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Are you looking to expand your real estate investing areas, or thinking about getting started in real estate? Well, we’ve assembled a list of the best cities to invest in real estate for 2023.
Curious to see how we came up with this list? Stick around to the end to learn more about the methodology and why certain criteria were important to factor in when looking for investment properties. Without further ado let’s hop right into the list.
Top 25 cities to invest in real estate
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Boise, ID -
Coming up at the top of our list is Boise, ID, which you might be thinking “hmmm… I wonder why that is.” Well, Boise is one of the fastest-growing cities in the country, with an influx of people from the tech industry moving there, similar to Austin, TX. It has a high quality of life that makes it an attractive destination for young professionals and families. It is like a little piece of paradise for outdoor recreation.
Plus, the low rental vacancy rate and strong home appreciation suggest a strong demand for housing in the area, and the low property tax rate and relatively low cost of living make it an attractive place for real estate investors.
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Raleigh, NC -
Next on the list is Raleigh, NC. Raleigh is a great place for those who love art and culture. In fact, if you didn’t already know Raleigh is one of the three cities that make up what’s known as the Research Triangle. The Research Triangle is named as such because there are a number of scholarly and technology institutions in the area.
Raleigh is one of the fastest-growing cities in the country, with a strong job market, a low unemployment rate, and a low debt-to-income (DTI) ratio that suggests a stable local economy. The low property tax rate and relatively low cost of living also make it an attractive place for real estate investors, and the strong demand for housing in the area makes it a good place to invest in rental properties.
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Austin, TX -
Third is Austin, TX. I’ll give you one guess as to why the city is growing so quickly. If you guessed the tech industry you’d be right!
Austin is a rapidly growing city with a thriving tech industry, a strong job market, and a high quality of life that make it an attractive destination for young professionals and families. The high home appreciation and low rental vacancy rate suggest a strong demand for housing in the area, and the lack of state income tax makes it an attractive place for real estate investors.
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Salt Lake City, UT -
Salt Lake City is a growing city with a strong job market, a low unemployment rate, and a relatively low cost of living which makes it an ideal place for real estate investors.
The high home appreciation and low rental vacancy rate also suggest a strong demand for housing in the area, and the city's proximity to outdoor recreation and national parks make it a nice destination for those seeking an active lifestyle.
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Charlotte, NC -
Charlotte is a rapidly growing city with a strong job market, a low unemployment rate, and a low DTI ratio that suggest a stable local economy. The high home appreciation and low rental vacancy rate also suggest a strong demand for housing in the area, and the relatively low cost of living makes it an attractive place for real estate investors.
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Des Moines, IA -
Des Moines is a growing city with a low property tax rate, a low DTI ratio, and a relatively low cost of living that make it an attractive place for real estate investors.
The city's strong job market and low unemployment rate suggest a stable local economy, and the high home appreciation suggests a strong demand for housing in the area. The city's central location in the Midwest also makes it a good place for real estate investors looking to diversify their portfolios.
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Nashville, TN -
Nashville is a fast-growing city with a strong job market and a low unemployment rate which suggest a stable local economy. The high home appreciation and low rental vacancy rate also suggest a strong demand for housing in the area.
The city's thriving music and entertainment industry make it an attractive destination for young professionals and tourists. The lack of state income tax also makes it a tempting place for real estate investors.
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Colorado Springs, CO -
Colorado Springs is a growing city with a high home appreciation and low property tax rate that make it an attractive place for real estate investors.
The city's proximity to outdoor recreation and natural beauty also makes it a nice destination for those seeking an active lifestyle, and the lack of state income tax makes it an inviting place to invest in real estate.
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Madison, WI -
Madison is a growing city with a strong job market, a low unemployment rate, and high home appreciation that suggest a stable local economy. The city's relatively low rental vacancy rate and the fact that it's home to the University of Wisconsin-Madison make it a good place to invest in rental properties. The relatively low cost of living and high quality of life also make it an appealing place for real estate investors.
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Tampa, FL -
Tampa is a growing city with a high home appreciation which makes it an attractive place for real estate investors. The city's strong job market and low DTI ratio also suggest a stable local economy.
Also, the city's proximity to beaches and outdoor recreation makes it an alluring destination for tourists and retirees. The lack of state income tax also makes it a sought-after place to invest in real estate.
Here are some honorable mentions that round out the last part of this top 25 list.
- Minneapolis, MN - A strong job market, low unemployment rate, high home appreciation, and a relatively low cost of living (measured by CPI).
- Columbus, OH - low DTI ratio, strong job market, low property tax rate, relatively low cost of living, high home appreciation rate, and potential for rental income from The Ohio State University.
- Kansas City, MO - High home appreciation, low rental vacancy rate, and a relatively low cost of living (measured by CPI).
- Chattanooga, TN - High home appreciation, low property tax rate, and a relatively low cost of living (measured by CPI).
- Greenville, SC - High home appreciation, low rental vacancy rate, and a relatively low cost of living (measured by CPI).
