The head economist for the National Association of Realtors said the state of housing indicates a “landlord’s market,” MarketWatch reported. NAR Chief Economist Lawrence Yun said the number of renters is increasing and homeownership rates have stagnated. While Yun said it’s a landlord’s market, there are certain areas of the country that may be more profitable than others.
Compared to metropolitan areas like Los Angeles, investment properties in Indianapolis or Memphis, Tennessee, might be the better buy, at least in the short term.
A study by real estate listing firm Zillow found Indianapolis investment properties ranked No. 9 in terms of the most profitable market for month-by-month gain on rent. Memphis rentals ranked just behind Indianapolis rounding out the top 10. The metropolitan area that ranked first was Oklahoma City in monthly and annual short-term profit.
The affordability of these areas may make them more appealing to tenants who have inadequate savings to buy a house or have too much debt to be qualified for a mortgage. Areas like Los Angeles, which are high in rental demand, may less affordable to many renters because of high prices. Los Angeles has the largest rental rates of the nation with renters paying an average of 47 percent of their income for housing, according to a recent study by University of California, Los Angeles.
“During periods of increasing inequality, the burden has grown even more severe,” said Paul Ong, professor of urban planning, social welfare and Asian American studies at UCLA. “Vacancy rates have risen only slightly – even dipping at times when the housing burden has increased. And renters are paying more for the same quality housing, suggesting that neither market forces nor changing housing quality fully explain the increasing rents.”
Whether putting in money toward purchasing single-family homes for a higher short-term profit, or investing for a longer-term gain, Memphis or Indianapolis investment properties will help provide a steady source of income for investors.