To earn a stable rental property income, invest in cities that have steady population growth, a strong economy, and plenty of job opportunities.
Table of Contents
- Should You Invest in a Rental Property in 2022?
- How Can You Earn Rental Property Income?
- Top 10 Cities With Monthly Rental Property Income of $2,000 or More
- How to Find a Profitable Rental Property
- Subscribe to Mashvisor to Find a Profitable Investment
While the U.S. real estate market remains strong despite the pandemic, some rental property owners still face difficulties in maintaining good returns and steady income flow. In most states, the demand for housing is continuously rising; however, inventory remains low. The high demand and low supply are one of the reasons why property prices continue to skyrocket each year. Because of this, many homebuyers are priced out of the market and are forced to rent instead.
This opens up more opportunities for traditional rental owners to earn a lucrative rental property income. The high demand for rentals means that landlords won’t have a hard time getting their rental homes occupied. Also, the surging rental rates make it difficult for renters to keep up with the competition. However, to attract the best renters in the market, landlords need to be innovative and should invest in modernizing their properties.
One of the challenges many landlords face these days is to find tenants who can pay the rent without delays. This is only possible if you invest in the best states for traditional rentals. Despite the demand and high rental rates, there are some cities that are not optimal for traditional rental investing. Cities with poor economic conditions are more likely to have residents that couldn’t afford to pay rent—and this will be a huge problem for landlords.
Should You Invest in a Rental Property in 2022?
Rental properties can be a lucrative investment, especially this year when there is a major decline in housing inventories in most markets. When a city has a growing population, its new residents will need to find a home to live in. However, the U.S. real estate market has seen growing demand, but the supplies couldn’t keep up. This results in tight competition in the market, rising home prices, and a surplus of homebuyers.
When new residents could not find a home that they can afford to buy, they will be forced to rent instead. This is good news for traditional rental owners because it means more tenants for them. However, some places don’t have enough properties available for rent, and this opens more opportunities for new investors.
How Can You Earn Rental Property Income?
There are several reasons why you should invest in a rental income property, and the most important one is the stable returns. There are two major ways to make money from investing in real estate:
1. You Can Make Money Through a Steady Stream of Income
Investing in traditional rentals in a good location can provide you with a steady stream of rental property income. With good returns, you will have sufficient cash flow from rent to cover the costs of the property, including the mortgage. It’s essential to make sure that your rental property investment can generate enough income to pay for your expenses, with more left for profit.
Related: Passive Income vs Active Income—Real Estate Strategies
2. You Can Make Money When Your Property’s Value Appreciates
Real estate is a lucrative long-term investment because most home prices appreciate over time. In fact, in some markets, housing appreciation rates are as high as 200% in just 10 years. You can find a good investment property in a progressive location and keep it for several years. Then you can benefit from its appreciation and earn good profits when you decide to sell it in the future.
Related: Is It a Bad Idea to Invest Solely for Real Estate Appreciation?
Top 10 Cities With Monthly Rental Property Income of $2,000 or More
When it comes to real estate investing, it’s essential to choose your location wisely. The best cities that can provide a good rental property income are those that have a continuously improving economy and offer several job opportunities. You should also ensure that these cities have a growing population and are generally safe for raising a family.
When evaluating the best cities for traditional rentals, we considered cities that can generate an average monthly traditional rental income of $2,000 or more. In addition to monthly rental income, we only included cities that have a medium to high price to rent ratio. Moreover, these top cities have a cash on cash return and a cap rate of at least 3% or higher. A good walk score is also a plus factor.
According to Mashvisor’s data as of June 2022, here are the best cities with $2,000+ rental property income:
1. Saint Helena, CA
- Median Property Price: $2,171,273
- Average Price per Square Foot: $1,567
- Days on Market: 94
- Monthly Traditional Rental Income: $11,502
- Traditional Cash on Cash Return: 4.39%
- Traditional Cap Rate: 4.41%
- Price to Rent Ratio: 16
- Walk Score: 80
Why Invest in Saint Helena?
Located in Napa County in the San Francisco Bay Area, Saint Helena is home to over 6,000 people. Although the home prices in St. Helena real estate are among the most expensive in California, it is one of the hottest markets in the United States.
St. Helena properties have appreciated by 105.5% in the last ten years, with an average annual appreciation rate of 7.47%. If you’re planning to invest in St. Helena real estate, your property is expected to appreciate quickly. This is why holding on to your investment property for the long term is a good real estate strategy in this city.
