The 12 Best Markets for Cash Flow Rental Properties (Updated for 2024)
Note: this article has been updated for 2024 with the most recent census and housing data.
The last few years have been uncertain times financially, with a pandemic and multiple armed conflicts buffeting the globe’s economies. This has reinforced the need to have a strong financial strategy that can withstand future storms. For growing numbers of people, rental properties are a way to diversity investments, hedge against inflation, and create stable cash flow. As difficult as these years have been, rental properties fared remarkably well — as I’ve shared in my monthly and annual portfolio updates — evidence for the resiliency of rental properties against financial and economic shocks. Perhaps this is why rental property investing continues to grow in popularity.
If you’re looking to buy rental properties, one of the first questions you’ll need to answer is which market you’ll invest in. I’ve previously written about how to choose a rental property market, and why cash flow is key to successful rental properties. And with out-of-state investing being easier than ever, it pays to consider all available markets, no matter where you live.
In this article, I’ll leverage my previous methodology and review 12 markets that are currently ripe for cash flow investors. If you’re not fully focused on cash flow, I’ll also mention seven other markets that provide opportunities for a strategy that is “balanced” between cash flow and potential appreciation.
My Criteria for Cash Flow Markets
To generate this list, I leveraged publicly available data as well as my own knowledge of particular markets. It is not meant to be exhaustive, and of course there are other cash flow markets that will also work — but these are the ones that I believe represent the best opportunities for investors right now.
I did use one clear criterion, though: a market had to have a price-to-rent ratio of no more than ~12 in order to qualify as a “cash flow market”. That is to say, the median home price in the market had to be no more than 12 times the median annual rent.
For each market, I will provide the same set of basic data, as well as a discussion of the particular pros and cons. The markets are not ranked, per se, but the article is organized in order of ascending price-to-rent ratio. Here’s a graphic summary of the markets I’ll be reviewing:
Wait, isn’t Detroit a great cash flow market?
Detroit does have very attractive home prices — in fact, it would have a much better price-to-rent ratio than any other market on this list. But I’ve curated this list to present a range of cash flow markets that I believe are best-suited for remote investors. Detroit presents some unique challenges, particularly with respect to its falling population. At its peak in 1950, Detroit was home to 1.8M people; today, that number is just 640K. And for all the talk of a renaissance in Detroit, it continues to bleed population quite rapidly today: the city lost more than 10% of its population between the 2010 and 2020 census. So while the cash flow opportunities are certainly strong, it’s not a market that I would enthusiastically recommend to investors — particularly remote investors, who should proceed with caution.
Where did I get the data?
In order to assemble this overview, I leveraged numerous public sources of data: population and demographic data is from the US Census Bureau; state income tax and capital gains taxes are from the tax authorities in each respective state; flood risk is from RiskFactor.
Some data is harder to find, and less clear cut. Property taxes are generally calculated based on the appraised value of each property, but each market has its own quirks that make calculating an overall tax rate a bit tricky. I used various online sources who have already performed this data exercise for specific markets, and did my own analysis to fill in the gaps for a few other markets. I believe the numbers I provide are directionally correct and provide useful comparisons between markets.
Price to Rent Ratio is even more slippery, because of the various ways one might draw the geographic boundaries of a “market”, the relative paucity of rental data in general, and other factors. I have done my best to piece together valid, useful data from various public sources in order to create the “apples to apples” comparison of price-to-rent ratio across these markets, but this is not an exact science.
One more quick thing…
Want more personalized help selecting YOUR market? You’re not alone — this is one of the key decisions I help my private coaching clients make as I help them to acquire their own rental properties. Schedule a free consultation if you’d like to chat with me about rental property coaching.
OK, let’s dive into these cash flow markets!
1 Cleveland, OH
FINANCIAL
Price-to-Rent Ratio: 7.6
Cost of $1K/mo. rental: $91K
Property Taxes: 2.11%
State Income Tax: 3.99%
DEMOGRAPHIC
City Population: 374K
Metro Population: 2.08M
City +/- since 2010: -5.4%
Metro +/- since 2010: +0.5%
OTHER
Tenant Laws: Landlord-Friendly
Flood Risk: 7%
Other Risks: Harsh winters
Overview
Cleveland is a former manufacturing center on the southern shores of Lake Erie. It grew rapidly as a shipping hub after the completion of the Erie Canal in 1832, which allowed its goods to reach the Atlantic via the Hudson River, and continued to expand for a century thereafter as a key hub for industries such as railroads and steel. In 1969, the Cuyahogo river running through the city caught fire — yes, the river was actually burning, and not for the first time, in fact — which drew attention to the issue of industrial pollution and provided a spark for the American environmental movement.
