Profitable Ventures: 7 Best Cities to Invest in Real Estate in 2023

by | Feb 29, 2024 | blog

Are you planning to invest in a rental property in a US city boasting a robust real estate market with landlord-favoring regulations? Or perhaps you’re looking to buy a home in an affordable housing market with tremendous long-term growth. Real estate investors must embrace the golden rule of profitable investments: location reigns supreme.
After all, the inherent value of a property is tethered to its geographic placement. Discerning the best cities for real estate investment demands astute market research. Clarity on property type, coupled with a long-term perspective, is pivotal. Local expertise, channeled through real estate agents and financial advisors, is invaluable. Consult a financial advisor or industry expert prior to investing in any property, regardless of its location.
In 2023, Austin, Texas, is taking the lead, with an impressive 354% increase in home values since 1998, while rental rates in Nashville, Tennessee, have surged by 18.3%. While home values and rental income potential are crucial, investors must scrutinize the local markets with comprehensive due diligence. Read on to explore the best cities to invest in real estate and strategic insights into their investment potential.

Factors to Consider When Evaluating Investment Potential

Investors should meticulously assess economic stability and real estate profitability, seeking a harmonious balance that aligns with their investment goals and risk tolerance. A comprehensive evaluation ensures informed decisions and maximizes the potential for a lucrative real estate venture.

Economic Stability and Growth Prospects

Investors should focus on cities exhibiting stable economic conditions and a trajectory for growth. This includes examining GDP growth rates, industry diversification, and local government policies conducive to business development.

Population Growth and Demographics

Cities experiencing population growth through natural increase and immigration present strong investment opportunities. A growing population translates to increased demand for housing, ensuring a robust rental market.

Employment Opportunities and Job Market

A thriving job market with diverse employment opportunities is pivotal. Lucrative professional opportunities attract residents and ensure a consistent income stream for potential tenants.

Real Estate Market Trends and Appreciation Rates

Studying historical trends and projected appreciation rates is fundamental. Investing in areas with a track record of property value appreciation and a promising outlook ensures a solid return on investment.

Infrastructure and Transportation Development

Cities with well-developed infrastructure and accessible public transportation networks are prime investment targets. Proximity to major highways, airports, and public transit hubs enhances a city’s overall appeal.

Regulatory Environment and Investment Policies

Investor-friendly regulatory environments are crucial. Favorable tax policies and regulations that support property ownership and leasing are indicative of a conducive investment climate.

Local Amenities and Quality of Life

Essential amenities such as schools, parks, healthcare facilities, and shopping centers enhance a city’s livability. Areas offering a high quality of life will likely attract and retain tenants.

Short-Term Rental Locations

For those considering short-term rentals, proximity to tourist attractions and compliance with Airbnb regulations may be pivotal. A city with popular landmarks and favorable short-term rental ordinances also can equate to steady flow of guests.

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1. Austin, Texas

Austin, Texas, part of the Austin-Round Rock-Georgetown metropolitan area, exemplifies real estate growth. Over the past 25 years, home values in this region have witnessed an extraordinary surge, boasting a cumulative growth rate of 353.92% between 1998 and 2022. This impressive trajectory is a testament to Austin’s robust real estate market.

Austin continues to be a focal point for commercial real estate investors. According to the CBRE’s 2023 U.S. Investor Intentions Survey, Austin secured the #2 spot for the second consecutive year.

Economic Vitality and Population Growth

Austin’s stellar real estate performance is deeply intertwined with its economic vitality. The city has become a thriving hub for tech giants like Apple, Amazon, and Tesla, doubling the population in the last two decades. This economic growth and a burgeoning job market have spurred a substantial demand for housing, making Austin a lucrative destination for real estate investment.

Factors Driving Investment Potential

Austin, Texas, emerges as a real estate powerhouse driven by its robust economy, limited housing supply, burgeoning population, and diverse investment opportunities.

Tech-Centric Economy

Austin’s economy is booming, particularly in the tech sector, attracting a diverse pool of young professionals and families. This burgeoning job market significantly contributes to the growing demand for housing.

