Investing in Rental Property: Top 10 Undersupplied Markets

Investing in rental property can be lucrative, but it’s important that investors be wise and deliberate in their strategy. One of the most commonly asked questions from new and seasoned residential property investors alike is, “Where should I invest?” This is a vital consideration when it comes to the ultimate success of a rental investment. Investors need to be able to analyze not only their prospective properties, but also their prospective markets. If an investor doesn’t live in a strong rental market, it may be prudent to consider investing in real estate out of state.

When considering out of state markets, investors should identify areas where available housing supply is low. Seems obvious, right? Put simply, undersupplied markets may signify demand outpacing supply, generally due to rising employment rates and insufficient new building supply to meet the growing demand. A rising population, coupled with a housing inventory shortage, can be an investor’s dream. A key metric for those investing in real estate out of state is the employment-to-building-permits ratio. Investing in rental property in an undersupplied market means that as an investor, you can often charge higher rents and expect lower vacancies.

Top 10 Undersupplied Markets in the U.S. in 2016*:

  E/P Ratio  Vacancy 
1. Lima, OH   367.8  4.80%
2. St. Cloud, MN  270.1   4.39%
3. Modesto, CA  131.1   9.56%
4. Lewiston, ID-WA  446.6   10.99%
5. Sheboygan, WI  73.9   4.68%
6. State College, PA  16.8   1.01%
7. Janesville-Beloit, WI  18.4   4.96%
8. Lancaster, PA  18.3   5.42%
9. Boulder, CO  14.9   7.88%
10. San Luis Obispo-Paso Robles-Arroyo Grande, CA  14.1   7.07%

 

*Based on data collected by RentRange®

BlogMichael Shai