Best Cities to Invest in Real Estate

On March 6, 2020 Dave Meyer from Bigger Pockets posted an article about a market study they did on the top 25 US cities for cash flow and appreciation. In the article they encouraged everyone to download the spreadsheet and conduct our own analysis. So, I did.

The following is some of my anaylsis on the best cities to invest in real estate.

First, a brief explanation of what data I am using.

  • Home price appreciation is calculated using the change in value from the 2010 census to the 2018 census.
  • Same thing for rent appreciation rate... it used median rent (more on this in a bit).
  • Vacancy rate and property taxes were also from the census data.
  • Insurance and capital expenses were compiled by Dave. I'll add that these are incredibly difficult to estimate accurately at scale.

If you purchased the properties for all cash (no loan... but I'll get to that in a bit), used the median home price and median rent with the other estimated taxes, insurance, capital expenses/maintenance, vacancy numbers, the following is a chart showing the average cash flow grouped by state.

Next, let's look at the best markets for cash on cash return on investment, home price appreciation and rent appreciation.

Cash on Cash Return on Investment

These are the highest cash on cash return on investment numbers for an all cash purchase. If you click through to the individual states, we have more detailed information if you opted to finance your purchases in a specific city within the state.

The following table also shows the state's average Cash on Cash Return on Investment (CoC ROI), home price appreciation rate (Price App) and rent appreciation rate (Rent Appr).

State CoC ROI Price Appr Rent Appr
Ohio 3.9% -1.75% 4.34%
Indiana 3.48% 0.11% 4.16%
Michigan 3.43% -1.09% 3.93%
Pennsylvania 3.35% 0.06% 4.79%
Delaware 3.07% -1.02% 3.94%
Arizona 2.88% -0.83% 3.38%
Idaho 2.61% 0.78% 3.34%
Nevada 2.61% -1.19% 2.25%
Utah 2.43% 1.41% 4.04%
Virginia 2.41% 0.08% 4.27%
Mississippi 2.4% -0.77% 3.6%
North Carolina 2.35% 0.9% 4.65%
Colorado 2.34% 2.95% 5.44%
Wyoming 2.3% 2.16% 5.26%
Georgia 2.27% 0.23% 4.79%

Top Appreciating Real Estate Markets

The following states have the highest average home price appreciation rates from 2010-2018. Click on the state in the table below to get more details on that state.

The following table also shows the state's average Cash on Cash Return on Investment (CoC ROI), home price appreciation rate (Price App) and rent appreciation rate (Rent Appr).

State CoC ROI Price Appr Rent Appr
North Dakota 0.58% 4.11% 4.88%
Colorado 2.34% 2.95% 5.44%
District of Columbia 1.45% 2.51% 4.85%
Hawaii 1.48% 2.45% 3.85%
Texas 1.27% 2.27% 5.3%
Wyoming 2.3% 2.16% 5.26%
Montana 1.21% 1.64% 4.2%
Oklahoma 0.17% 1.62% 5.24%
South Carolina 2.05% 1.6% 5.29%
Tennessee 2.18% 1.57% 5.18%
South Dakota 0.66% 1.51% 3.36%
Utah 2.43% 1.41% 4.04%
Louisiana 0.66% 1.33% 4.38%
Alaska 1.69% 1.27% 3.73%
Nebraska 0.68% 1.26% 4.43%

Top Rental Appreciation Real Estate Markets

Looking for the states that have seen the greatest rental appreciation rates? Here are the top states for rent appreciation rates between 2010 and 2018.

The following table also shows the state's average Cash on Cash Return on Investment (CoC ROI), home price appreciation rate (Price App) and rent appreciation rate (Rent Appr).

State CoC ROI Price Appr Rent Appr
Colorado 2.34% 2.95% 5.44%
Texas 1.27% 2.27% 5.3%
South Carolina 2.05% 1.6% 5.29%
Wyoming 2.3% 2.16% 5.26%
Oklahoma 0.17% 1.62% 5.24%
Alabama 1.86% 0.37% 5.23%
Tennessee 2.18% 1.57% 5.18%
Kentucky 2.11% 1.09% 5.14%
Oregon 1.65% 1.14% 4.99%
Kansas 1.05% 0.57% 4.92%
North Dakota 0.58% 4.11% 4.88%
District of Columbia 1.45% 2.51% 4.85%
Washington 1.93% 1.25% 4.83%
Pennsylvania 3.35% 0.06% 4.79%
Georgia 2.27% 0.23% 4.79%

Top 20 Price Appreciation Cities

Looking for the top 15 cities for home price appreciation between 2010 and 2018?