Economic Growth

Austin boasts a commendable economic growth rate of 4.3%, positioning it favorably for further real estate development in 2023. Factors such as abundant tech job opportunities, a thriving venture capital ecosystem, and a robust tourism industry contribute to its economic resilience.

Limited Housing Supply

Due to zoning restrictions and a commitment to preserving natural spaces, Austin faces a scarcity of available land for development. This has led to a constrained housing inventory, consequently driving up home prices.

Population Surge

Austin’s economy is one of the fastest-growing in the US, primarily attributed to a population growth rate of approximately 2.39%. This demographic surge amplifies the demand for housing, rendering Austin an attractive real estate market for investors.

Short-Term Rental Potential

Austin commands a substantial presence in the short-term rental market, making it an alluring destination for property investors. Events like the Austin City Limits Music Festival, the Formula 1 US Grand Prix, and South By Southwest bolster the city’s accommodation demands, augmenting occupancy rates and return on investment for short-term rentals.

Key Investment Sectors

This booming Texan hub is particularly enticing for its diversified investment avenues. Multifamily properties are in high demand, especially apartment complexes, industrial spaces, and modern logistics facilities in major markets. Moreover, grocery-anchored centers have garnered significant interest among retail investors.

For astute investors, Austin presents a fertile ground for short- and long-term real estate ventures, offering a promising landscape for growth and prosperity.

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2. Knoxville, Tennessee

Knoxville, Tennessee, nestled at the foothills of the Great Smoky Mountains, emerges as a prominent player in the real estate market for 2023. Its diverse cultural tapestry, bolstered by the presence of the University of Tennessee and vibrant events, makes it an attractive city.

Housing Affordability

Knoxville boasts a commendable score of 97.2 on the NAR Housing Affordability Index, signifying strong affordability. This metric, evaluating whether a median-income family can afford a home, positions Knoxville favorably compared to cities like San Antonio and Raleigh.

Rental Affordability

Approximately 24.1% of renters in Knoxville can now afford to transition into homeownership. This higher percentage than cities, including Dallas and Atlanta, underscores a robust housing market with increased potential for property investment.

Job Growth

Knoxville’s thriving job market, with a 4.5% growth from October 2021 to October 2022, bolsters its appeal. A robust employment landscape ensures financial stability and attracts newcomers seeking promising opportunities.

Projected Growth and Investment Potential

Knoxville’s projected home value of $431,981 by 2026, coupled with a strong job market and a rapidly growing real estate landscape, presents an opportune time for investment. The city’s 8.3% increase in single-family home prices and 20.4% surge in condo prices in Q4 2022 underline its growth trajectory.

Inbound Migration and Rent Growth

Knoxville ranked 11th in US metros for inbound migration, indicative of its allure. The area witnessed a 19.6% year-over-year increase in rent in Q3 2022, surpassing the national average by a significant margin. This upward trend in rent, coupled with a robust housing market, reflects the city’s investment potential.

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3. Tampa, Florida

Tampa, Florida, emerges as a real estate investor’s dream with an economy on the rise and a robust job market. Boasting a diverse economic landscape encompassing finance, STEM fields, healthcare, research, and more, Tampa stands tall among the fastest-growing metros in the US. Entrepreneurs, or “Tampreneurs,” are flocking to this city, enticed by its dynamic business environment.

Key Factors Driving Real Estate Growth

Bolstered by a city government fostering economic development, Tampa has become a magnet for millennials seeking entrepreneurial opportunities. Notable figures like Jeff Vinik and Bill Gates are investing billions in transformative projects, signaling a bright future for Tampa’s real estate market.

Job Growth Pinnacle

Metro Tampa experienced an unprecedented surge of 40,000 new jobs in 2016, outpacing both state and national averages. The city’s job market remains robust with 19 firms boasting revenues exceeding $1 billion headquartered in Tampa.

Population Surge and Desirability

Tampa’s population has surged by nearly 9% since 2010, double the national average. This influx underscores the city’s desirability as both a place to live and invest in real estate.

Investment Strategies and Opportunities

The Tampa market in 2023 presents a myriad of profitable opportunities. Metrics indicate a robust market, with the median property price standing at $671,127. Despite this figure exceeding the national average, Tampa remains comparatively affordable.

