The average return on investment, also called ROI, is more difficult to calculate than you might think when you are considering an entire city as the sample size. The reason for this is that there will be so many data points, some high and some low, and the average ROI might not be similar to anyone’s actual ROI on their actual investments.
And besides, gathering data on ROIs always ends up begging the question: Why do some investments fail? The most obvious answer is that they are bad investments. And that is probably true. But it also moves the question a bit deeper: Why are they bad investments?
Answering this question is the key to finding good investments. So, to help understand ROI and where you might find good investments, let’s look at some of the cities with the best ROI.
Top 10 Cities That Can Generate The Maximum ROIs On Real Estate Investments In The US
10. Las Vegas, Nevada
The thing that makes Las Vegas both interesting and profitable to investors right now is the influx of residents from California. This means that you have two things: First, you have people from a much larger economy coming to a comparatively smaller one to spend money.
And second, you have people that need housing and have low standards for renting. Most California cities have obscene renting practices, after all.
9. Tampa, Florida
Tampa is another city that has seen a population increase, and therefore fewer empty apartments and more efficiently run businesses. The big difference here is that the people moving to Tampa tend to be moving from other places in Florida.
This brings with them the advantage of knowing Florida rental laws. That means it will be easier to move in and out of properties, both residential and commercial.
It helps that the Florida economy is growing. There was a brief hit to the economy after the governor decided to take on Disney, but now that it has been a few weeks and Disney has not made good on its threat to leave, people are realizing that the government is reliable (sort of).
8. Phoenix, Arizona
This is a city with a disproportionately high rental yield compared to other cities on this list. The reason is that the economy of Arizona at large is growing at around the same rate as the rental and housing industry. This is pretty uncommon, as in most places wages don’t increase.
Due to this, people are also leaving other states to come to Arizona. And yes, that means people from as far away as California are coming out to Phoenix to set down roots.
There is always a chance that growth slows down and the bubble bursts, but localized bubbles like this will usually burst way more gently than nationwide bubbles.
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7. Seattle, Washington
This is a city with high ROI and the cause of that high ROI comes from some very obvious sources: Amazon and Starbucks. Amazon in particular was one of the big companies to see the most growth in 2020. Then, when everything picked up in 2021, they saw another year of growth as the whole world bounced back from the economic struggles of the pandemic.
Though it should be noted that the size of the Washington state economy has had positive secondary effects as well. It has resulted in there being plenty of startups to invest in.
6. Columbus, Ohio
This is another high rental yield city. However, the reason for that has less to do with a growing rental economy and more to do with the growing population and economy at large.
It is pretty easy to see why this would happen: The rental economy is too large. It does not need to shrink, but it helps it to slow down. Columbus is the perfect place for that.
5. Colorado Springs, Colorado
Home prices in Colorado Springs have gone way up in the last few years. They have gone up so much that there will probably be a burst of that bubble in the coming years.
However, every burst is precipitated by an unprecedented climb. If you get in before the end of the year, then you will probably have an opportunity to sell your property before it gets bad.
4. Charlotte, North Carolina
This is another place where home values are increasing massively. The big difference here is that at the same time that there is probably an incoming burst, there are a few other factors at play. For one, the population is also increasing. This is due to New England’s rental problems.
The Northeast of the United States is squeezing renters too hard, and they are fleeing south where rent is cheaper. The rental industry in the south is growing as a result. And once that housing bubble pops, you better believe the rental industry will be there.
3. Arlington, Texas
While the rest of Texas is seeing the population get redistributed, Arlington is seeing foreign capital come into the city at a much higher rate. This is from the Texas government inviting them in.
Foreign capital means new money, and new money means a bigger ROI.
2. Austin, Texas
While other parts of Texas are seeing foreign money, Austin is seeing corporate money. While Disney has not left Florida yet, it is making investments in Texas to prepare for that. Primarily in the Austin area. This makes it a great place to invest in businesses.
But it does not stop there. House prices are already near bursting in Austin, making it a great place to get houses for cheap once they do burst.
1. San Francisco, California
This is a weird one, as San Francisco is known as a city with some problems. It is not easy to get into its economy, but it is easier than it was before. That is because we’re all of these cities have housing bubbles ready to burst, and San Francisco’s has already burst.
The short version of appraising all of these cities is that their ROI is most based on renter exploitation and overpriced housing. And since both of those things are near crashing, you will get a good price on both of them before the end of the year.