Rental property investors: here’s where to buy to maximize ROI

Aly J. Yale
The Mortgage Reports contributor

Where to buy rentals

Though average rental investors can expect a yield of about 8 percent on each home in their portfolio, in some cities, those returns are almost doubled. According to recent data, investors in Kansas City and Pittsburgh can make 14 percent or more.

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Kansas City is king

According to the most recent Canary Rental Index, rental property investors in Kansas City, Missouri-Kansas, see the biggest annual gross yields out of all major metros in the U.S. Investors in the city rake in 14.1 percent on each property.

Pittsburgh ranked at No. 1 for highest gross yields at 14 percent, while Memphis, Tennessee, took No. 3. Memphis investors see yields of 13.3 percent.

Other cities to also post above-10 percent gross yields were Birmingham, Alabama; Buffalo, New York; Cleveland, Ohio; Indianapolis; Rochester, New York; St. Louis; and Oklahoma City, Oklahoma. The average gross yield for rental property investors is 7.7 percent, according to the Index.

Not ready to be a homeowner? Then buy a rental home and move in later

Lowest ROI cities

The metro with the lowest yields for rental property investors was San Jose-Sunnyvale-Santa Clara, California, where the average ROI clocks in at just 2.8 percent.

Additionally, nearby San Diego and Sacramento had similarly low ROIs. Las Vegas and Seattle also had gross yields under 5 percent, while New York City investors see a mere 5 percent ROI on rental properties.

One more reason to buy a rental property: tax cuts for landlords

Other cities that also came in under the national average ROI for rental properties included: Providence, Rhode Island; Boston; Washington, D.C.; Phoenix; Portland, Oregon; Minneapolis; Denver; Raleigh, North Carolina;  Riverside, California; Nashville; Miami and Orlando, Florida; and Hartford, Connecticut.

All three of the Lone Star State’s major metros Dallas, Austin and Houston — also showed below-average yields for rental investors.

Verify your new rate (Jun 24th, 2019)

Get today’s mortgage rates

Are you looking to boost your portfolio with a rental property in one of these high-ROI cities? Then shop around and see what mortgage rates you qualify for today.

Verify your new rate (Jun 24th, 2019)