Home Price Appreciation

Tampa’s real estate market has witnessed a substantial 9.22% appreciation in home values since September 2022. This suggests a compelling opportunity for long-term investors to capitalize on potential gains.

Renters’ Market

With over 2,500 long-term rental listings and a monthly income of $2,770, Tampa’s rental market demonstrates strong potential for investors. Short-term rentals also present opportunities, with an average monthly income of $2,699 and an occupancy rate of 47%.

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4. Charlotte, North Carolina

Charlotte, North Carolina, stands out as 2023’s hottest housing market, earning the top spot in Zillow’s analysis. With a population approaching one million, the real estate landscape in Charlotte presents a balanced market, offering opportunities for both buyers and renters.

Factors Boosting Real Estate

Charlotte strikes a balance between buyer and renter markets. High demand, propelled by a thriving job market, has led to a scenario where both buyers and renters have ample options. Real estate developers are actively meeting this demand with new rental opportunities, including mixed-use developments combining upscale living with retail and office spaces.

Robust Rental Market

The city’s attractiveness is driving a surge in population. The presence of major employers like Lowe’s, Wells Fargo, and Bank of America, along with a low unemployment rate, fuels the demand for rental properties. Young professionals and families flock to Charlotte, resulting in a robust rental market.

Investment Strategies and Opportunities

The demand for urban living experiences is boosting the rental market, with residents willing to pay a premium for amenities and conveniences. Rental rates have steadily grown, and landlords are well-positioned to capitalize on this trend.

Steady Rent Increases

The rental market in Charlotte has experienced consistent growth. As of January 2023, the median rent cost is $1,850, showcasing an increase of $50 from the previous year. This upward trend is attributed to the city’s booming economy, high demand for housing, and an influx of new residents. The combination of steady rent increases and a competitive market makes it an opportune time to invest in rental properties.

Home Price Appreciation

Charlotte’s real estate market has grown remarkably, with home values soaring over 120% since 2014. This steady appreciation trend and a thriving economy bodes well for property investors.

Affordable Housing Options

Charlotte’s median home price stands at $369,109, offering an attractive entry point for investors and potential buyers looking for more affordable housing options.

Charlotte boasts a lower cost of living than the national average, adding to its appeal for residents and potential real estate investors.

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5. Atlanta, Georgia

Atlanta, Georgia, emerges as the prime real estate destination in 2023, topping the list of markets to watch, according to the National Association of Realtors (NAR). Its stellar performance across key metrics, including affordability, employment conditions, and population growth, sets it apart from the 179 metro areas analyzed.

Factors Influencing Real Estate Growth

Modern-day homebuyers seek residences conveniently located within walking distance of essential amenities. Atlanta offers walkable neighborhoods featuring renowned restaurants, luxury shopping, and the Atlanta BeltLine—a 22-mile corridor promoting outdoor living.

Better Affordability

Atlanta’s real estate market enjoys a long-standing reputation for cost-effectiveness and ample available land, setting it apart from cities with natural constraints like Manhattan.

More Renters Qualified to Buy

Due to more economical property prices, a higher proportion of renters in metro Atlanta possess the financial capacity to transition into homeownership. This contributes significantly to market stability.

Robust Job Market

Georgia, particularly metro Atlanta, has been a magnet for major economic development ventures, especially in the burgeoning electric vehicle and battery sectors. Substantial incentives at various governmental levels have further fueled job growth.

Internationally Recognized Private Schools

Atlanta’s top priority is education, evident in its wealth of internationally acclaimed private schools. Da Vinci International School, Midtown International School, and Atlanta International School offer diverse, globally oriented curricula, fostering well-rounded perspectives.

Atlanta Real Estate Market Insights

The Atlanta real estate market is marked by fierce competition, with listings garnering multiple offers and select properties snatched up in 18 days. On average, properties ultimately sell for 3% below their listed price, typically after spending 47 days on the market.

The Zillow Home Values Index reflects an average home price of $367,309 in Atlanta. This contributes to a more equitable market dynamic, fostering a sense of stability between sellers and buyers.

Supply and Demand Dynamics

Atlanta’s housing supply is struggling to meet the surge in demand, with current inventory levels at 2.1 months. This falls significantly short of the six-month benchmark indicative of a balanced market.