Today, the city is home to major sports franchises, such as the Cleveland Cavaliers and their homegrown star LeBron James, and well as major cultural institutions like The Cleveland Orchestra, considered one of the best in the country. But like many Rust Belt cities, the decline of manufacturing has dramatically reshaped Cleveland in recent decades. Once the 5th-largest city in the country, it is now the 53rd-largest, with its population declining from 900K in 1950 to just 374K today. But since 2010, investment has increased in the downtown area, which has seen both economic and population growth as a result. And the low cost of living means that there are lots of cash-flowing properties available. Read more on Wikipedia.
What to Like
Excellent price-to-rent ratios
Low home prices
Start of a turnaround?
What to Watch Out For
Large population declines from mid-century peak
Economic challenges
Relatively high crime and poverty rates
High property taxes
Harsh winters, and 54” of snowfall annually (and yes, harsh winters can be tough on your properties)
Eric’s Take
While the numbers work great in Cleveland, making it a great cash flow market, I worry about the city’s population growth. I’m also not a huge fan of the climate — the area gets nearly 5 feet of snow each winter — and the high property taxes aren’t much fun either. Still, if Cleveland does start to turn around, buying here could be a tremendous choice in the long run.
2 Birmingham, AL
FINANCIAL
Price-to-Rent Ratio: 8.4
Cost of $1K/mo. rental: $100K
Property Taxes: 0.65%
State Income Tax: 5.00%
DEMOGRAPHIC
City Population: 206K
Metro Population: 1.11M
City +/- since 2010: -2.9%
Metro +/- since 2010: +5.1%
OTHER
Tenant Laws: Landlord-Friendly
Flood Risk: 19%
Other Risks: n/a
Overview
A former industrial powerhouse, Birmingham’s rapid growth and output in the early 20th century earned it the nickname “The Magic City”. Later, it served as the setting for some of the most important events in the civil rights movement, including the arrest of Martin Luther King in 1963 that inspired his now famous “Letter from a Birmingham Jail”, and the infamous bombing of the 16th Street Baptist Church that same year — events that ultimately contributed to the passage of the Civil Rights Act in 1964.
Like other cities built on industry, Birmingham has struggled to maintain jobs and residents in the last 50 years — the population peaked in 1960 at 340K, and has now fallen to 206K. Of late, however, with a diversifying economy led by banking, health care, and leisure & hospitality, the city population has stabilized and the suburbs are growing. The area’s low cost of living makes it attractive to both residents and rental property investors, and many predict that the city is in the early stages of a revival. It’s no wonder, then, that Birmingham has become one of the most popular markets for rental investors. Read more on Wikipedia.
What to Like
Among the best price-to-rent ratios in the US
Low home prices
Low property taxes
Stable population — and a coming revival?
What to Watch Out For
Smaller market
Relatively high crime and poverty rates
Flood risk (check out floodfactor.com, an amazing new resource based on a 2020 study of flood risk across the US)
Eric’s Take
I’m a big fan of Birmingham, and I’m currently working with several of my coaching clients to buy properties there. The numbers work very well, and though it’s a smaller market, there are plenty of deals to be had, rental demand is pretty strong, and there are a number of mature property managers. The climate is temperate & favorable. If you’re looking to maximize cash flow, Birmingham is a great choice.
3 Dayton, OH
FINANCIAL
Price-to-Rent Ratio: 9.3
Cost of $1K/mo. rental: $111K
Property Taxes: 2.03%
State Income Tax: 3.99%
DEMOGRAPHIC
City Population: 137K
Metro Population: 814K
City +/- since 2010: -2.9%
Metro +/- since 2010: +1.9%
OTHER
Tenant Laws: Landlord-Friendly
Flood Risk: 10%
Other Risks: Small market
Overview
200 miles southwest of Cleveland, and sandwiched between the much larger cities of Columbus and Cincinnati, lies the city of Dayton. It is perhaps most famous for being the “birthplace of aviation” — Orville Wright was born there, and he and his brother Wilbur performed many of their test flights and demonstrations in a cow pasture outside the town (though not the first flight, which was famously at Kitty Hawk, NC.) The city is still heavily involved in the aerospace industry — numerous research & development labs make their home there, and there is an air force base not far from where the Wright Brothers perfected their flying machine.
