Two factors make a real estate purchase a winner—affordability and growth. Whether you’re looking to put down some roots or provide a nest egg for your future, real estate investment is a wise decision.
Affordability can be determined fairly easily by the median home price in the area and the amount of high-paying jobs available. Growth potential is determined by population increases and a healthy job market.
However, those looking to invest and possibly rent out their property will be looking for some additional factors as indicators of a good buy. One of these is capitalization rate (CAP), which is the rate of return on investment based on income that a property is expected to generate. The other factor is the potential supply and demand of rental properties in the area.
We’ve analyzed these indicators to predict the top 10 cities for real estate investment in 2018. There are some unlikely winners as well as some more obvious choices, but all of the chosen cities have one thing in common—they have a high opportunity for return on an investment.
1. Jacksonville, Florida
The first of three Florida cities on this list, Jacksonville is the best city for real estate investment in the US. With a low median home price of around $232,000 and a population growth rate of 2.1 percent, Jacksonville is in that rare place where home values are still incredibly low, but are rapidly appreciating in value.
Its abundance of urban parks, plentiful beaches and vibrant social scene make Jacksonville the perfect place to settle down. With a diverse job market and CAP rates at a healthy 7.2 percent on average, Jacksonville is the best place for real estate investment right now.
2. Raleigh, North Carolina
The combination of a high growth rate (2.5 percent) and the highest job growth ranking on our final list, Raleigh is a great buy with a median price of $278,300. Because of its thriving job market, rental vacancies are at a low 4.3 percent and CAP rates sit at a high 5.6 percent. Young professionals are driving the demand for homes, likely because of the plethora of jobs available. Those looking to enter the Raleigh housing market quickly will likely see high returns on their investment.
3. Columbus, Ohio
Its median home price sits just under $200,000, making Columbus an affordable place to invest in a property. However, its in-demand seller’s market makes property likely to appreciate quickly. With a combination of a growing population and a robust job market, those buying in Columbus are in a great spot.
Its prosperous economy is constantly drawing new pilgrims to the city, many of which are millennials, creating a vibrant nightlife and atmosphere. With employers like Honda, Nationwide Insurance and JPMorgan Chase & Co. headquartered in the area, it’s unlikely its real estate climate will cool down anytime soon.
4. Charlotte, North Carolina
Charlotte is a city on the rise, with new restaurants and attractions drawing visitors and new citizens alike. CAP rates sit at 6.8 percent in Charlotte on average, mainly due to a rapidly growing population and plentiful job opportunities.
Average single-family home prices still are at an affordable $234,4000, making it a profitable place to invest. While the culture and unique feel of the city develops, there is an exciting chance to get in the market early.
5. Minneapolis-St. Paul, Minnesota
Low rental vacancy rates (4.1 percent) and a solid job growth ranking make it very likely that an investment property in Minneapolis will yield a solid return on investment. CAP rates reflect this at 6.9 percent, further reassuring those thinking about buying property here.
The historic atmosphere and cooler temperatures coupled with the big-city amenities offered make the Twin Cities a distinctive place to live. Their proximity to the lakes gives residents the opportunity for outdoor activities, even during the harsh winters. With an average home price of $259,000 it’s still an optimal time to invest in Minneapolis-St. Paul.
6. Atlanta, Georgia
While Atlanta mostly has mediocre scores across the board, its low median home price of $204,900 and rapidly growing population make Atlanta a likely environment for appreciation. They were hit hard by the housing market collapse, but it’s beginning to rebound, and this is a great chance to snatch up some real estate.
Its job market is also recovering, offering a promising future. Home to many Fortune 500 companies including Coca-Cola, UPS and Delta Airlines, it’s highly likely that homes prices will continue to rise.
7. Orlando, Florida
A rapidly growing population and healthy job market boosted CAP rates in Orlando to 6.9 percent, a solid number for those looking to invest. Posting some of the highest gains in the United States during 2017, home values in Orlando are expected to continue to increase over the next few years.
While two or three years ago Orlando had one of the highest foreclosure rates in the country, investors rehabbed many of these properties and are not having trouble finding buyers. Orlando’s vibrant social scene and abundance of theme parks make it an exciting place to live.
8. Oklahoma City, Oklahoma
Oklahoma City’s low median home price of $160,200, its solid population and job growth give it one of the highest CAP rates on our list at 8.4 percent. Investors should jump at the chance to acquire property at low prices with predictions of high returns.
Supply is low and demand is rising which means that the price of real estate is also likely to rise. The city’s revitalization and strong culture are attracting an influx of younger residents, giving the region a more energetic feel. It’s the perfect environment for a real estate boom.
9. Cincinnati, Ohio
Similar to Oklahoma City, Cincinnati’s low median home price and rapid growth give it an extraordinary average CAP rate of 9.4 percent. Its post-recession rebound has helped those who were smart enough to invest see large returns.
The still low average home price of $168,600 makes it relatively easy to enter the market here, and the area is expected to see strong growth in the future. Excellent public school systems and the abundance of Fortune 500 companies should ensure its growth doesn’t lose momentum.
10. Indianapolis, Indiana
A CAP rate of 7.7 percent helps Indianapolis into the top 10 despite its lower population and job growth than many of the cities on our list. The housing market in Indianapolis has seen rapid gains over the past year as property values skyrocket.
With a walkable and entertaining downtown area, there are plenty of activities for residents, and it’s sports and racing events draw thousands of visitors each year. It’s relatively low cost of living makes it a great place to live or invest.
11. Tampa, Florida - Tampa is growing rapidly, and its tropical climate and relatively low cost for housing make it a great opportunity to enter the investment market.
12. Nashville, Tennessee - A healthy job growth ranking and population growth make Nashville a good investment. With a low but fast-increasing median home price, it’s the perfect time to buy in Music City.
13. Louisville, Kentucky - CAP rates sit at 7.1 percent because of Louisville’s low housing prices, high population and job growth. Prices shouldn’t be low for long, though, so it’s a great time to join the market.
14. Austin, Texas - While some would argue that the median housing price is already fairly high in Austin, there are still great investments to be found. With one of the highest population growths on the list, the appreciation isn’t set to stop any time soon.
15. Seattle, Washington - The median home price is already quite high in Seattle, but high population growth and one of the strongest job markets on the list make Seattle still a good buy as well.
Methodology: We took the top 100 most populated cities in the US and ranked them according to CAP rate, job growth ranking, population growth percent and single family home price. We then assigned points for each rank in each category.
These points were then multiplied by the percent rank of importance (HomeUnion CAP Rate: 25 percent, Glassdoor Job Growth Ranking: 20 percent, Rental Vacancy Rates: 20 percent, Population Growth: 20 percent and Low Single-Family Home Price: 15 percent). We then took the top 50 cities and analyzed their markets further, determining if they were a good fit and throwing out any that disqualified.
Those with the highest scores across the board made our list.
- Cap Rate:
- Median Single-Family Home Prices:
- Job Growth Ranking:
- Population Growth:
- Rental Vacancy Rates: