Whether you’re looking to become an investment property owner, or are looking to buy additional investment properties, large cities can offer a number of benefits. From high-rises to single-family homes, large cities provide more diverse housing options as well as ample opportunities to find tenants, but knowing where and when to invest is a key factor. In order to determine the best large cities to buy an investment rental property, we recently analyzed home values and median rent as well as other metrics in cities around the country.

The large cities on our list all have a population size of 300,000 residents or more and were ranked based on five metrics: median home value, year-over-year home value growth, 10-year population growth, annual property tax and annual return.

On average, these cities have experienced a 10% growth in population since 2010. They also offer an average annual yield of $5,451, which represents potential profit after mortgage, property taxes and homeowner’s insurance. We also displayed home value to gross rent ratio, which represents the number of rent payments it would take to pay for a home in each city based on median rent and median home value if a home were financed based on a 30-year mortgage with a 4% fixed interest rate.

Eyes on the South and West

More than half of the cities on our list are located in either the South or the West, making both regions areas that investment property owners will want to keep an eye on. Texas makes the most appearances on our list with four cities: Dallas, Fort Worth, San Antonio and Corpus Christi. Florida also has a strong presence with three cities: Tampa, Miami and Jacksonville.

1. Cincinnati
   At nearly $8,000, Cincinnati offers the highest potential annual return on our list, if an investor financed a home at the city’s median home value of $161,508. It also provides the best home value to gross rent ratio at 102. This number represents the number of rent payments needed to pay off a home. These factors along with a 7.1% year-over-year home value growth propelled Cincinnati as the best large city to buy an investment property.
2. Colorado Springs
   Head West to find the No. 2 city on our list. Although the median home value is higher ($302,900), Colorado Springs offers low annual property taxes of $1,484, which is nearly $1,000 less per year than the overall average on our list of 30 cities ($2,363). This city has also seen a population growth of 11% within the last ten years. Two other Colorado cities, Aurora and Denver, also made it onto our list at No. 6 and No. 28, respectively.
3. Tampa
   Looking to invest in property and plenty of sunshine? With a potential annual return of $6,459, Tampa is your best bet. The city has also been booming in terms of both population and job growth. In fact, the Tampa Bay metro area added more than 26,000 jobs over the last year, according to the Florida Department of Economic Opportunity.
4. Atlanta
   With a population teetering on half a million people, Atlanta offers the best of both worlds in terms of “big city” feel and big potential for investors. The city has experienced a 14% population growth since 2010 and offers potential annual returns of $6,428 making it No. 4 on our list of best large cities to buy an investment property.
5. New Orleans
   If you want to be close to the action (and the party), New Orleans is calling your name. The Big Easy offers a reasonable median home value of $228,780, low annual property taxes of $1,828, a growing population of more than 10% since 2010 and potential annual returns of more than $6,000.

For local comparison, when comparing major metro areas with populations greater than 300,000, Tucson ranked #41. The Old Pueblo has a median home value of $196,300, annual property taxes of $2,004, a growing population of 3% since 2010 and potential annual returns of $3,876 and a home value to gross rent ratio of 157.

Whether you’re considering becoming an investment property owner, or already own investment properties, utilizing a 1031 Exchange can defer capital gain taxes on investment property. You can use our Capital Gain Estimator or click here to learn more about how a 1031 Exchange can help preserve and grow your assets when selling and buying investment properties.

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Methodology

To determine the best large cities to buy an investment property, we compared cities with a population of 300,000 or more. From there, we considered median home value, year-over-year home value growth, 10-year population growth, annual property tax and annual return for each city. Data for 10-year population growth was collected from the U.S. Census Bureau. Median housing cost, median rent and year-over-year home value growth data was collected from Zillow. Each factor was graded on a 100-point scale and then weighted to determine a final ranking.

We determined an overall weighted average based on the following:

Median Home Value: Median home value in each city. (20 points)
Home Value Growth: Year-over-year home value growth (as of December 2019, not displayed in the above graphic). (20 points)
Annual Property Tax: Annual property tax amount within each city based on the median home value. (20 points)
Population Growth: Each city’s 10-year population growth. (20 points)
Annual Return: Represents the annual profit an investor could potentially make if a home was financed based on a 30-year mortgage with a 4% fixed interest rate. This potential profit includes factoring in home insurance and property taxes, but does not include factors such as closing costs, maintenance or utilities. (20 points)

Partnership purchases 212-unit apartment community in Tempe, Arizona, comprising 66-percent naturally-occurring affordable housing

Tempe, Ariz.  – Western Wealth Capital (WWC), a growth-oriented real estate investment company, and PGIM Real Estate, the real estate investment business of PGIM, the $1.2 trillion global investment management business of Prudential Financial, Inc. (NYSE: PRU), today announced the acquisition of Sonesta on University, a 212-unit apartment community in Tempe, Ariz.

