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Are you unsure of where to invest in a rental property? One way of finding the best places to invest in real estate is by looking at the price to rent ratio by city. The price to rent ratio is a simple real estate metric that measures what is more affordable in a given city: to buy a house or to rent one. Basically, it calculates the ratio between property prices in the real estate market and annual rent. Thus, the formula for calculating the price to rent ratio is:

Price to Rent Ratio = Average Property Price/Average Annual Rent

For example, according to data, the property price in the Dallas real estate market is $440,058 and the average monthly rent is $1,829 (annual = $21,948). Following the above formula, the price to rent ratio in Dallas is 20. But what does this number mean exactly? Well, the price to rent ratio by city is classified into three ranges:

Low (15 and below): It’s better to buy a house than to rent one
Moderate (16-20): It’s usually better to rent than to buy a house
High (21 and above): It’s definitely better to rent a house than to buy one
Why Do I Need to Know the Price to Rent Ratio by City?

Knowing the price to rent ratio in your housing market is important whether you’re a renter/homebuyer or a real estate investor. Renters/homebuyers need it to decide whether buying or renting makes more financial sense. As a real estate investor, the price to rent ratio helps you find the best places to buy a rental property for high returns.

Related: 10 Best Places to Invest in Real Estate in 2019

If you’re thinking of investing in real estate, keep reading as we show you the price to rent ratio by city in the US housing market. We also discuss the advantages and disadvantages of investing in markets with a low, moderate, and high price to rent ratio. This will help you further understand why it’s better to buy rental properties in certain markets than in others.

* Note: The following data is provided by investment property calculator. I make it easier for real estate investors to find and analyze investment properties in any city or neighborhood in the US housing market. To learn more about our product, click here.

Low Price to Rent Ratio by City

As mentioned, a low price to rent ratio falls below 15. This number indicates that it’s better to buy a home because property prices are cheap relative to rents in that city. For example, the price for houses for sale in Baltimore is $224,970 (lower than the US median price of 275,000) and the monthly rent is $1,512 (close to the US median rent of $1,625). As a result, rental demand may not be as strong in this city as it is in other real estate markets.

However, there are some advantages to investing in cities with low price to rent ratios. The most obvious one is the lower property prices. These real estate markets are a good place to consider for investors looking to buy investment properties in cash rather than take out a loan for financing. The second benefit is the high rental income. Data shows that the monthly rental income in these cities is pretty high. So if you find a renter for your investment property here, you’ll enjoy positive cash flow and good cash on cash return.

Here’s our list of the lowest price to rent ratio by city:

City Price to Rent Ratio

San Antonio, TX 15

Detroit, MI 14

Milwaukee, WI 14

Baltimore, MD 12

Moderate Price to Rent Ratio by City

A moderate price to rent ratio falls between 16 and 20. This is basically a neutral zone where it’s probably better to rent a property rather than to buy one because prices are rather high compared to rents. As a real estate investor, this tells you that you can expect decent demand for rental properties, meaning you can find good investment opportunities in these markets.

Let’s take Tampa for an example. Based on data and analytics, houses for sale in Tampa have a price of $328,520 and an average rent of $1,511. As you can see, property prices here are higher than the national, while the rental rate is lower. You can expect more people to be looking for houses to rent than to buy. So, you should definitely look into buying an investment property in Tampa!

Related: 2019 Tampa Real Estate Market Forecast

However, property investors need to carefully conduct a neighborhood analysis before investing in such real estate markets. The price to rent ratio by city doesn’t take into account how each neighborhood is performing in the city. While Tampa has a moderate price to rent ratio, does that mean that every neighborhood in the city is good for real estate investing? Of course not. This is why you need to conduct a neighborhood analysis to find a good location before buying an investment property. And after that, a real estate investor also needs to perform an investment property analysis to ensure buying a positive cash flow rental property in that neighborhood.

