that come with managing a property
This allows you to be hands-off while still reaping the rewards of your investment. It also helps ensure that your property is always properly maintained and your tenants are happy, leading to lower vacancy rates and long-term profitability.
Make Your Investment Work Harder Than You Do
Choosing the best place to buy a rental property is one of the most important decisions you’ll make as an investor. Don’t waste time chasing one “hot” city after another. Focus on using the methods above to find the right fit property for your goals and lifestyle.
At Reed & Company, we help investors like you make smart, confident moves every single day. Whether you’re local or investing from across the country, our team knows how to take the guesswork out of managing your property and help you grow your portfolio with ease.
If you’re ready to turn your investment into income without burning out in the process, we’d love to be your boots on the ground. Submit your property online to get started. Let’s build something great together.