Dayton’s trajectory is similar to Cleveland and other Rust Belt towns: strong growth through mid-century, followed by decades of economic and population declines that have recently been countered with increased investment in urban renewal projects. Expansion of parks, arts & entertainment facilities, and infrastructure in the downtown area has helped to revitalize Dayton since 2000, but the city’s population has nonetheless continued to fall, and now stands at just 137K, about half what it was at its peak in 1960. Health care and education are the two fastest-growing industries, and largest employers, in the city. Read more on Wikipedia.
What to Like
Excellent price-to-rent ratios
Low home prices
What to Watch Out For
Small market
Large population declines from mid-century peak
Economic challenges
High property taxes
Eric’s Take
Like Cleveland, Dayton has great financials and lots of opportunity for strong cash flow. Also like Cleveland, it faces challenges maintaining and growing its population and economy. The climate is better, but the market is smaller, which can pose specific challenges with remote rental properties (such as slower turns and fewer mature property managers). Dayton is a good choice for investors worried exclusively about cash flow, and who don’t mind a smaller market.
4 Memphis, TN
FINANCIAL
Price-to-Rent Ratio: 10.5
Cost of $1K/mo. rental: $126K
Property Taxes: 1.42%
State Income Tax: None
DEMOGRAPHIC
City Population: 651K
Metro Population: 1.34M
City +/- since 2010: -0.2%
Metro +/- since 2010: +1.9%
OTHER
Tenant Laws: Balanced
Flood Risk: 13%
Other Risks: n/a
Overview
Memphis is the largest city along the Mississippi River. Its access to the river played a role in its early economic development, when it became the leading market for the export of cotton and lumber. Like Birmingham, it also featured prominently in the civil right movement, and was the site of the 1968 assassination of Martin Luther King Jr. The city has long been a cultural hub as well — American blues music traces its roots to Memphis (the music clubs on Beale Street remain popular attractions today), and Memphis-style barbecue is world-renowned.
This is the first city on our list that has not lost population. Memphis grew to 650K residents in 1980, and has remained quite stable since then. The current economy is diversified, but is led by transportation & logistics — there is still a busy inland port on the Mississippi River, but Memphis is also ideally situated with rail, road, and air connections, making it a ripe target for any company looking to deliver goods to the eastern half of the US. This is why the city’s largest employer, FedEx, has its global headquarters in Memphis and maintains its largest air hub at the Memphis International Airport, which as a result is the world’s second-busiest cargo hub. Many other companies, including Amazon and Nike, are making significant investments in warehousing & logistics as well. Health care is another major industry in town, with the St. Jude Children’s Hospital leading the way. Read more on Wikipedia.
What to Like
Very solid price-to-rent ratios
Large, stable rental population
Favorable climate
No state income or capital gains taxes
What to Watch Out For
Relatively high crime & poverty rates
Eric’s Take
Memphis is my primary investment market, so naturally I think it has a lot going for it! Quite a few of my coaching clients are investing in Memphis as well. It doesn’t get the kind of attention that Nashville does in the press, but it is an increasingly popular investment market, which means it has mature providers in the turnkey and property management industries. Investment in the city is increasing, both from private entities like FedEx and St. Jude, and from the public sector as well — there is a multi-billion-dollar downtown revitalization underway. While the city does struggle with crime in some neighborhoods, it remains a great place to live and work, and in addition to the strong cash flow opportunities, investors should like the climate and the fact that Tennessee has no state income taxes. Overall, I think Memphis is one the most attractive cash flow markets in the country.
5 Allentown, PA
FINANCIAL
Price-to-Rent Ratio: 10.5
Cost of $1K/mo. rental: $126K
Property Taxes: 1.69%
State Income Tax: 3.07%
DEMOGRAPHIC
City Population: 125K
Metro Population: 861K
City +/- since 2010: +6.6%
Metro +/- since 2010: +5.0%
OTHER
Tenant Laws: Renter-Friendly
Flood Risk: 6%
Other Risks: Small market
Overview
Allentown is the largest population center in the Lehigh Valley area, which is home to nearly one million Pennsylvanians. The center of the town was laid out in 1762 by William Allen, a wealthy shipping merchant and a rival of William Penn, the state’s namesake. During the Revolutionary War, several large iron bells, including the Liberty Bell, were removed from Philadelphia and hidden in Allentown to avoid them being captured by the British and melted down for weapons. Until the mid-20th century, Allentown boomed as a manufacturing center, but if faced hard times after 1960 as manufacturing declined and the surrounding suburbs grew. In fact, Billy Joel used Allentown as the title subject of a hit song from 1982, which describes both the hardships and the resiliency of residents living in a city with dwindling economic prospects.