Here’s our list of price to rent ratio by city with moderate rates:

City Price to Rent Ratio

Dallas, TX 20

Durham, NC 20

Nashville, TN 20

Richmond, VA 20

New Orleans, LA 20

Virginia Beach, VA 20

Pittsburgh, PA 20

Scottsdale, AZ 20

Jacksonville, FL 19

Memphis, TN 19

Atlanta, GA 19

Bakersfield, CA 18

Chicago, IL 18

Tampa, FL 18

Minneapolis, MN 18

Philadelphia, PA 18

Houston, TX 18

Orlando, FL 17

Indianapolis, IN 16

Columbus, OH 16

High Price to Rent Ratio by City

A high price to rent ratio is above 21. This number tells renters/homebuyers that you should definitely rent a property and not buy one. Property prices are too expensive compared to rents in these real estate markets. Consequently, property investors are encouraged to invest here due to the strong rental demand. In fact, of the 16 cities on our list, 5 ranked in the top 10 markets to watch and 9 are in the top 20 according to an emerging trends in real estate 2019 report.

Additionally, many of them made it on lists of cities where it’s more affordable to rent than to buy in the US. In the Austin real estate market, for example, the price for homes for sale is $514,702 (more than double the national!) while the average rent is $1,898. The city’s 2019 population growth is also projected to be 3 times higher than the national average. This new population is looking for places to live and will most likely choose to rent.

Related: Report: It’s More Affordable to Rent than Buy a House in 2019

There are certain disadvantages of investing in real estate where the price to rent ratio by city is high. Of course, there is the expensive property price which not all investors can afford. Second, while the rental demand is high, the rental rate might not be high enough to cover the expenses of owning an investment property. Thus, a rental property may not always be a profitable investment in such competitive markets.

The best thing for a real estate investor to do is to use a Heatmap Tool. With this tool, you can see how different areas in the city are performing based on other real estate metrics like the cap rate, cash on cash return, and rental income. This allows you to find where the best investment properties are in these cities.

Use the heatmap tool to find metrics beside price to rent ratio by city

Here’s our list of price to rent ratio by city with the highest rates:

City Price to Rent Ratio

New York, NY 30

Seattle, WA 30

San Francisco, CA 28

Boston, MA 28

San Diego, CA 25

Phoenix, AZ 25

Raleigh, NC 25

Los Angeles, CA 24

Denver, CO 23

Las Vegas, NV 23

Austin, TX 23

Charlotte, NC 22

Sacramento, CA 21

Miami, FL 21

Washington, DC 21

Grand Rapids, MI 21

So, What Should Real Estate Investors Expect in 2019?

Taking into consideration that only 5 of the major cities in the US have a low price to rent ratio, it’s safe to say that more people are going to choose to rent rather than buy in 2019. The main reasons for this trend are the increasing property prices and mortgage interest rate. As a result, first-time homebuyers are choosing to keep renting until they can afford to buy and own their homes. For property investors, this should mean that buying rental properties will continue to be a profitable real estate investment!

To start looking for and analyzing the best investment properties in your city of choice, click here.

Is This Enough for Real Estate Investors?

While it’s important to check the price to rent ratio by city, it’s not the only thing to take into account before buying investment properties. First off, this ratio doesn’t say anything about the economic growth, crime rate, whether it’s a seller’s or buyer’s market, and other factors that make for good places to invest in real estate.

Moreover, real estate investors need to calculate the cap rate and cash on cash return as they’ll determine your rate of return on the rental property. Remember, the better you do your due diligence and take the proper steps of investing in real estate, the higher your chances are to find the best investment opportunities.
I like - Comment - Share - Permalink - 4 January 21:24 - Public
Rent to own. From worst to best