St. Helena is considered a white-collar city, with most of its residents employed as managers, office and sales workers, and professionals. More than 33% of its residents are renters. With a medium price to rent ratio of 16 as of June 2022, the number of renters is expected to increase in the coming months and years. St. Helena is a great place for luxury housing.
The town’s population has a median household income of $103,452 and only 7.5% of its residents belong to below-poverty level. This means that landlords won’t have a hard time finding renters who can pay their rent.
2. Palm Beach, FL
- Median Property Price: $1,709,556
- Average Price per Square Foot: $1,136
- Days on Market: 51
- Monthly Traditional Rental Income: $8,452
- Traditional Cash on Cash Return: 3.83%
- Traditional Cap Rate: 3.88%
- Price to Rent Ratio: 17
- Walk Score: 71
Why Invest in Palm Beach?
Palm Beach is a small coastal town located in Palm Beach County, Florida with a current population of 8,921. Palm Beach has had a population growth rate of 9.2% since 2010. 96% of the working residents in Palm Beach are employed in white-collar jobs, and it is also a town of artists, designers, and media-related employees. Palm Beach has a generally strong economy, with a median household income of approximately $169,003.
Since the pandemic started in 2020, a lot of people are noticeably moving to Florida due to the Sunshine State’s favorable tax laws. With the new work-from-home setup, many professionals have found refuge in this warm city with beautiful sceneries.
Palm Beach is a great place to buy property for rental income because it has a high demand for long-term rentals from new residents. In addition, Palm Beach is also a top tourist destination. You can invest in apartment complexes or high-rise apartments, which are the most common property types in Palm Beach. You can also rent a spare portion of your property on Airbnb so you can earn short-term rental property income.
3. Westport, CT
- Median Property Price: $1,559,755
- Average Price per Square Foot: $576
- Days on Market: 65
- Monthly Traditional Rental Income: $8,319
- Traditional Cash on Cash Return: 4.35%
- Traditional Cap Rate: 4.38%
- Price to Rent Ratio: 16
- Walk Score: 68
Why Invest in Westport?
Westport, CT is another great location for earning a rental property passive income. It is a coastal town located in Fairfield County, Connecticut, with a current population of over 28,000. Westport is also a white-collar city, with 95% of its workforce employed in white-collar positions. Westport is an excellent place for traditional rentals because it has a fairly large population and a good economy, with a median household income of $222,375. Only 3.4% of its residents are considered below the poverty level.
Westport is also a safe city for raising a family. In fact, it is considered safer than 60% of other cities in the United States with a total crime rate of 9.4% per 1,000 residents. The average rent for a one-bedroom apartment is $3,032, which is a 44% increase from last year. If you invest in a two-bedroom apartment, you can expect to earn an average monthly rental rate of $5,538. While rent prices are high in Westport, traditional rental owners can still find quality tenants because of the city’s good economic status and high average household income.
4. Falmouth, MA
- Median Property Price: $966,924
- Average Price per Square Foot: $519
- Days on Market: 98
- Monthly Traditional Rental Income: $4,171
- Traditional Cash on Cash Return: 3.53%
- Traditional Cap Rate: 3.57%
- Price to Rent Ratio: 19
- Walk Score: 74
Why Invest in Falmouth?
Falmouth is a coastal town located in Barnstable County, Massachusetts, and is home to more than 32,000 people. Although the housing prices in this town are some of the highest in the country, Falmouth is not one of the most expensive markets in Massachusetts. However, with low inventory and a medium price to rent ratio of 19, many residents still prefer to rent rather than buy a home. This is why buying a rental income property in Falmouth is a good idea.
A one-bedroom apartment in Falmouth can earn an average monthly income of $2,000. Although only 22% of its residents are renters, the growing population is one of the reasons why the demand for rentals is also expected to rise. Based on Mashvisor’s data as of June 2022, there are only six traditional listings recorded in this town. With more than 30 listings currently for sale in the area, this is a great opportunity for new investors to acquire a good amount of share of the traditional rental market.
5. Oakbrook Terrace, IL
- Median Property Price: $772,228
- Average Price per Square Foot: $244
- Days on Market: 64
- Monthly Traditional Rental Income: $3,663
- Traditional Cash on Cash Return: 3.09%
- Traditional Cap Rate: 3.15%
- Price to Rent Ratio: 18
- Walk Score: 50
Why Invest in Oakbrook Terrace?
