Top 5 cities in the South for Real Estate Investing?

5 Replies

@Yazan Dabbagh

Here is a quick spreadsheet I put together for you. It lists all the cities over 10k in population located within the South region as defined by the Census Bureau and their respective rent to price ratios. (See link below)

List of Cities in the South by Rent to Price Ratio

I have ordered the list by rent to price ratio, starting with the highest value first.

You seem like a new investor so I'll advise you to try and not base your decision to invest solely on the rent to price ratio. 

More often than not, the places with the highest yields will also be accompanied by the highest levels of risk, which can wipe out all the returns you hoped to realize with your investment. 

Hope this helps! 

@Art Perkitny wow!! Thank you so much this is awesome.

You got me, I’m a newbie so I genuinely appreciate your advice.

Couple of questions for you. Are you saying I should take the ratio with a grain of salt? If so, what should the bare minimum P/R ratio be? Is it possible to have a lower P/E ratio but still be a good investment ? I’m mainly thinking about cash-flowing buy and hold type of properties.

Also, what risk factors should I take into account? I understand crime is a big one but is there anything else?

Looking forward to hearing back

@Yazan Dabbagh , glad I could help!

The rent to price ratio is simply a quick way of gauging the profitability of a property, however it does not clearly describe the risk profile of an investment. Risk can be things like low quality tenants, crime (violent, drug, and property), environmental, political, economical, etc...

With that in mind, there is not bare minimum ratio to search for. Rather, I suggest looking at the whole picture. 

Here is a list of variables I find will help paint a decent picture of the quality of a location:

- Population Total

- Population Age

- Home Values

- Household Incomes

- Rental Vacancy Rate

- Homeowner Vacancy Rate

- Poverty Rate

- Educational Attainment Rate (High School/GED & Bachelors)

- Number of Housing Unit

- Rent to Income Ratio

- Rent to Price Ratio

- Population on SNAPS (supplemental nutrition assistance program) percentage

- Property Tax Rate

- Median Age of Buildings

- Number of Structures by Units (SFR, Duplex, Triplex, Quadplex, etc...)

- Median Rents by Number of Bedrooms

- Unemployment Rate

- Employment Sectors Percentages

- Number of Building Permits Issued

- Foreclosure Rate

- School Ratings

- Crime Statistics

Also take into consideration the direction in which each of these market indicators are trending. This will better help you get an understanding of not just where market is today, but also where it may be heading.

Let me know if you have any other questions, hope this helps!

@Art Perkitny That makes a lot of sense. Where would I get this sort of data points and where would I see those trends? I’m not sure if it’s available on Zillow and Trulia.

Also, considering that I am very prone to paralysis from analysis, which of those risk factors should I focus on the most?