CRE Report Exclusive: Top 6 Rental Markets of the Next Decade

In exploring the top 6 cities for rental investments, our team cross-referenced data points in both commercial and residential markets that show above-average growth mixed with high livability attributes.

The main question we asked ourselves is, “Is there enough corporate growth and migration of America’s youth to this city to the point that is can withstand a recession?”

Charlotte, North Carolina

A capital of the New South diversifies as it develops

Infrastructure projects in Charlotte are indicators of this city’s growth. A five-year expansion of Charlotte Douglas International Airport is underway, and the metro area has invested in adding a bus and light rail network.

Low taxes and a business-friendly environment are pushing Charlotte’s development. Both the manufacturing and tech industries are investing in the city, as are real estate investors. The metro area attracted 1.5% of the nation’s real estate investment in 2019. That’s up from 1.2% between 2016 and 2018.

Dallas, Texas

Rents are climbing along with the infrastructure to sustain growth

Speaking of infrastructure spending, the Dallas-Fort Worth metro is expanding its Cotton Belt Regional Rail Corridor. The Silver Line, expected to launch in 2022, will connect Dallas and its surrounding counties to Dallas-Fort Worth (DFW) International Airport.

Also at DFW, American Airlines is spending $3 billion to build a new terminal that is scheduled to open in 2025. Amazon’s cargo air service, Amazon Air, is opening a regional hub at the nearby Fort Worth Alliance Airport.

These projects illustrate Dallas-Fort Worth’s growth, an expansion that’s projected to continue. The metro area is not far behind Austin in the number of new jobs foreseen this year.

Chicago, Illinois

The tale of two cities

Known for its towering skyscrapers and Fortune 500 companies, the Windy City is one of the few remaining U.S. markets where you can still find great investment opportunities.

With higher real estate prices and lower-than-average job and population growth, Chicago may not seem like a “good” place to invest in real estate. That said, it is one of the few cities in the nation where housing prices still haven’t risen above their 2006 levels. When focusing on finding the highest capital growth and cash flow, you’ll find some neighborhoods offer homes at $128,000 to $210,000 with rents as high as 1.13% (above national average) of the purchase price every month. !

All of this is good news for investors lookin for under market value properties, with tremendous monthly cash flow, and poised for steady appreciation.

Job Growth: Chicago is the 3rd largest city in the United States and among the top 5 most economically powerful cities in the world. There are 30 Fortune 500 companies headquartered in the metro area, which boast a $500 billion GDP. In the past year, Chicago added 37,900 new jobs to their economy.

Population Growth: Real estate prices have soared within Chicago’s city limits, causing people to move out of the city and into the suburbs. As a result, prices in some of these neighborhoods continue to increase. While Chicago’s population growth is well below the national average, it’s important to note that it’s still consistently growing, which his a good sign for those looking to invest in more stable markets.

Affordability: Chicago is one of the last markets where housing prices have not yet risen past their 2006 levels, simply due to the state’s tough foreclosure laws. The median sale price for a home in Chicago is $210,000, but it’s still possible to find homes for sale in mid-level neighborhoods between $128,000 and $210,000. In the neighborhoods where RealWealth members invest, 3 bedroom homes rent for $1,450 per month, which is 1.13% of the $128,000 median purchase price. This is 51% higher than the national average. This means there are great opportunities for cash flow in Chicago, and a strong chance of appreciation too.

Atlanta, Georgia

The Southern Belle City with Northern Cash Flowing In

Located in the low foothills of the Appalachian Mountains, Atlanta is the third-largest metropolitan region in the Southeast, behind the Greater Washington and south Florida areas.

For decades, the Atlanta metro area experienced rapid population growth to match the demand of new jobs being created, many of them in high-paying sectors like manufacturing. Today, Atlanta’s growth has slowed a bit, but there are still good investment opportunities to be found if you know where to look. Today, Atlanta’s growth has slowed a bit, but not entirely.

Job Growth: In the last year, 53,700 new jobs were created in Atlanta – an annual growth rate of 2.15%. This is a higher rate than the national average of 1.47%.

Population Growth: Over the past 8 years,, Atlanta’s population grew by 12.18%, which is 111% faster than the national average of 5.76%. 

Affordability: In 2019, the median purchase price of 3 bedroom single family homes in the Atlanta area was $190,000. This is 15% lower than the national average of $222,000 for 3 bedroom homes. This is great news for real estate investors in 2020.

Orlando, Florida

Great weather, affordable prices, with a growing population

The demand for single family homes has been on the rise in the Sunshine State for quite some time. Still, it’s possible to acquire fully renovated properties in good Florida neighborhoods for under $193,000.

What’s even more interesting is that, despite these incredibly low housing prices statewide, many home seekers are choosing to rent instead of buy. As you can imagine, this is causing rental rates to rise (over 6% in just a year) and is expected to keep increasing in 2020.

On top of great cash flow, values are on an upswing in these areas with no sign of slowing down. They are nowhere near their 2006 highs and inventory levels are still way down because builders just can’t make a profit at these price points.

Property taxes and insurance are low, plus there’s no state income tax. Add warm weather and exceptional health care, and you can see why many of the 10,000 baby boomers retiring every day are moving to Florida.