Oakbrook Terrace is also a good location to buy a passive income rental property. It is the smallest city in DuPage County, Illinois, and is home to around 3,000 people. Oakbrook Terrace is considered to be one of the best places to live in Illinois, giving residents an urban feel. 62% of its residents are renters, and with the current price to rent ratio of 18, the number of renters is expected to rise.
Experts project that Oakbrook Terrace will see a future job growth rate of 27.6% over the next ten years. The current median household income in Oakbrook Terrace is $69,333 per year. This is higher compared to the U.S. median household income average of $53,482 per year. If you plan to invest in a three-bedroom apartment in Oakbrook Terrace, you can expect to earn a rental property income of around $2,355.
6. Mound, MN
- Median Property Price: $804,642
- Average Price per Square Foot: $323
- Days on Market: 62
- Monthly Traditional Rental Income: $3,616
- Traditional Cash on Cash Return: 3.10%
- Traditional Cap Rate: 3.15%
- Price to Rent Ratio: 19
- Walk Score: 61
Why Invest in Mound?
Mound is a small city located in Hennepin County, Minnesota. It has a current population of over 9,000, with most of its workforce employed in a mix of white-collar and blue-collar jobs earning a median household income of $72,184 a year. Mound’s job market increased by 1.8% from the previous year, and job growth for the next ten years is projected to be at 36.9%.
The average rent estimate for a four-bedroom apartment in Mound is around $2,100. With the current price to rent ratio of 19 and a high median property price, many residents will find renting a home to be more practical than buying one. Mound is considered safer than 69% of U.S. cities, which is one of the reasons why this city is a good place to buy an income property.
7. Fountain Hills, AZ
- Median Property Price: $929,162
- Average Price per Square Foot: $381
- Days on Market: 50
- Monthly Traditional Rental Income: $3,225
- Traditional Cash on Cash Return: 3.09%
- Traditional Cap Rate: 3.13%
- Price to Rent Ratio: 24
- Walk Score: 39
Why Invest in Fountain Hills?
Located in Maricopa County, Fountain Hills is a medium-sized town that is home to more than 23,000 people. The per capita income in Fountain Hills is $57,550, with an annual median household income of $87,080. Currently, Fountain Hills has an unemployment rate of 4.4%, which is lower than the U.S. average of 6%.
Investors who plan to buy a property as part of their traditional rental real estate strategy in Fountain Hills can expect a good rental property income potential. You can rent a one-bedroom apartment for an average of $2,100 per month, while a two-bedroom apartment can generate an average monthly rent of $2,750.
8. Newtown Square, PA
- Median Property Price: $621,160
- Average Price per Square Foot: $265
- Days on Market: 30
- Monthly Traditional Rental Income: $3,107
- Traditional Cash on Cash Return: 3.56%
- Traditional Cap Rate: 3.62%
- Price to Rent Ratio: 17
- Walk Score: 69
Why Invest in Newtown Square?
Newtown Square is a town located in Delaware County, Pennsylvania. It is home to around 23,000 people and ranks as the 36th largest community in Pennsylvania. 93% of its workforce are employed in white-collar positions, earning a median household income of $107,415. Despite the pandemic, it has seen a 0.3% job increase from last year. It is also expected to grow its job market by 27.7% in the next 10 years.
In general, Newtown Square is a great place for raising a family. It is home to a number of quality schools and has a low crime rate. In fact, it is considered safer than 71% of other cities in the country, with only 7.3% of recorded crimes per 1,000 residents. Moreover, Newtown Square provides a good community to raise children. This is one of the reasons why Newtown Square is an excellent place that allows you to generate a good income from rental property investing.
9. Powell, OH
- Median Property Price: $549,528
- Average Price per Square Foot: $203
- Days on Market: 34
- Monthly Traditional Rental Income: $2,928
- Traditional Cash on Cash Return: 3.28%
- Traditional Cap Rate: 3.34%
- Price to Rent Ratio: 16
- Walk Score: 47
Why Invest in Powell?
Although a relatively small city, Powell offers great opportunities for traditional rental investors because of its growing population and thriving economy. Located in Delaware County, OH, Powell is home to around 14,000 people, with 96% of its workforce employed in white-collar positions. Powell is expected to see an increase in job growth by 35.8% in the next 10 years, making it a great location for real estate investment.
