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With the proper research and a little patience, a smartly advertised rental property should be an excellent long-term investment. Even though the same general principles apply around the United States when it comes to rental properties, factoring in regional differences is an essential part of finding the right rental and maximizing your profitability. Here’s a breakdown of the significant rent costs from region to region you’ll want to consider as you hunt for the perfect income property.
The Highest Rent Costs In The Country
It’s no surprise the biggest cities in the country tend to come with the highest rental prices, with metropolises like San Francisco, Boston and Manhattan typically ranking at the very top of the list. By the end of the 2018 summer in San Francisco, the average rental cost was north of $3,500, and multiple estimates pointed to the median price for a one-bedroom apartment landing at about $3,400 a month. Meanwhile, Boston’s average rent is just a shade below San Francisco at about $3,400, though the median for a one-bedroom is a much more manageable at $2,400 per month even after a recent boost in prices. As for Manhattan, the average price of an apartment is the highest in the nation and estimates range from about $3,650 to more than $4,100 per month, with a one-bedroom apartment renting out well north of $3,000.
Beyond the major cities, states like California continue to grab headlines for being far above the national average when it comes to rental costs — a trend that goes beyond just the Bay Area, Los Angeles and San Diego. Mostly thanks to high prices of beach towns and small cities all along the West Coast, California has a fleet of high-rental areas that rank neck and neck with the priciest neighborhoods in San Francisco and New York City. Looking at median rental price projections for one or two-bedroom rentals based on Census Bureau stats, California has six of the top 10 as well as 15 of the top 20 most expensive towns/cities.
High rental costs certainly aren’t limited to California. In New Jersey, Watchung, Bridgewater and Florham Park all rank among the top 10 most expensive areas to live according to the same median-price projections, with median prices of a one-bedroom apartment exceeding $3,600 per month. Nearly all of the most expensive places in the U.S. to live are close in proximity to either the Bay Area in California, New York City or Boston. Out of the top 20 cities with the highest average rental costs, 19 come from California, New York or Massachusetts. The only other entry is Stamford, Connecticut, a small coastal city that’s only a 50-minute train ride from Manhattan.
Looking For Gems Within High-Rental Cities And Regions
At first glance, the extraordinarily high prices of Manhattan or San Francisco might make you assume you’re priced out of the market as a potential income-property owner, but that might not be the case. Looking at Manhattan, for example, there is still an amazing range of property values and rental prices throughout more than two dozen different neighborhoods. While a two-bedroom apartment in Battery Park City will likely run you about $1.8 million (average rent is typically between $6,500 and $7,000 per month), the average two-bedroom in Washington Heights is closer to $725,000 and rents out for about $2,775 per month, as of the summer of 2018.
This isn’t just a New York City phenomenon either. In Houston, average monthly rent can go from close to $1,900 per month in the Greater Third Ward down to about $650 per month for the average rental in the Greater Fifth Ward. Because of the variance from neighborhood to neighborhood, it’s critical to look for specific, localized information within the overall market you’re looking at for a rental property. If you like the long-term viability of a city’s market, going neighborhood by neighborhood might open rental-income opportunities you may not initially think are feasible.
An Overview Of The Lower Rental Areas
While the upper levels of the real-estate market mostly consist of the United States’ biggest cities and towns with significant geographical advantages, rent in most of the country is significantly less expensive. A great example of a historically inexpensive city that has seen solid growth in recent years is Boise, Idaho, where a typical one-bedroom apartment will usually rent out for about $900 per month. For a property owner looking to rent out a two- or three-bedroom unit, prices are roughly $1,050 and $1,200 per month, with prices across the board showing a solid uptick in a city ranked by Forbes as the fastest-growing metropolitan area in the nation. You’ll also find similar rental prices in Charlotte, North Carolina, another rapidly growing city that doesn’t come with the high rental costs of the most expensive cities.
If you’re looking for regions with lower rents in general, you won’t want to overlook the Midwest and the South. Midwestern cities like Kansas City, Missouri; Omaha, Nebraska; and Louisville, Kentucky, all have relatively low costs of living and average rental prices of well under $1,000 a month. That trend holds when you expand your search to the South, like Birmingham, Alabama; Memphis, Tennessee; and Baton Rouge, Louisiana, are all well-known for rents that are far below the national average. Even in New Orleans, one of the biggest cities in the South, rents are much less expensive than other large American cities.
For other populous U.S. cities that don’t come with sky-high rental costs, Denver, Philadelphia, Austin, Portland and Atlanta all rank well outside of the top 50 cities concerning average rent.
The devil truly is in the details, as there are all kinds of different estimates and projections that attempt to give you a snapshot of a specific rental market. That’s why it’s critical to seek information from various sources to provide you with the full picture, as differing methodologies and an ever-shifting industry force prospective landlords to stay on their toes. Once you’ve done the necessary legwork and found the perfect region or city for your next real estate investment, you should be well on your way to a terrific long-term investment.