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Real estate investment has been one of the most widely heralded strategies for diversifying investments and for good reason. Real estate is a tangible asset that typically appreciates in value, since there is always demand for places to live.
However, contrary to popular belief, real estate investment is not a passive investment that is guaranteed to make you money. In fact, you need to put a lot of thought into real estate investing in order to make the most out of your money. This means taking into account that area’s housing market, its jobs market, long-term outlook for growth, and how you intend to use that property whether as a rental unit or a quick flip. Luckily there are a number of cities which meet many of the criteria for promising real estate investments.
Criteria for Real Estate Investments
There are a number of factors that make a city a good choice for real estate investments. Factors which affect housing demand are obviously paramount when making a decision o have a diverse, job-friendly economy and low unemployment, which would translate into more people demanding housing in that city with the jobs to be able to afford it.
You also would want a city that has relatively low tax rates, since that encourages more people to move to it. Additionally, you’d also want cities with properties that are fairly priced, so you can get in and invest, while appreciating in value over time as well.
Of course, there are a lot of cities that offer incredible investment opportunities and properties that pay their landlords extremely high rents each month, but those cities aren’t suitable for the average person to invest in, which is why the 11 cities on our list have the best of both worlds – golden investment opportunities as well as fair pricing.
We start off with Boise, Idaho, which is a great place to buy real estate for several reasons. Over the past 10 years, the value of real estate in this city has increased by 12%, much higher than the national average of 3 to 5%.
Because of this, the median value for real estate in Boise is $485,000 which is slightly greater than the national median of $412,000.
This happened because many people have recently migrated to the city, to take advantage of the job market, which has recently been boosted by tech companies such as Micron Technology Inc. (NASDAQ: MU) setting up shop in Boise.
These tech companies came to Boise to take advantage of its low housing prices and low taxes, especially compared to the neighboring state of California, which has long been the tech capital of the U.S..
Speaking of taxes, Boise’s taxes are some of the lowest in the U.S.. For example, the income tax in the state of Idaho is a 5.8% flat rate, while the corporate tax rate in the state is a flat 6%.
On the other hand, income tax in Idaho’s neighboring state, California, ranges from as little as 1% to as much as 12.3%, which is one of the highest tax rates in the country! The corporate tax rate in California is 8.84%, which explains why businesses would be more willing to set up shop in Idaho.
So, if you buy an apartment in Boise now, how much money would you make as a landlord? Well, the average rent for an apartment in Boise is $1,330, which is lower than the national average of $1,702.
The low rent is explained by the increased housing supply, which itself is a response to increased demand for housing due to the booming economy of the city.
Las Vegas, Nevada
You might be surprised by this, but Las Vegas is a good place for buying real estate.
The median real estate price there is $405,000, less than the national average. This situation might not last long, because real estate prices in Las Vegas can fluctuate wildly. This is because it is heavily dependent on its tourism industry, which itself fluctuates according to economic conditions.
There are plenty of other reasons why buying real estate in Las Vegas is a good idea. The city has a very strong and diverse economy, with sectors like tourism, entertainment, gaming, technology, healthcare, and education. This provides a stable income source for residents.
Las Vegas also has ongoing infrastructure development projects, such as new roads, public transportation, and community amenities. These projects can improve the quality of life and property values, making it a good choice for long-term real estate investors.
Currently, Las Vegas’ real estate market is cooling down, since the supply has recently been increased to meet increased demand for housing, which could provide new buyers with an opportunity to get in and buy properties before the prices jump again.
The average rent in this city is $1,457, which is lower than the national average. This relatively low rent has to do with the high supply of housing, which is itself a cause of high demand. In fact, this low rent despite the high demand shows how volatile the housing market is, so get in while prices are down.
As for the taxes, you’ll be glad to hear that Nevada doesn’t have an income tax. This is bound to attract both people and businesses, and this is exactly what’s happening.