Today, though, Allentown has a growing economy based on services, transportation, and health care. It has been noted in the media as a city on the rebound, particularly after a 2016 revitalization project that pumped nearly $1B worth of projects into the downtown area. Read more on Wikipedia.
What to Like
Growing population
Urban revitalization
What to Watch Out For
Smaller market
Relatively high property taxes
Renter-friendly laws
Eric’s Take
This one might be another surprise, but Allentown is one of the best cash-flow targets on the East Coast, and has good future prospects. If major urban centers like New York City and Philadelphia continue to lose population (as they were even before the coronavirus pandemic), secondary cities like Allentown stand to gain. In fact, Allentown is only 90 miles from downtown Manhattan! Just be sure you understand the implications of higher-than-average property taxes on your returns, and of the local laws which are more favorable to renters than landlords.
6 South Bend, IN
FINANCIAL
Price-to-Rent Ratio: 10.6
Cost of $1K/mo. rental: $127K
Property Taxes: 1.00%
State Income Tax: 3.23%
DEMOGRAPHIC
City Population: 103K
Metro Population: 324K
City +/- since 2010: +2.3%
Metro +/- since 2010: +1.7%
OTHER
Tenant Laws: Landlord-Friendly
Flood Risk: 16%
Other Risks: Small market; harsh winters
Overview
South Bend is so named because it lies near the southernmost bend of the St. Joseph River, just five miles from the Michigan border. Due to its proximity to Lake Michigan, the city experiences tough winters with nearly six feet of snowfall per year. Incorporated in 1865, South Bend grew and prospered as a trade and manufacturing hub for nearly a century — in fact, by 1950, nearly half of the jobs in town were in manufacturing, led by Studebaker. The nearby University of Notre Dame has also contributed to the city’s economy and culture over its history. Recently, the city gained national attention thanks to its former mayor Pete Buttigieg, who was the first openly gay person to launch a major presidential campaign, and is now serving as Secretary of Transportation. He is the first openly gay Cabinet secretary in U.S. history.
With the closing of the major Studebaker plant in 1963, South Bend struggled to find its footing in a post-manufacturing economy, and lost nearly 25% of its residents. Since 1990, though, the population has been stable, and has recently started to rebound thanks to investments in the riverfront area, and incentives to grow the city’s technology sector. Read more on Wikipedia.
What to Like
Low property taxes
Low state income and capital gains tax
“Turnaround city”
What to Watch Out For
Very small market
Harsh winters, with 70” of snowfall annually
Eric’s Take
There are excellent cash flow opportunities in South Bend, including wide availability of small multi-family properties. There’s a good case to be made that this is a city on the upswing. However, it’s a very small market — it’s right on the “cut-off line” of what I would consider to be a viable rental market in terms of population. But if you’re someone who prefers a smaller market, South Bend is a great target.
7 St. Louis, MO
FINANCIAL
Price-to-Rent Ratio: 11.2
Cost of $1K/mo. rental: $134K
Property Taxes: 1.29%
State Income Tax: 5.40%
DEMOGRAPHIC
City Population: 292K
Metro Population: 2.82M
City +/- since 2010: -8.6%
Metro +/- since 2010: +1.2%
OTHER
Tenant Laws: Landlord-Friendly
Flood Risk: 10%
Other Risks: n/a
Overview
St. Louis is the 21st-largest metropolitan area in the United States, and sits on the western bank of the Mississippi River that forms the border with Illinois. It hosted both the World’s Fair and the Olympics in 1904, becoming the first city outside of Europe to host the Olympics. In 1965, construction was completed on the Gateway Arch, a now world-famous architectural landmark that has become a symbol of the city and a popular tourist attraction.
Like other midwestern cities, it boomed during the period of industrialization in the early 20th century, providing jobs to new immigrants and migrants from the South; even today, St. Louis contains the largest population of Bosnians outside of Bosnia. Since then, the population has declined due to de-industrialization and suburbanization — but while the city population has fallen, the greater metro area has continued to grow, and it now boasts a large, diversified economy that produces over $160B per year in goods and services. Read more on Wikipedia.