The following table also shows the city's Cash on Cash Return on Investment (CoC ROI), home price appreciation rate (Price App) and rent appreciation rate (Rent Appr) sorted by home price appreciation rate highest to lowest.

State CoC ROI Price Appr Rent Appr
Newport Beach, California 0.26% 6.67% 2.2%
Mountain View, California 0.76% 4.99% 6.14%
Odessa, Texas 2.23% 4.96% 8.57%
Bismarck, North Dakota 0.58% 4.94% 5.5%
Sunnyvale, California 0.99% 4.9% 6.17%
Austin, Texas -0.14% 4.88% 5.78%
McKinney, Texas 0.03% 4.68% 6.2%
Midland, Texas 1.67% 4.57% 8.09%
Allen, Texas 0.67% 4.52% 5.11%
Frisco, Texas -0.29% 4.47% 5.33%
The Woodlands, Texas -0.23% 4.41% 5.62%
Georgetown, Texas 0.38% 4.4% 5.45%
Denver, Colorado 1.8% 4.33% 6.2%
Arvada, Colorado 1.96% 4.19% 5.48%
Santa Clara, California 1.22% 4.04% 5.85%
Lakewood, Colorado 2.07% 3.9% 5.52%
Richardson, Texas 1.02% 3.74% 5.11%
Centennial, Colorado 2.43% 3.68% 5.11%
Greenville, South Carolina 1% 3.68% 6.23%
Round Rock, Texas 0.75% 3.66% 5.13%

Bottom 20 Price Appreciation Cities

Looking for the worst 20 cities for home price appreciation between 2010 and 2018?

The following table also shows the city's Cash on Cash Return on Investment (CoC ROI), home price appreciation rate (Price App) and rent appreciation rate (Rent Appr) sorted by home price appreciation rate lowest to highest.

State CoC ROI Price Appr Rent Appr
Flint, Michigan 14.08% -8.82% 5.29%
Detroit, Michigan 9.06% -6.98% 4.35%
Trenton, New Jersey 3.28% -4.26% 3.64%
Deerfield Beach, Florida 4.07% -3.81% 3.03%
Largo, Florida 4.04% -3.81% 3.57%
Paterson, New Jersey 0.22% -3.8% 3.46%
Bridgeport, Connecticut 1.42% -3.8% 4%
Yuma, Arizona 3.56% -3.55% 3.75%
Elizabeth, New Jersey -0.03% -3.16% 3.26%
Sunrise Manor, Nevada 3.54% -3.16% 2.07%
Cleveland, Ohio 4.8% -3.02% 4.16%
Waukegan, Illinois 1.84% -3.02% 3.1%
Deltona, Florida 3.92% -2.95% 2.82%
Youngstown, Ohio 8.69% -2.88% 6%
Lansing, Michigan 4.3% -2.85% 3.8%
Waterbury, Connecticut 1.63% -2.83% 3.59%
Pawtucket, Rhode Island 1.61% -2.82% 3.08%
Newark, New Jersey 0.72% -2.62% 3.41%
Port Orange, Florida 2.79% -2.61% 3.85%
Spring Hill, Florida 3.51% -2.58% 3.3%

Top 20 Rent Appreciation Cities

Looking for the top 15 cities for rent appreciation between 2010 and 2018?

The following table also shows the state's average Cash on Cash Return on Investment (CoC ROI), home price appreciation rate (Price App) and rent appreciation rate (Rent Appr) sorted by rent price appreciation rate highest to lowest.