- Boise City-Nampa, ID - High home appreciation, low rental vacancy rate, low property tax rate, low DTI ratio, and a relatively low cost of living (measured by CPI).
- Cedar Rapids, IA - Low property tax rate, a low DTI ratio, and a relatively low cost of living (measured by CPI).
- Lexington, KY - High home appreciation, low property tax rate, and a relatively low cost of living (measured by CPI).
- Denver, CO - High home appreciation, low rental vacancy rate, and a relatively low cost of living (measured by CPI).
- Indianapolis, IN - High home appreciation, low DTI ratio, and a relatively low cost of living (measured by CPI).
- Springfield, MO - High home appreciation, low property tax rate, and a relatively low cost of living (measured by CPI).
- Huntsville, AL - High home appreciation, low rental vacancy rate, and a relatively low cost of living (measured by CPI).
- Greensboro, NC - High home appreciation, low property tax rate, and a relatively low cost of living (measured by CPI).
- Grand Rapids, MI - High home appreciation, low unemployment rate, and a relatively low cost of living (measured by CPI).
- Portland, ME - High home appreciation, low rental vacancy rate, low property tax rate, and a relatively low cost of living (measured by CPI).
Methodology
In order to determine what cities would be the best to potentially invest in a variety of different factors could come into play. So, I started with a list of the 200 largest cities in the United States and then gathered the following data points for them.
Now, I tried to find the most recent data for each of the cities, sometimes which meant pulling data from Q2 of 2022 and other times it meant pulling it from the first few months of 2023 data. But each of the data points had a weight behind it, in order to help balance the list.
House Price Index (25%)
The House Price Index (HPI) is a metric that is used to track changes in the prices of residential real estate. You can find the HPI for different areas from government agencies, real estate associations, or data companies. Believe it or not, the information is used not only by investors but also by economists to help monitor the health of the market.
Now HPI is typically based on a weighted average of single-family property prices where each home is assigned a weight proportional to its value. Then those weights are adjusted over time to reflect changes in the market and the resulting index is used to compare home prices across different regions and time periods.
So, you might still be wondering why this point of data is an important factor when deciding where to invest. Well, it can help identify the different trends in the market and evaluate the potential returns of a given investment.
You can find the HPI for different areas from the U.S. Federal Housing Agency or take a look at the map below ⬇️.
Median Property Taxes (20%)
Median property taxes are way more simple to understand in my opinion than HPI, so I’ll keep the explanation brief. This refers to how much the property taxes are collected only instead of finding this out for each individual property, it’s been compiled into the average percentage for each area.
Now, this is important to factor into where you want to start investing especially if you are going to buy and hold a property. You want to make sure to factor in property taxes into if a deal will make sense to you. The lower the property tax for the area the less you will need to pay.
Rental Vacancy (25%)
This is another easy one to see how it fits into the grand scheme of this whole puzzle. Rental vacancy refers to the percentage of rental units that are unoccupied and available for rent at a given time. A high rental vacancy rate can indicate a weak rental market, while a low vacancy rate may suggest strong demand for rental housing.
If you are buying properties for rentals, you’ll want to look in areas that have a higher demand for rental housing. Even if you are wholesaling real estate there is a good chance that some of your buyers want to hold the properties to use as rentals, so it is a win-win scenario to look at the vacancy rates in each city.
Debt to Income Ratio (DTI) (15%)
Debt-to-income ratio (DTI) is a financial metric that compares a person's monthly debt payments to their monthly income. It is calculated by dividing the total amount of debt payments by the total income for a given period, usually expressed as a percentage. A lower DTI ratio indicates that a person has a lower debt burden and is generally considered more creditworthy.
A tenant or buyer with a high DTI ratio may be at greater risk of defaulting on their rent or mortgage payments, which could negatively impact the investor's returns. Now looking at this from an overall city location is helpful because you can determine which cities have a higher risk of defaulting on the payment based on their DTI.
Consumer Price Index (CPI) by Region (15%)
The Consumer Price Index (CPI) is a measure of the average change in the prices of a basket of goods and services commonly purchased by households over time. It is used to track inflation and adjust for changes in the cost of living.
Real estate investors should consider the CPI when making investment decisions because inflation can affect the purchasing power of the rental income or resale value of a property. By knowing the CPI for different areas you can see how it impacts things like rental pricing, resale value, and potential costs in the area.
Resources for Data
In case you’d like to do a little digging for the information in your area you can check out the resources I used to compile the information for our chart.
- House Price Index
- Median Property Taxes Paid
- Rental Vacancy/Rental Demand
- Debt to Income Ratio
- Consumer Price Index
Conclusion
Thanks for checking out our list of the best cities to invest in for 2023. We hope you learned a little about the potential in each market as well as the criteria you should be looking at when making your decisions on where to invest. It is important to note that while this list of the 25 best cities to invest in is a great starting point, it's important to remember to research and evaluate each individual market yourself before making any investment decisions.