What to Like
Large metro population and economy
Strong cash flow opportunities in specific neighborhoods
What to Watch Out For
Population declines (city only)
Relatively high crime and poverty rates
Eric’s Take
The cost of living is low, so the cash flow opportunities are quite strong in many pockets of the metro area. While the city has suffered huge population declines in the since 1950, part of that is due to the city’s inability to annex fast-growing suburbs over that period, as many other cities did — the greater metro area has continued to grow, and is now one of the major economic engines in the Midwest. I do worry about the nearly 9% decline in the city’s population since 2010, but the size of the market means plenty of buying (and selling) opportunities, mature property managers, and no shortage of demand for high-quality rental homes.
8 Buffalo, NY
FINANCIAL
Price-to-Rent Ratio: 11.4
Cost of $1K/mo. rental: $137K
Property Taxes: 2.37%
State Income Tax: 10.90%
DEMOGRAPHIC
City Population: 254K
Metro Population: 1.17M
City +/- since 2010: -2.9%
Metro +/- since 2010: +2.8%
OTHER
Tenant Laws: Balanced
Flood Risk: 23%
Other Risks: Harsh winters
Overview
Buffalo earned its nickname as the “City of Light” in the early 20th century, when its access to ample hydroelectric power from the Niagara River made it an early adopter of electric lights. Like Cleveland to the southwest, Buffalo lies on the shores of Lake Erie, and it likewise benefited from the completion of the Erie Canal, and boomed as a manufacturing and shipping center, and a leader in industries like steel and automobiles. President William McKinley was shot by an anarchist at the Pan-American Expo in Buffalo in 1901. He died from his injuries eight day later, and Teddy Roosevelt was sworn in as President at the Wilcox Mansion close to downtown Buffalo.
While Buffalo has lost more than half its population since its peak of 580K in 1950, things have been looking up recently. The population has stabilized, and many are remembering that Buffalo is an undeniably beautiful city, with an extensive system of parks and direct access to the awesome Niagara Falls. It also has a thriving arts, music, and food scene, and the cost of living is low. The summers are gorgeous; the winters, however, are dreadful, with an average of 93 inches of snow falling each winter, an effect of the lake and the prevailing westerly winds. Read more on Wikipedia.
What to Like
Solid price-to-rent ratios
Stable rental population
What to Watch Out For
Large population declines from mid-century peak
High property taxes
Very high state income tax
Harsh winters and high flood risk
Eric’s Take
You might be surprised to see Buffalo on this list — when people think of cash flow markets, they don’t think of New York State. But Buffalo is as much a midwestern city as a northeastern city, both in geography and culture, making it a closer cousin to Cleveland and Detroit than it is to New York City. While investing here comes with similar risks and concerns as Cleveland, I think Buffalo’s economic trajectory and prospects are slightly better. You can find strong cash flow today, and the city could be a great long-term play.
9 Pittsburgh, PA
FINANCIAL
Price-to-Rent Ratio: 11.4
Cost of $1K/mo. rental: $136K
Property Taxes: 1.98%
State Income Tax: 3.07%
DEMOGRAPHIC
City Population: 299K
Metro Population: 2.37M
City +/- since 2010: -1.9%
Metro +/- since 2010: +0.6%
OTHER
Tenant Laws: Renter-Friendly
Flood Risk: 14%
Other Risks: n/a
Overview
From Allentown, we have to travel nearly 300 miles across the state of Pennsylvania to reach the city of Pittsburgh. An old steel town, Pittsburgh sits at the point where the Allegheny and the Monongahela Rivers converge, and become the Ohio River — all those rivers means lots of river crossings, and Pittsburgh has a remarkable 446 bridges, earning it the moniker “City of Bridges”. But it’s also know as “the Steel City”, thanks to J.P. Morgan forming and headquartering US Steel in Pittsburgh, which by 1920 was producing nearly half of all steel made in the United States.
Today, Pittsburgh has become a magnet for young professionals, and is a leader in health care, education, and technology. In particular, the growth of tech in Pittsburgh has been the engine of its renaissance — major firms like Apple, Google, Facebook, Amazon, Microsoft, IBM, and Uber all have a presence here, and there is a robust startup community as well. It is consistently recognized as one of the most livable cities in the country. Read more on Wikipedia.
