The US buy-to-let market is one of the most interesting in the world. Rather than being viewed as a single market that spans the entire continental United States, it’s better to think of it as a smorgasbord of different markets, all with various features.
Take San Francisco, for instance. A two-bed apartment here can easily go for over a million dollars, and renters are often willing to pay top dollar to be near to their place of work. Contract that to somewhere like Mobile, Alabama, where renters pay just a fraction of the national average.
The question for landlords, though, is which of these regions offers the best return on their money. Sure, rents might be high in San Francisco, and so are mortgages. Where should landlords look to buy new real estate that will help them make a good return on their asset?
Seattle, Washington State
Seattle, home to the Frasier Crane show, is one of the hottest locations right now for landlords looking to get into the buy-to-let property market. What makes it so enticing? The future - that’s what.
As an American city, Seattle seems to have it all: the laidback culture, the bleeding-edge companies, and a way of life unique to the West Coast.
Rents might not be particularly high right now, but many analysts expect Seattle to become an even greater center of commerce than it is today, thanks to the anticipated influx of high-tech companies, looking for new bases outside of California. The same economic mechanisms that pushed up prices in San Francisco to astronomical heights could do the same here.
The city’s population increased by three percent in 2018. And that growth is expected to continue for the foreseeable future. Real estate prices are already up 15 percent, and look set to continue to rise as the demand for accommodation accelerates.
Seattle is exciting, but if it’s out of your budget range, then there are other options up and down the country. Perhaps one of the most interesting is in Columbus, Ohio. Columbus is Ohio’s state capital. But despite it’s importance to the local area, the median price of houses here was just $157.000 in 2018.
Why is it a great place for landlords to put their money? It all comes down to rents. Despite the low purchase price of most properties, rents in the area are surprisingly high. The average landlord can charge around $800 per month, meaning that it is possible to pay off the mortgage in approximately ten years from rental income alone - no dipping into personal savings.
What’s more, the employment status of the city is stable - a contrast to a couple of decades ago. There are new jobs in health, government, and finance, all pushing up the desirability of the area.
For many people, Cheyenne, Wyoming is a far-flung place, well out of the way of the hustle and bustle of the east and west coasts. But homes for sale here are going up in value at a surprisingly fast rate.
The reason for this comes down to the recent trend for remote working. If you had a choice of living anywhere in the US, where would it be? For some, it would be in downtown LA or metropolitan New York, but many people want to experience the quieter side of life and reconnect with nature. Thanks to its location and wealth of national parks, Cheyenne is the perfect location for remote workers who want to get away from it all.
The good thing about Cheyenne is the fact that prices here remain low for landlords. As with other areas we’ve discussed so far, the city has stable employment which means that it will be able to provide incomes to support high rents in the future. Wyoming might not be on many people’s watch list, but it should be on yours.
Las Vegas, Nevada
Historically, Vegas was seen as a place to go an party, gamble, and generally have fun. But thanks to the sheer demand for the city’s services, it’s becoming much more diversified, attracting a range of ancillary industries beside leisure and tourism.
The evidence for this is the city’s remarkable growth rate. The number of jobs in Las Vegas grew by more than 3.7 percent in 2017, and that number continues to rise as Vegas becomes an international capital for casinos.
Strangely, average property prices here are still low: most of the people who live in the city work in relatively low-wage service jobs. But that could all change as Las Vegas continues to expand. Rental yields stand at an impressive 5.5 percent already and could go higher if real estate values increase.
Detroit used to be one of America’s most celebrated cities. Home to car manufacturing, it created vast wealth in the 20th century for the people who lived there. The financial crisis of 2008 devastated Detroit and the city became a ghost town, full of abandoned apartments and dilapidated buildings.
But despite losing nearly half of its population, the city is staging a comeback. Last year, the automotive industry announced that it was looking to Detroit again for expansion, advertising more than 200,000 new jobs in the process. Thanks to more liberal economic policies, the capital of Michigan could be restored to its former glory. And if that happens, house prices and rents will shoot through the roof.
You can grab yourself a bargain in Detroit. The average price of a property here is a mere $44,900. Students, military and factory workers all need places to rent, so you could achieve exceptional yields, especially as demand ramps up over the next few years.
You might not think of Atlanta as a boom town, but it is. The population is up more than 12 percent since the start of the decade, and this has led to an increase in house prices. If you want to buy a property here today, it’ll set you back more than $326,000.
There is a combination of factors driving the value to landlords higher. Perhaps the most important is the booming media industry. Atlanta has a growing film industry that now exports high-value titles to the rest of the world, and supports a wealthy population of actors, producers and supporting crew. There’s also the airport close to the city, providing easy access for international and national business travel.
Landlords in Atlanta can take advantage of the short term rental demand. A growing population of young professionals wants the opportunity to dip in and out of accommodation on a monthly or weekly basis. Landlords who can provide this level of service will be able to reap the rewards and start earning passive income sooner.
Finally, Nashville is on the radar of many savvy property investors because of its booming popularity with young people. Millennials love the city because of its history and culture and believe that it’s a place that will help them get more out of life.
Employment here is up by more than 3.6 percent, reflecting the changes in the appeal of the city. And that’s causing dramatic rises in home price which are up more than 13 percent in a year.
As Nashville changes its image, those prices will likely go up further in the future, providing landlords considerable equity on their investments. Rents are running at an average of $1,600 a month, and house prices at around $340,000, depending on proximity to the center.