Pricing Discrepancy and Buyer Benefits

Realtor.com reports a median list price of $399.9k in Atlanta, while the actual median sale price hovers around $370k. This price differential creates favorable conditions for buyers, with over 15% of homes selling above their initial asking price and an additional 26.7% experiencing price reductions.

Rental Market Trends

Rental prices in Atlanta have experienced a 4% year-over-year increase. One-bedroom apartments now command an average rent of $1,767, while two-bedroom units see an average of $2,300—an impressive 7% uptick from the previous year.

With 55% of Atlanta households being renter-occupied, there are currently 5,434 available rental units within the metro area. Encouragingly, the National Association of Realtors’ report foresees that over 20% of Atlanta residents will have the financial means to afford a home in the area, surpassing the national average.

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6. Boston, Massachusetts

With nearly 4.9 million residents, Boston boasts a resilient housing market anchored by its rich history and robust economy. Despite a slight year-over-year dip in home sales, median prices stand strong. Single-family homes average around $900,000, while condos have seen a 6.4% surge from $700,000 to $745,000.

Factors Driving Real Estate Growth

Greater Boston’s population has been on a consistent upward trajectory. According to the United Nations, this trend is expected to persist until 2035, driving an increased demand for housing and subsequent property appreciation.

Resilient Economy

Boasting a GDP of $444.4 billion in 2021, Boston’s economy has exhibited impressive resilience, rebounding strongly from the 2020 pandemic. With steady job growth and a low 2.2% unemployment rate as of May 2023, the city provides a stable economic backdrop for real estate investments.

Swift Transactions

Properties in Greater Boston are moving rapidly, with single-family homes spending just 16 days on the market, compared to the national median of 44 days. This indicates a quick turnover and a vibrant real estate environment.

Investment Strategies and Opportunities

Rents in the Boston metro area have experienced a steady annual growth rate of 1.9%, with a median overall rent of $2,026. This positions Boston as one of the top five cities with the highest rents in 2023, presenting significant profit potential for landlords.

Fix-and-Flip Potential

Investors in Boston may find the fix-and-flip strategy particularly lucrative in a market where properties sell in as little as 16 days. This strategy involves identifying off-market properties, renovating them, and subsequently selling or renting them out.

Home Price Appreciation

Boston’s real estate market is experiencing robust growth. Median single-family home prices in August 2023 reached $881,000, signifying a 6.8% year-over-year increase. This surpasses the national median by a significant margin.

Massachusetts closing costs typically amount to around 1.3% of the home’s sale price. On a median-priced $881,000 Boston home, this equates to approximately $11,453. This information is crucial for prospective buyers to consider when budgeting for a home purchase.

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7. Alexandria, Virginia

Situated just minutes from Washington, D.C., Alexandria offers a unique advantage in terms of career prospects. With a thriving economy and a diverse range of businesses, including the presence of industry giant Amazon, the city provides fertile ground for professional growth.

The average household income, surpassing $100,000, outpaces the national average, showing a consistent 4% year-over-year increase. Alexandria anticipates a 41% job market expansion over the next decade, surpassing the national average increase of 33.5%.

Key Factors Influencing Real Estate Growth

Alexandria seamlessly combines historical charm with modern conveniences. The Old Town district, characterized by its cobblestone streets and well-preserved 18th-century architecture, offers a quaint and picturesque setting. The waterfront along the Potomac River provides opportunities for leisurely activities, while a vibrant arts scene, diverse dining options, and lively festivals enhance the city’s appeal.

Competitive Housing Market

The Alexandria housing market is robust and competitive. Homes receive an average of three offers and typically sell within 29 days, a marked improvement from the previous year. The median sale price of homes in Alexandria was $611,000 last month, reflecting a substantial 22.2% increase from the previous year.

Swift Transactions and Seller’s Advantage

Homes in Alexandria are selling speedily, spending only 29 days on the market, compared to 35 days in the previous year. Sellers also enjoy an advantageous position, with many homes selling for about 1% above the list price.