An example for this is the gaming company Skillz (NYSE: SKLZ), which moved its headquarters from San Francisco to Las Vegas in 2023, thanks to Vegas’ welcoming environment for tech and “real money” gaming companies.
Our third option for real estate investment is Denver, Colorado. The median value of real estate in Denver is $550,000, which is on the more expensive end as it’s much higher than the national average.
This is because there’s strong demand for housing in Denver, as the city has been attracting migrants due to its booming job market.
The reason for this is that there are major companies operating nearby, such as Lockheed Martin (NYSE: LMT), a leading global security and aerospace company.
Other major companies operating in Denver include Fidelity Investments (NYSE: FNF), Comcast Corp (NASDAQ: CMCSA), Charles Schwab Corporation (NYSE: SCHW), and many more in all kinds of different industries.
Of course, all of these factors result in high rents that greatly reward landlords, with the average rent in Denver being $1,737.
If we take a look at the state’s taxes, we find that both the income tax and corporate tax are low at around 4.40%, which encourages people and businesses to move to the city.
Overall, despite being on the pricier side, Denver properties have everything it takes to offer great investment opportunities.
Now, let’s head to the south, to Austin, Texas. The median value for real estate there is above the national average, being $424,990.
This is because the city is seeing a surge in its population. In fact, the Austin metro area is the fastest-growing in the country, and has been so for 12 years in a row. This drives up the demand for housing.
These people are moving into the city because there’s plenty of job growth, with lots of major companies such as Google (NASDAQ: GOOGL) and Tesla (NASDAQ: TSLA) setting up shop in Austin. These companies, and many others, are encouraged to set up HQs in the city because Texas doesn’t have a corporate tax rate, and no state income tax. However, it makes up for them with a relatively high sales tax rate of 6.25%.
This also explains why the rent is somewhat expensive, but the average rent is around $1,436.
Now, we move to the west, to take a look at another good city for real estate investment, and that is Phoenix, Arizona. The median prices here are around $444,000, slightly above the national average. This represents an increase of 2.3% over the last year, which isn’t much. The previous year however, prices increased 24% compared to the national average of 3% to 5%.
This is mainly due to the city’s strong labor market, which is the result of a business-friendly environment and a diverse economy. In addition to these factors, Phoenix also has great infrastructure that encouraged many major companies to set up HQs in the city, including Amazon (NASDAQ: AMZN), PetSmart, Alaska Airlines (NYSE: ALK), and many more.
The city is also one of the fastest growing in the U.S. in terms of population. In fact, it is estimated that by the year 2060, Phoenix would host a population of 2.18 million people, a near 31% increase from its 1.66 million population reported by the U.S. Census in 2020.
Naturally, this could in turn increase the demand for housing in the city.
The average rent in Phoenix is $1,534, which is less than the national average. This relatively low living cost is part of what encourages people to move to Phoenix. However, this rent will probably increase as more people move to Phoenix and demand increases.
While Arizona does have an income tax, it’s still very low at 2.5%, and a flat rate to boot. The corporate tax rate is also relatively low at 4.90%. As we’ve seen with other states, low taxes encourage both businesses and individuals to move in.
Nashua, New Hampshire
From the south west to the north east, we’ll now take a look at Nashua, New Hampshire. The median price in Nashua is $457,500, which is higher than the national average. This relatively high price is a result of the low supply of the city’s real estate accompanied with the high demand.
Nashua homes are in demand because real estate prices and rents in nearby Boston have soared in 2023 by 3.6%, a faster rate than what it was seeing in 2022.
This has led to an exodus toward more affordable places like Nashua, which shows the increasing demand for housing in the city. In fact, the property values in Nashua are expected to increase by 25% to 50% over the next 10 years due to this increased demand.
The average rent in Nashua is higher than the national average at $2,042. This steep rent represents the increase in demand, but it also presents a good opportunity for those who manage to acquire real estate and rent it out.
New Hampshire is unique in that it’s only one of five U.S. states that doesn’t have a sales tax. That encourages consumption and decreases living costs. Its income tax is also low at a flat rate of 4%, while its corporate tax is at 7.50%.