New York, NY 34 $1,444,500 $2,780
Honolulu, HI 30 $936,800 $2,610
San Francisco, CA 28 $1,546,300 $4,520
Boston, MA 27 $852,800 $2,640
Irvine, CA 27 $1,103,000 $3,440
San Diego, CA 26 $823,300 $2,670
Los Angeles, CA 26 $831,600 $2,680
Phoenix, AZ 25 $403,700 $1,370
Fort Lauderdale, FL 24 $667,300 $2,300
Jersey City, NJ 24 $668,200 $2,310
New Orleans, LA 24 $416,800 $1,440
Memphis, TN 23 $244,000 $880
Austin, TX 23 $526,100 $1,890
Miami, FL 23 $651,500 $2,370
Charlotte, NC 23 $491,400 $1,870
Long Beach, CA 23 $827,600 $3,050
Scottsdale, AZ 22 $881,700 $2,030
Atlanta, GA 22 $465,800 $1,790
Nashville, TN 22 $424,800 $1,640
Washington, DC 22 $651,400 $2,520
I like - Comment - Share - Permalink - 4 January 21:08 - Public
Irina
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I like - Comment - Share - Permalink - 4 January 16:00 - Public
everyones always telling you how great alipay, and wechat pay is, but they're not. here's why. first of all, in order to sign up for alipay, or wechat pay, you generally need a chinese bank account. i have heard that you can sign up with foreign credit cards, but those solutions are temporary, and not easy. this route also comes with a 3% fee, therefore puts most people at a disadvantage. the traditional route is by opening a chinese bank account, but most foreigners cant get this. in order to get a chinese bank account, you must have a juzhuzheng which is a residency permit for long term residents. you would need something like a work visa, or student visa. tourists, for the most part cant get a bank account. even if you did have a bank account, alipay, and wechat pay must be linked to a cell phone number which is real bad, because if you signed up with one phone number, and dont lose access to it, you lose your alipay/wechat too. logins may also require sms verification, so if you cant verify, you cant use. say you signed up with a chinese phone number, and you go back to your country. now you dont have access to your chinese phone number anymore, and you wont be able to use your alipay/wechat. bank accounts are also bound to cell phones, so you wont be able to use online banking without it. you would also be required to change your number at the branch. you cant do it online or over the phone like you do in the west.

your bank account is also linked to your passport, so if your passport expires, your bank account is stopped, along with your alipay/wechat.

theres also a trick with chinese bank accounts. you cant call in to do anything. you must show up at the branch, and in many cases you must show up at the original branch you opened your account in. so if you opened your account in beijing, you must go back to beijing to take care of business. often times, a shanghai bank wont help you.

in conclusion, the three main weaknesses of alipay wechat are 1) you need a chinese bank account. 2) it's bound to a phone number. 3) you need a chinese address

although wechat/alipay are very user unfriendly, the stores have done a remarkable job of accepting it. no other country has implemented mobile payments better than china. apple pay (in the west) does not have nearly the reach that alipay/wechat does in china.

unfortunately, if youre a foreigner, or someone on the move, alipay/wechat wont be of much use to you, and cash will be your option.
I like - Comment - Share - Permalink - 29/12/2019 00:22 - Public
FLEUR DE LI
FLEUR DE LIFLEUR DE LI
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I like - Comment - Share - Permalink - 28/12/2019 19:09 - Public
The 60s
60s60s
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I like - Comment - Share - Permalink - 16/12/2019 15:33 - Public
wechat is hard to sign up for. they want an existing member to scan a qr code for one to sign up. even if you dont engage in poletekol chat, accounts gets frozen a lot, and again, they want contacts to scan a qr code to unfreeze. these are all time restricted qr codes, so it would be necesary for the user, and the contact to be online at the same time, and coordinate the scan. like facebook, they also periodically ask you to identify your friends (for your own security of course). dont be surprised each time you log in from another device, they require you to reverify your cell phone through sms. if you dont log in for a while, they also freeze your account, and create more obstacles to get back on. one thing that i dont like about wechat is that you cant just post text, you must post both text, and photo. let's say you just want to wish everyone a happy new year, they wont let you do that unless you accompany a picture with it. so youre essentially forced to find a random picture to accompany the message. the functions of the computer version of wechat is also quite limited in comparison to the cell phone version. for example, you cant post to the moments section, nor can you send audio messages. qq is a slightly better program, but most of the messengers nowadays are a hassle. gone are the days where you could just sign up, or log in with a user name and password.
I like - Comment - Share - Permalink - 14/12/2019 15:37 - Public
+13478345358 ROB MORISEY
I like - Comment - Share - Permalink - 13/12/2019 01:49 - Public
ann curry
currycurry
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I like - Comment - Share - Permalink - 12/12/2019 18:57 - Public
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