Favorable Market Dynamics

The dynamics of the Alexandria real estate market reveal a noteworthy trend. Over 41.3% of homes are sold above the list price, indicating a competitive environment. Moreover, the sale-to-list price ratio stands at 100.5%, showcasing the seller’s edge in the market.

Investment Strategies and Opportunities

Rental Market Overview

As of October 2023, the average rent in Alexandria, VA, was $1,868/month. When you rent out an apartment in Alexandria, you can expect to earn a steady rental income ranging from $1,534 to $2,456, depending on the location and size of the apartment. In the past year, rent has increased by 2.73%, averaging $52 more per month.

For investors seeking an alternative approach to real estate, mortgage note investing with reputable firms like CWS Investments offers a compelling opportunity. With a track record of managing a diverse portfolio valued at over $75M, we specialize in providing a passive investment option to investors.

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Tips for Finding a Profitable Investment Property

A “good deal” in real estate often entails three key factors: a property priced below market value, in a favorable location, and good condition. This trifecta can set the stage for maximizing rental returns.

Crafting a Search Strategy

Before embarking on a property hunt, establish your search criteria. This criteria encompasses location, square footage, the desired number of bedrooms, property condition, and budget. A clear set of criteria ensures a targeted and efficient search process. Consult a financial advisor to verify your investing goals and plan accordingly.

A well-thought-out plan can enhance your chances of finding the right deal. Employ creative strategies, such as distributing flyers or utilizing online platforms. These tactics can yield unexpected but rewarding opportunities.

Exercise Patience

Patience is a vital virtue in real estate investing. After planting the seeds of your search, allow time for opportunities to materialize. Meanwhile, continue exploring potential properties online. The digital landscape has made real estate more accessible than ever before.

Consider the Neighborhood

The choice of neighborhood significantly impacts tenant demographics and vacancy rates. Proximity to universities may attract students but can lead to higher turnover rates. Be mindful of local regulations that may hinder rental conversions.

Evaluate Property Taxes

Property taxes play a crucial role in your overall expenses. They can vary widely within a target area. High taxes may be justified in desirable neighborhoods, but balancing this with realistic rental income is crucial. Researching the municipality’s assessment office or consulting local homeowners can provide insights.

Remember, the right investment property aligns with your goals, offers competitive returns, and suits your risk tolerance.

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Final Thoughts

Real estate investors face formidable challenges navigating property investments while combatting the macroeconomic risks of inflation and rising interest rates, both at 29%. From rents to operational costs, the reverberations of economic uncertainty are felt deeply. These fluctuations cast a shadow on property valuations, compelling lenders to add loan-to-value cushions and creating a substantial barrier for real estate investors in 2023.

Recognizing the shifting landscape, many are turning towards alternative investments, with 67% of institutional investors anticipating superior performance from portfolios with a 20% allocation to alternatives. Among these alternatives, mortgage note investing stands out as a strategic option. At CWS Investments, with a great track record of managing a diverse portfolio valued at over $75M, we offer investment options for accredited, non-accredited, and self-directed IRA investors.

By acquiring defaulted mortgage notes and employing a proprietary assessment strategy, CWS aims to provide consistent, real estate-backed returns. For investors seeking robust and enduring value, speak with a team member at CWS to map out a tailored strategy that aligns with your financial goals.

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Frequently Asked Questions (FAQs)

Where is the highest ROI in real estate?

The highest ROI in real estate often occurs in cities with strong population growth, robust job markets, and limited housing supply. Currently, cities like Austin, Texas, and Phoenix, Arizona, are notable for high ROI potential.

Which real estate is best to invest in?

The best real estate investment depends on individual goals. Residential properties can offer steady rental income, while commercial properties may provide higher returns. Research and consider factors like location, market trends, and risk tolerance. Consult a financial advisor.

Which city has the highest rental yield?

As of recent data, cities like Memphis, Tennessee, and Cleveland, Ohio, are known for relatively high rental yields. These cities have a combination of affordable property prices and strong rental demand.

Where is real estate growing the fastest?

Cities in the Sun Belt region of the United States, such as Phoenix, Atlanta, and Austin, have experienced rapid real estate growth. Factors like favorable climates, job opportunities, and affordability contribute to this trend.