Now, we move to Pennsylvania and to Pittsburgh specifically. The median price there is lower than the national median, at $239,000. This makes real estate investment in Pittsburgh potentially a good idea, especially if values increase.
Will this happen? Given what we know about the city, it might. The city is home to many colleges and universities, such as Carnegie Mellon University, the University of Pittsburgh, Duquesne University, and many more. This provides landlords an opportunity to rent their properties to students.
In addition, there are plenty of industries in Pittsburgh which create a strong economy and encourage people to move to the city to find jobs. These industries include manufacturing, leisure, technology, and health care.
This is shown in the number of prominent firms operating in the city, such as Google, Apple Inc. (NASDAQ: AAPL), Bosch (NSE: BOSCHLTD), Facebook (NASDAQ: META), Uber (NYSE: UBER), Microsoft (NASDAQ: MSFT), and IBM (NYSE: IBM).
In terms of rent, the average in the city is $1,512, below the national average. This relatively low rent might be one of the reasons encouraging people and businesses to move to Pittsburgh, as we saw with other cities.
Another factor which might be encouraging people and businesses to move in is the state’s fair taxes, as its income and corporate tax rates are 3.07% and 8.99% respectively.
Further to the north, we find another good place for real estate investment, namely Minneapolis, Minnesota. Median prices there are $311,000, which is much lower than the national average. This price tag might make buying real estate in Minneapolis a good opportunity because of these reasons.
First of all, the city has a strong rental market, especially because it benefits from students from the University of Minneapolis housing in it. But, the market isn’t just dependent on students, as it also benefits from a strong economy.
The city’s economy is very diverse, and benefits from the presence of several fortune 500 companies in the city, like Target (NYSE: TGT), Best Buy (NYSE: BBY), and General Mills (NYSE: GIS). The presence of these companies encourages people to work in Minneapolis, which is good for the housing market.
The rent is also affordable, at $1,420, lower than the national average. This is one another reason that encourages people to move to Minneapolis.
As for taxes, Minnesota has a progressive income tax ranging from 5.35% to 9.85%. This is considered high compared to other states that we covered.
The corporate and sales tax rates are also on the higher end, at 9.80% and 6.87% respectively.
New Orleans, Louisiana
For our final city for real estate investment, we picked New Orleans, Louisiana. Median prices in this city are $310,000, much lower than the national median price. This might be another good opportunity to get into while prices are low in a city that has really high potential.
Buying real estate in New Orleans could be a good idea because the city benefits from a diverse economy. It’s a major tourist destination and acts as a commercial hub, because of its geographic position on the Gulf of Mexico.
This position also allows the city to take advantage of the oil and gas industry, as these two commodities are extracted from the gulf.
In fact, 25% of the total state revenues come from its oil and gas industry, while 40% of its operating budget comes from tourism.
These different industries provide jobs which encourage people to come to New Orleans, which means more renters.
The city’s economy also benefits from a low income tax, which starts from 1.85% to 4.25%. Additionally, it has favorable corporate tax rates between 3.50% to 7.50%. This has encouraged businesses to set up shop in New Orleans, such as Chevron (NYSE: CVX) and Shell (NYSE: SHEL).
As for rents, these average around $1,198. The fact that this average rent is lower than the national average might encourage people to move to New Orleans, which would be good for the housing markets, as demand would increase.
To sum up, there are plenty of good opportunities for investors interested in real estate investment in the many U.S. cities. There are some cities where you could buy real estate for relatively cheap prices, despite these cities having lots of potential.
In order to recognize these cities, you need to do your own due diligence and research the area you want to buy real estate in, or consult with a professional if needed.
In this list, we tried to provide you with cities in which real estate is fairly priced, but also have good buying opportunities based on the city’s economy. Hopefully, you can take advantage of this list, especially if you happen to live in one of these 9 cities or near one of them.
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