State CoC ROI Price Appr Rent Appr
Odessa, Texas 2.23% 4.96% 8.57%
Midland, Texas 1.67% 4.57% 8.09%
Broomfield, Colorado 2.31% 3.57% 6.95%
Suffolk, Virginia 2.38% -1.12% 6.74%
Jackson, Tennessee 2.51% 1.33% 6.53%
Abilene, Texas 2.67% 1.48% 6.24%
Greenville, South Carolina 1% 3.68% 6.23%
McKinney, Texas 0.03% 4.68% 6.2%
Denver, Colorado 1.8% 4.33% 6.2%
Sunnyvale, California 0.99% 4.9% 6.17%
Owensboro, Kentucky 2.6% 1.14% 6.17%
Mountain View, California 0.76% 4.99% 6.14%
Redwood City, California 0.84% 3.59% 6.11%
Brownsville, Texas 2.03% -0.11% 6.06%
Aurora, Colorado 2.91% 3.56% 6.04%
Seattle, Washington 1.1% 3.15% 6.02%
Youngstown, Ohio 8.69% -2.88% 6%
Westminster, Colorado 2.61% 3.29% 5.96%
Kansas City, Kansas 3.01% -1.62% 5.91%
Santa Clara, California 1.22% 4.04% 5.85%

Bottom 20 Rent Appreciation Cities

Looking for the worst 20 cities for rent appreciation rates between 2010 and 2018?

The following table also shows the city's Cash on Cash Return on Investment (CoC ROI), home price appreciation rate (Price App) and rent appreciation rate (Rent Appr) sorted by rent appreciation rate lowest to highest.

State CoC ROI Price Appr Rent Appr
Miramar, Florida 1.27% -0.89% 1.69%
Spring Valley, Nevada 2.8% -1.63% 1.76%
Enterprise, Nevada 2.85% -0.84% 1.82%
Paradise, Nevada 1.88% -1.58% 1.83%
Henderson, Nevada 2.42% -0.86% 2.03%
Avondale, Arizona 3.66% -0.98% 2.06%
Sunrise Manor, Nevada 3.54% -3.16% 2.07%
Newport Beach, California 0.26% 6.67% 2.2%
Meridian, Idaho 2.44% 1.1% 2.2%
Lancaster, California 2.47% -1.2% 2.24%
Bethesda, Maryland 0.66% 0.86% 2.28%
Lake Forest, California 1.81% 0.47% 2.35%
Garden Grove, California 1.47% 0.91% 2.36%
Pembroke Pines, Florida 1.68% -1.41% 2.38%
Thousand Oaks, California 1.55% 0.21% 2.39%
North Las Vegas, Nevada 3.55% -1.61% 2.42%
Las Vegas, Nevada 2.59% -1.04% 2.49%
Peoria, Arizona 2.66% 0.01% 2.5%
Metairie, Louisiana 0.21% 0.67% 2.51%
Cranston, Rhode Island 1.16% -1.59% 2.52%

Best Real Estate Markets For Investors

The following are ALL the states combined. Drill down into a specific states to get more detailed data.

The following table also shows the state's average Cash on Cash Return on Investment (CoC ROI), home price appreciation rate (Price App) and rent appreciation rate (Rent Appr).

State CoC ROI Price Appr Rent Appr
Alabama 1.86% 0.37% 5.23%
Alaska 1.69% 1.27% 3.73%
Arizona 2.88% -0.83% 3.38%
Arkansas 0.87% 0.83% 4.62%
California 1.68% 0.48% 3.61%
Colorado 2.34% 2.95% 5.44%
Connecticut 1.56% -1.94% 3.85%
Delaware 3.07% -1.02% 3.94%
District of Columbia 1.45% 2.51% 4.85%
Florida 2.01% -1.04% 3.53%
Georgia 2.27% 0.23% 4.79%
Hawaii 1.48% 2.45% 3.85%
Idaho 2.61% 0.78% 3.34%
Illinois 1.17% -0.89% 3.87%
Indiana 3.48% 0.11% 4.16%
Iowa 1.34% 1.11% 4.22%
Kansas 1.05% 0.57% 4.92%
Kentucky 2.11% 1.09% 5.14%
Louisiana 0.66% 1.33% 4.38%
Maine 1.24% 0.99% 3.57%
Maryland 2.26% -0.59% 3.74%
Massachusetts 1.57% 0.58% 3.87%
Michigan 3.43% -1.09% 3.93%
Minnesota 1.75% 0.06% 3.45%
Mississippi 2.4% -0.77% 3.6%
Missouri 1.75% 0.38% 4.62%
Montana 1.21% 1.64% 4.2%
Nebraska 0.68% 1.26% 4.43%
Nevada 2.61% -1.19% 2.25%
New Hampshire 1.52% -0.7% 3.07%
New Jersey 1.1% -1.9% 3.6%
New Mexico 2.14% -0.43% 3.4%
New York 1.8% 0.24% 4.09%
North Carolina 2.35% 0.9% 4.65%
North Dakota 0.58% 4.11% 4.88%
Ohio 3.9% -1.75% 4.34%
Oklahoma 0.17% 1.62% 5.24%
Oregon 1.65% 1.14% 4.99%
Pennsylvania 3.35% 0.06% 4.79%
Rhode Island 1.65% -2.02% 2.79%
South Carolina 2.05% 1.6% 5.29%
South Dakota 0.66% 1.51% 3.36%
Tennessee 2.18% 1.57% 5.18%
Texas 1.27% 2.27% 5.3%
Utah 2.43% 1.41% 4.04%
Virginia 2.41% 0.08% 4.27%
Washington 1.93% 1.25% 4.83%
Wisconsin 1.78% -0.65% 3.73%
Wyoming 2.3% 2.16% 5.26%