Based on rental comps, a three-bedroom apartment in Powell generates an average monthly rent of $2,400. With a median household income of $159,368, landlords will definitely find quality tenants who are less likely to default on rent. Moreover, Powell is an ideal place to raise a family. With a low crime rate of 5.5% per 1,000 residents, it’s considered safer than 80% of U.S. cities.
10. Newburgh, NY
- Median Property Price: $404,661
- Average Price per Square Foot: $201
- Days on Market: 57
- Monthly Traditional Rental Income: $2,124
- Traditional Cash on Cash Return: 3.15%
- Traditional Cap Rate: 3.24%
- Price to Rent Ratio: 16
- Walk Score: 35
Why Invest in Newburgh?
Newburgh is a city within Orange County, New York, and has a population of more than 28,000. Its job market increased by 0.8% from the previous year, and it’s expected to grow by 25.1% in the next 10 years. Newburgh’s working residents are typically employed as service providers, office and sales workers, and professionals.
68.9% of Newburgh’s residents are renters, which is understandable due to the medium price to rent ratio of 16. The median home prices in Newburgh are trending up by around 13% year-over-year. While the median home price is $404,661, there are also more affordable homes for sale in the Newburgh real estate market that can provide a good rental property income.
How to Find a Profitable Rental Property
Finding a profitable rental property is an important first step to successful real estate investing. However, not all income properties can provide the same income potential. As mentioned, choosing the right location for your investment is crucial if you want to maximize your profit.
Here are some ways to help you find a home that can provide a lucrative rental property income:
Determine a Good Location for Traditional Rentals
Good locations for rental properties are those that are progressive and have a growing population. You can start with the above list of locations that we provided and see if some of these areas interest you.
If you choose to find a different location, make sure to do your research and consider these factors:
- Steady population growth
- Strong economy
- Diverse job opportunities
- Number of renters
- Safe with a low crime rate
- Price-to-rent ratio
- Average monthly rental property income
Know Where to Search for Properties for Sale
Since most real estate markets are having the same problem of low inventory, searching for a good investment property can also be challenging. For starters, you can ask your network (friends, family, and fellow investors) if they have leads.
You can also work with a real estate agent who can provide you with access to MLS listings. Another way to find rental income properties for sale is to do an online search. You can also subscribe to real estate platforms that can give you access to certain listings.
Check and Analyze Real Estate Comps
Once you find certain properties that interest you, it’s important to do your real estate analysis and research thoroughly before making a decision. Performing a comparative analysis can help you determine an accurate estimate of the present market value of the property you’re interested to buy.
Also, comparing similar rental properties within the same location can give you an overview of how much potential income you can possibly earn. This allows you to make the right investment decision and maximize your profit.
Conduct Real Estate Research and Analysis
Another very important step is to make sure that you do your detailed property research and analysis to determine which property will be most profitable. A few crucial things that you need to find out are the property’s cash on cash return, cap rate, price to rent ratio, average rental income, and expected expenses.
You also need to determine how much potential rental property income you can generate after paying for all expenses, including your mortgage. To do this, it’s best to use an investment property calculator to ensure that you’ll get an accurate figure.
Related: How to Conduct Investment Property Analysis in 2022
Subscribe to Mashvisor to Find a Profitable Investment
For most investors, doing research and analysis can be tedious and time-consuming. If you don’t want to go through this on your own, you can use a real estate analytics platform that can provide all the necessary information that you need. Fortunately, with online real estate platforms like Mashvisor, you don’t have to leave the comfort of your home or office to get this done.
Mashvsior is a real estate data analytics platform that can help you find a profitable rental property through its large database. It is generally easy to use. In fact, even new investors who don’t know how to invest in real estate will be able to determine which property will make a good investment.
Mashvisor provides all the important information about an investment property, including the rental income, cash on cash return, cap rate, price to rent ratio, rental comps, and expected expenses. Additionally, you can use its rental property income calculator to estimate your potential returns and cash flow based on the expected expenses on the property and your preferred financing method. This way, you can get an overview of how much income you can possibly earn and compare it with the other properties in the market.
With Mashvisor, you can make an informed investment decision based on in-depth research, thorough analysis, and data-driven figures. Having this tool empowers you to invest in properties that can provide generous rental property income.
Start a free trial now to get hands-on experience on how Mashvisor works.