Housing Market Statistics

• Median Sales Price: $231,000
• Median Rent Per Month: $1,486
• Median Household Income: $42,418
• Population: 2.6 M
• 1-Year Job Growth Rate: 3.44%
• 7-Year Equity Growth Rate: 110%
• 8-Year Population Growth: 30%
• Unemployment Rate: 2.9%

Job Growth: Orlando’s employment growth is among the best in the U.S. with more than 45,000 new jobs created in just a year  and a projected growth rate of 3.44% annually for the next ten years.

Population Growth: Orlando’s population has grown 252% faster than the national average over the last 8 years, and with all the new jobs coming to the area, it’s very likely this trend will continue in 2020.  (This means the demand for housing is likely to increase.)

Affordability: In Orlando it is still possible to purchase fully renovated 3-bedroom properties in good neighborhoods for as little as $193,000.

Brooklyn, New York

Hyper-growth, hip residents, low vacancy rates; it’s hard to lose

Brooklyn has long been the trendy cousin to Manhattan, drawing in students, Millennials, and hipsters who either can’t afford to or don’t want to rent in Manhattan. Naturally, as the biggest borough by population and the second biggest by land mass, there are a lot of neighborhoods to choose from when it comes to investing here. In many ways, there has never been a better time since the housing crash to start investing in the Borough of Trees.

The coming L-train shutdown is likely to force new arrivals to the city to consider newer, up-and-coming Brooklyn neighborhoods. The formerly industrial Gowanus neighborhood is getting hipper all the time. It will undoubtedly see a continuing influx of new residents due to the L-train situation, and it has the perfect mix of people, restaurants and housing units to make it an investment hotspot. These are the perfect properties for investors of any experience to get their teeth into. With a tipping point of 6 years, if you get in now, you should see some real growth.

While you are looking for up-and-coming neighborhoods in Brooklyn, keep Bay Ridge in mind, too. It is another area that has the right kind of properties to get started investing with. Rather than luxury condos, Bay Ridge has a great mix of Colonials, Tudors and apartment buildings that appeal to both Millennials and families. In fact, the entire neighborhood feels more like a small town than part of a big city. With a short tipping point, it seems like the perfect time to dive in.

Another neighborhood to keep on your watch list is East New York. When the community was rezoned in 2016, it touched off a real estate makeover.

That year, developers filed applications for 339 residential units. But in 2017 that number shot up by 284 percent to 1,303 units — many of them heavy on the affordable housing.

A handful of developers have gotten in on the ground floor.

Multifamily developer Radson Development is preparing projects for two vacant lots: one a 235-unit mixed-use, 12-story building on Linden Boulevard, the other a 521-unit affordable housing-and-retail complex on Loring Avenue.

Meanwhile, Monadnock Development, the East Brooklyn Congregations and the Department of Housing Preservation and Development filed plans in September for a 240-unit affordable rental development as part of the sprawling Nehemiah Spring Creek development, which sits on city-owned land adjacent to the Gateway Center shopping mall.

And Phipps Housing is diving in with a 403-unit affordable housing complex on Atlantic Avenue in Cypress Hills, a section of East New York.

Though some of those developments are outside of East New York’s rezoned area — which includes about 190 blocks, roughly between Fulton and Belmont avenues — competition for investment properties in the area is strong.

That may be because residential prices in East New York have shot up 45 percent since 2012 — the same sort of jump being logged in pricey Brooklyn neighborhoods like Carroll Gardens and Park Slope, according to PropertyShark.

“There’s a lot of cash buyers coming in looking for good deals, mostly for [two- and three-family homes they can rent out] anywhere under the million-dollar range,” noted Citi Habitats broker Kendall Vidal, who said he has 20 interested parties for one property he’s selling in the neighborhood.

Investors are “super interested in the area,” partly because they are banking on the fact that buyers and renters will increasingly get priced out of other areas and turn to East New York as a cheaper alternative.

The neighborhood — which is on six subway lines and the Long Island Rail Road — is a short train ride from Bushwick and Bedford-Stuyvesant, where rents shot up by 44 percent and 36 percent, respectively, between 1990 and 2014. But it has a different genetic makeup.

“A lot more rental units in East New York are rent-stabilized and rent-controlled than in Bushwick and Bed-Stuy,” said Ideal Properties Group’s Aleksandra Scepanovic.

Real estate players say that for now, affordable housing is where profits are penciling out. That’s thanks largely to the availability of tax-exempt bonds and government subsidies.

“I don’t see a huge rush of for-profit buying at these prices to build market-rate housing,” said Alan Bell, a principal at B&B Urban, which is building a 100-unit affordable rental project in the area.

Bell, whose firm invested before the rezoning was finalized and land prices shot up, said he’s not sure whether B&B could make the project work financially now. In some cases, property owners are looking for prices between $70 and $80 per buildable square foot, he said. That’s almost twice the roughly $43 average the neighborhood was seeing in 2014, according to TerraCRG.

“Owners of property are going to have to get more realistic, [and] when it happens I’ll be ready to jump,” Bell said.

In general, East New York is not without its warts. While crime has fallen 73 percent since 1990, more major crimes were committed in East New York and Cypress Hills than in any other precinct citywide in 2017. And crime there was twice what Williamsburg and Bed-Stuy saw, according to the NYPD.

And commercial sales volume has not seen the same bump as residential. While there was $155.5 million in commercial deals in 2017 —  a 27 percent increase from 2008 — the neighborhood peaked in 2015, when $274.8 million in property traded hands.

Bell said the first wave of market-rate housing will likely get built on smaller plots, where sellers may be more willing to drop prices. Those who own large parcels, he said, are more likely to wait for the big money to arrive down the road.