Many people are deciding that home ownership is currently out of their reach, and as a result there is increasing interest in the rental market. According to market research company Reis, rental property vacancies dropped from 6.6% to 6.2% last year and as the economy slowly improves, the demand for rental units should increase as well.
The best market for rental property investment appears to be Houston. The Texas city is ranked in the top ten in both the rental property growth and rent-increase rankings. MSN ranked Houston as one of the top ten markets in which to invest because of its room for expansion and thriving economy. Reis also ranked it number ten on the list of fastest growing rent-growth cities, enjoying a average 4.6% rent increase last year.
Other markets recommended by MSN for rental growth include:
- Las Vegas, NV – One in 89 homes are being foreclosed. This is driving high demand for rental units.
- Orlando, FL – A growing condo conversion market went bust, thus flooding the market with potential renters.
- Colorado Springs, CO – Low rents are driving demand and rental growth.
- Memphis, TN – A tight housing market is sending more people into rental units.
- Jacksonville, FL – Unemployment has hurt the home buying marketing and the area has the third largest military presence in the country, a key driver for rental units.
- Atlanta, GA – High unemployment and a falling housing market are fueling a surge in the rental market.
- Columbus, OH – A solid combination for rental demand being a college town and a state capital with plenty of government jobs.
- Phoenix, AZ – A triple play for favorable rental demand: a capital city with lots of state jobs, a college town, and a huge military presence with nearby Luke Air Force Base.
- Tulsa, OK – The growth of new energy companies, the decision of American Airlines to keep its maintenance center here, and college rentals from Oklahoma State University and Oklahoma University are driving a robust rental market.
If you are looking for markets where rents are growing fastest, then to paraphrase writer Horace Greeley, “Go west, young man (or woman)!” Based on data collected by Reis, nine of the top markets for rent-growth are west of the Mississippi.
The technology sector appears to be driving the growth in the top three markets of San Jose (5.3% growth), Seattle (5.2%), and San Francisco (5.2%). Portland, with 4.7% growth, was the other west coast market ranking seventh. Texas, with no state income tax, had three markets on the list with Dallas (5.0%) at number four and Austin (4.6%) at number eight joining number ten Houston (4.6%). Minneapolis (5.0%) ranked fifth while Denver (4.9%) slotted in sixth. The only market east of the Mississippi in the top ten was Fort Lauderdale, which showed a 4.6% growth rate. Experts feel this is a result of the growing Florida tourism industry.
Whether you are looking for areas with growing rental unit demand or simply markets with the largest increase in rents, you have plenty of options.