What to Like
Large metro population
Technology leader
What to Watch Out For
Relatively high property taxes
Renter-friendly laws
Flood risk in some areas
Eric’s Take
Like Allentown, Pittsburgh has pretty high property taxes, and the same renter-friendly state laws and regulations. But it’s a much larger, more dynamic market that nonetheless has areas with great cash flowing rental properties. It has been on the upswing, so much so that you might now consider this a “balanced” investment market, rather than a “cash flow” market, based on home prices. The fact that Pittsburgh’s tech sector is growing so rapidly is a strong sign for its future. Flooding is common in Pittsburgh, so be sure to do your research into the flood risk for individual properties before purchasing.
10 Augusta, GA
FINANCIAL
Price-to-Rent Ratio: 11.8
Cost of $1K/mo. rental: $141K
Property Taxes: 0.97%
State Income Tax: 5.75%
DEMOGRAPHIC
City Population: 200K
Metro Population: 611K
City +/- since 2010: +2.1%
Metro +/- since 2010: +8.2%
OTHER
Tenant Laws: Landlord-Friendly
Flood Risk: 12%
Other Risks: Small market
Overview
Augusta is the second-largest city in Georgia, after Atlanta, and lies on the Savannah River that forms the border with South Carolina. In its early history, it was the capital of Georgia, before ceding that designation to Savannah (and later, to Atlanta). The city plays host to one of the biggest annual sporting events of the year, the Masters golf tournament, which for the last 80+ years has been played at the August National Golf Club. Both the course and the tournament were the brainchild of the great Bobby Jones in the 1930’s; today, it provides a reliable infusion of money into the local economy for several weeks every April.
The modern city of Augusta is a regional center for biotechnology and cybersecurity. The largest employer in town is the army installation at Fort Gordon, home of the US Army Cyber Command. The metro area is growing rapidly, having added over 40K residents in the last decade. Read more on Wikipedia.
What to Like
Growth in metro population
Economy built on future growth industries, like cyber
Landlord-friendly laws
What to Watch Out For
Smaller market
High cash-flow is becoming harder to find as prices rise
Eric’s Take
Having watched the Masters on TV for many years, I knew about the local golf course before I knew much about the city itself! But like other small- to mid-sized Southern cities, Augusta has become an investor favorite — particularly for those who may have invested in Atlanta in the past, where cash-flowing deals are now very hard to find. It’s a smaller market to be sure, but the area is growing, and that growth is built on high-paying industries of the future, which bodes well for both home and rent prices in Augusta going forward.
11 Montgomery, AL
FINANCIAL
Price-to-Rent Ratio: 12.2
Cost of $1K/mo. rental: $146K
Property Taxes: 0.36%
State Income Tax: 5.00%
DEMOGRAPHIC
City Population: 197K
Metro Population: 386K
City +/- since 2010: -4.0%
Metro +/- since 2010: +3.1%
OTHER
Tenant Laws: Landlord-Friendly
Flood Risk: 12%
Other Risks: Small market
Overview
Montgomery is the second city on our list in “Sweet Home Alabama”, and the first state capital. The city lies along the banks of the Alabama River, and is named for Richard Montgomery, a general in the Revolutionary War. The city also played an important role in another war: representatives from several Southern states met in Montgomery in February 1861 for the “Southern Convention” and formed the Confederate States of America, which led inexorably to the outbreak of the Civil War in April of that year. Nearly 100 years later, Montgomery became famous as the place where Rosa Parks was arrested in 1955 for refusing to give up her bus seat to a white man, which led to a court ruling ordering the desegregation of the Montgomery bus system.
As a state capital, Montgomery has a large, stable governmental sector that provides nearly 25% of the jobs in the city; education and transportation are large parts of the economy as well. Montgomery was never a large city, and at about 200K residents still isn’t — but it also never experienced large declines in population. Over the last decade, the city has invested in the revitalization of the downtown area, including parks and leisure spaces, infrastructure, and commercial and residential buildings. Read more on Wikipedia.
What to Like
Very low property taxes
Stable government jobs
Downtown revitalization
What to Watch Out For
Small market
Some loss of population since 2010
Eric’s Take
While Birmingham gets a lot of attention from investors, its smaller neighbor to the south is a ripe target as well. Montgomery is quite a bit smaller, which comes with the risks of slower rental demand and less mature property management, but quality of life is improving due to investments in the city’s downtown core, and Montgomery’s crime rate is lower than in all of Alabama’s other major cities. I also like that it’s a state capital, because government jobs form a very stable core for the local economy.
