In general, what these mostly secondary or tertiary markets share in common is a combination of factors including geographic location, local economies which are modernizing and expanding, and high affordability relative to more expensive markets on the coasts.
This geographic advantage can be either regional or national in scope. For example, cities such as El Paso (Texas), Memphis (Tennessee), Detroit (Michigan), Toledo (Ohio), and Rochester (New York) all benefit from acting as ports of trade for goods due to their locations next to international borders, major rivers, and Great Lakes.
At the same time, cities such as Jackson (Mississippi), Winston-Salem (North Carolina), Greensboro (North Carolina), and Lakeland (Florida) are centrally located in their respective states and can thus act as regional transit hubs.
In addition, cities that were once industrial leaders, such as Tulsa (Oklahoma), Detroit, and Rochester, have managed to expand their economies while also investing to attract more businesses, tourists, and homeowners.
With typical home values in these Top 10 areas ranging mostly from $150,000 to $200,000 versus almost $290,000 nationally, typical long-term rents ranging mostly from $1,200 to $1,500 per month, and average short-term revenue ranging mostly from $1,500 to $2,200 per month, savvy investors will have plenty of options from which to choose.
So what's the catch? Expenses, which can vary widely between locations, the age and condition of properties, mortgage payments, HOA fees, property taxes, and commissions paid to brokers or services such as Airbnb were not included in this analysis. Moreover, while it is true that the monthly revenues and yields are usually higher for short-term versus long-term rentals, overall operating costs are also higher, as they include utilities, furnishings, linens, and sometimes steep management fees. Consequently, any investors digging further into these markets should certainly conduct their own thorough due diligence and run their own financial models. But at least it's a jump on the competition.
What we're offering here is a first look at metro areas you may not have considered for investment, along with some helpful statistics on rent growth for long-term rentals, past and projected home value growth, vacancy levels (when available), and even information on the local short-term rental markets.
The Top 10 markets which follow are ranked by the typical annual rental revenue for a traditional, long-term rental (such as 12 months or more) divided by the typical home value, or what we'll call the Annual Long-Term Rental Yield.