The Past Does Not Equal The Future

Just because a market has gone up in value 4% per year for the last 10 years does not mean that it will go up 4% per year for the next 10 years.

The same thing is true of rent appreciation. The past is no guarantee of the future.

So, while looking at what has historically performed best can give you an idea of what has occured, we can only speculate on whether or not we will see the same performance or different (better or worse) in the future.

State CoC ROI Price Appr Rent Appr
Allen, Texas 0.67% 4.52% 5.11%
Arvada, Colorado 1.96% 4.19% 5.48%
Austin, Texas -0.14% 4.88% 5.78%
Bismarck, North Dakota 0.58% 4.94% 5.5%
Denver, Colorado 1.8% 4.33% 6.2%
Frisco, Texas -0.29% 4.47% 5.33%
Georgetown, Texas 0.38% 4.4% 5.45%
McKinney, Texas 0.03% 4.68% 6.2%
Midland, Texas 1.67% 4.57% 8.09%
Mountain View, California 0.76% 4.99% 6.14%
Odessa, Texas 2.23% 4.96% 8.57%
Santa Clara, California 1.22% 4.04% 5.85%
Sunnyvale, California 0.99% 4.9% 6.17%
The Woodlands, Texas -0.23% 4.41% 5.62%

The Problem With Medians (and Averages)

You'll note that the census data and Bigger Pockets used median home price and rents. What I am about to say applies similarly to averages.

Here's the problem... we don't typically buy the median property nor do we typically get the median rent.

In fact, if I dig into the data and use the median home price and rent from 2018, it is just not a reflection of reality.

For most real estate investors I know locally, we'd be buying properties below the median price (often in the second quartile) and getting slightly above median rent.

We'd be looking for deals that are likely to be about 10% below median price and typically getting about 10% above median rent. Your city may very well be very different.

And, that's part of the problem with using these numbers to analyze what makes the best market.

States With Highest Property Taxes for Rental Properties

The following states have the highest average property taxes (as a percentage of value).

State Annual Tax Percent
New Jersey 2.79%
Illinois 2.54%
New York 2.53%
Connecticut 2.52%
Wisconsin 2.32%
New Hampshire 2.17%
Texas 2.16%
Michigan 2.13%
Ohio 2.12%
Pennsylvania 2.08%
Nebraska 1.91%
Rhode Island 1.88%
Iowa 1.86%
Maine 1.6%
Kansas 1.51%
South Dakota 1.48%
Alaska 1.37%
North Dakota 1.21%
Missouri 1.21%
Minnesota 1.21%
Massachusetts 1.2%
Mississippi 1.19%
Maryland 1.18%
Oklahoma 1.17%
Georgia 1.14%
Oregon 1.13%
North Carolina 1.1%
Indiana 1.07%
Florida 1.06%
Kentucky 1.05%
Montana 1.02%
Virginia 1.02%
Washington 1.01%
Tennessee 1.01%
Delaware 0.95%
New Mexico 0.88%
California 0.85%
Idaho 0.8%
Arkansas 0.79%
Arizona 0.72%
Louisiana 0.7%
Nevada 0.67%
Utah 0.66%
South Carolina 0.64%
Wyoming 0.64%
Alabama 0.58%
District of Columbia 0.57%
Colorado 0.56%
Hawaii 0.29%
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