12 Baltimore, MD
FINANCIAL
Price-to-Rent Ratio: 12.2
Cost of $1K/mo. rental: $146K
Property Taxes: 1.51%
State Income Tax: 5.75%
DEMOGRAPHIC
City Population: 566K
Metro Population: 2.84M
City +/- since 2010: -8.7%
Metro +/- since 2010: +4.9%
OTHER
Tenant Laws: Balanced
Flood Risk: 6%
Other Risks: n/a
Overview
Baltimore sits at the entrance to the Chesapeake Bay, forming one of the most naturally beautiful city harbors in America. It was the bombardment of nearby Fort McHenry by the British Royal Navy during the Battle of Baltimore in 1814 that inspired Francis Scott Key to write the poem “The Star-Spangled Banner”, which more than a century later became the official national anthem of the United States. “Charm City”, as it is known, is also famous for seafood, particularly crabs and crabcakes - in fact, Old Bay Seasoning, the famous seafood spice blend, was originally created in Baltimore.
Today, Baltimore is largely a service-based economy with a vibrant tourism sector. It also has one of the fastest-growing technology industries in the country, making it an under-the-radar tech hot spot. Read more on Wikipedia.
What to Like
Large metro population and economy
Excellent cash flow in many neighborhoods
Large inventory of attached homes, which can be easier to maintain
What to Watch Out For
Population declines (city only)
High crime and poverty rates
Eric’s Take
You might be surprised to see Baltimore on this list, but it’s definitely worth a look. Baltimore has struggled with violent crime for decades, and as a result it has something of a reputational problem. Perhaps as a result, housing in Baltimore is quite inexpensive for large coastal cities of its size. The Baltimore metro area is large and dynamic, and most investors are actually buying in Baltimore County, which surrounds the city of Baltimore on nearly all sides, but is politically independent from it. Many of these areas have truly excellent opportunities for high cash returns, and are still close enough to the city to offer great benefits to residents — the food scene in Baltimore is amazing, and the Inner Harbor area is not only absolutely beautiful, but is rich with museums, restaurants, sports venues, and other culture hotspots.
Balanced Markets to Consider
If your strategy is more balanced between cash flow and appreciation, you might be drawn toward markets that are growing more rapidly, and seeing greater appreciation in home prices. You’ll definitely give up cash flow in these markets, so they aren’t the primary focus of this article, but I included them in the summary graphic, and I’ll provide a brief overview here of 7 “balanced” markets worth looking at:
Chattanooga, TN: Low property taxes and no state income tax make this small-but-growing market attractive, but beware of the high risk of flooding.
Tulsa, OK: The Tulsa metro has now sped past 1M residents. The local oil & gas industry seems to have figured out how to avoid causing those pesky man-made earthquakes.
El Paso, TX: This growing border town is popular with investors, but the high property taxes may crimp your profits.
Kansas City, MO: This would have been a great cash flow market 10 years ago, but prices have increased as the city and 2M+ metro area have grown.
Indianapolis, IN: One of the fastest-growing cities in the Midwest, Indy is a great target for “balanced” investors.
Columbus, OH: Like Indianapolis, Columbus is an outlier in the Midwest as one of the few large cities on the rise. Like other markets in Ohio, property taxes are high.
Oklahoma City, OK: Few areas are growing as quickly as OKC, but that means prices are going up, too.
Conclusion
The market you choose for your rental properties is one of the most important decisions you will make. But if you look at all the key data points, you can be sure you’re selecting a great market that will meet your long-term investment goals, and help you unlock the wealth-creating power of cash-flowing rental properties.
Still need more help selecting your market?
You’re not alone — this is one of the key decisions I help my private coaching clients make as I help them to acquire their first rental properties. Schedule a free consultation if you’d like to chat with me about private coaching.
And finally, here’s that graphic summary of all these markets, in case you missed it at the top:
About the Author
Hi, I’m Eric! I used cash-flowing rental properties to leave my corporate career at age 39. I started Rental Income Advisors in 2020 to help other people achieve their own goals through real estate investing.
My blog focuses on learning & education for new investors, and I make numerous tools & resources available for free, including my industry-leading Rental Property Analyzer.
I also now serve as a coach to dozens of private clients starting their own journeys investing in rental properties, and have helped my clients buy millions of dollars (and counting) in real estate. To chat with me about coaching, schedule a free initial consultation.