Sonesta on University was originally constructed in 1988 and features twelve two- to three-story garden-style apartment buildings, in addition to abundant parking. The property, which is located at 1975 E. University Drive in a low-income census tract, contains naturally-occurring affordable housing (NOAH), with 66 percent of in-place leases at an affordable price point to residents making less than 80 percent of the Area Median Income (AMI). The joint venture partnership plans to preserve the affordable housing units. Upgrades are planned for the property’s common areas to enhance their attractiveness and usability, which is part of the partnership’s focus on community engagement and resident programs.

The property is located one mile east of Arizona State University, the largest university in the country with total enrollment of 111,000 students, and approximately two miles east of the Mill Avenue District in Downtown Tempe, with more than 80 restaurants, 35 shops and 28 arts and entertainment venues. Notably, Tempe has recently benefitted from unprecedented job creation, as financial services and technology companies relocate into the market.

The acquisition further increases WWC’s U.S. rental portfolio, which comprises real estate in Houston, Dallas, Phoenix, Atlanta and San Antonio. The acquisition also marks WWC’s 50^th acquisition in the Phoenix market. WWC has acquired more than 70 multifamily properties in the U.S., with most purchases completed between 2016 and now.

WWC has identified the Phoenix market as continuing to meet all of the attributes of its business strategy and disciplined investment criteria. The Phoenix market shows both job and population growth that are driving both vacancy rates and rental prices in an environment with a large inventory of undervalued and underperforming multifamily properties.

“We continue to grow our portfolio in the Phoenix area. We are thrilled to add Sonesta on University to the mix. The Valley has been a key market for WWC for some time now,” said WWC CEO Janet LePage.

WWC has developed a proven, reliable system for investing in multifamily properties in key real estate markets across the U.S. WWC offers Investment Partners the opportunity to invest in cash-flowing properties with substantial value-add opportunities. Since its inception, WWC has successfully completed more than $2.2 billion in real estate transactions.

The property, which comprises 66% naturally-occurring affordable housing, aligns with PGIM Real Estate’s intended outcomes of investments through its dedicated real estate impact investment strategy.

“Through our impact investments, we’ve set out to promote greater housing stability and support high quality communities for low and moderate income people,” said Lisa Davis, PGIM Real Estate’s executive director and portfolio manager for its impact-oriented real estate investment initiatives. “One critical way that this can be accomplished is through the preservation of well-located housing properties with affordably-priced apartments, such as Sonesta on University.”

Another interesting aspect of the transaction is the leadership role that women played. In addition to Janet LePage and Lisa Davis, Nevene Vujic led the transaction for PGIM Real Estate. “This is the first transaction that I have closed where all three of the leadership roles were held by women—and all mothers with children under 10,” Davis continued.

Launched in 2018, PGIM Real Estate’s impact strategy focuses on investments in affordable housing and transformative developments in underpriced locations across major U.S. markets with anticipated population and economic growth.

Vestis Group negotiated a retail building sale in Old Town Scottsdale, located at 4165 N Craftsman Court, Scottsdale, AZ 85251, for $1,275,000, or $407 per square foot.

Phoenix, Arizona – Vestis Group, a commercial brokerage and investment firm, is pleased to announce the retail building sale in Old Town Scottsdale, located at 4165 N Craftsman Court, Scottsdale, AZ 85251, for $1,275,000, or $407 per square foot.

“The buyer has big plans for this mixed-use building in Old Town Scottsdale,” says Matt Morrell, President of Retail Investments at Vestis Group and the lead broker for this transaction, “The property is currently leased on an annual basis to The Brush Bar, with a two-bedroom apartment and a studio apartment located on the second floor. The property is located near six new hotel developments and is directly adjacent to a 10-unit condominium development. 4165 sits in an Arizona Opportunity Zone, which made it an extremely attractive investment for the new ownership which plans to redevelop the mixed-use building with approximately 2,000 square feet of new retail space on the ground floor and luxury residential apartments on the 2nd floor.”

The Phoenix based Vestis Group commercial brokerage team of Natan Jacobs and Matt Morrell negotiated the retail building sale on behalf of the buyer, a private investor from Scottsdale, Arizona. The seller, a private investor from Fountain Hills, Arizona, was represented by LevRose Commercial Real Estate’s Danielle Davis, Trent McCullough and Mark Cassell. Vestis Group provides tenant representation services to select national, regional and local tenants with their expansion plans throughout Arizona.

Vestis Group is the broker of choice for individuals and institutions investing in multifamily residential and commercial real estate throughout Metropolitan Phoenix. Our advisors assist clients in the acquisition and disposition of multifamily investment and retail investment assets, including, apartments, bulk condo packages, duplex/triplex/fourplex properties, single-family rental portfolios (SFR Portfolios), income producing single-family investment properties, neighborhood strip centers, retail power centers, retail strip centers, neighborhood grocery, retail PAD and retail shopping centers. In the field of housing, Vestis Group’s principals have developed, built, rehabilitated, constructed, improved, managed, and sold thousands of apartments units, condos, single-family homes and home sites.