I’ll begin with a disclaimer. I realize this is a VERY subjective topic and there are about a hundred different criteria one may use to determine the best area to invest in rental property however, having said that, I attempted to do a broad brush analysis from 30,000 feet. I decided to look at which area, in general, offers the best return on investment when it comes to rental property. For the sake of my analysis, I looked at single family homes as rental properties since they are the most common investment by individual investors.
To determine the best rate of return I looked at the median rent for the area as well as median vacancy rate of rentals and median home price. I then determined a rent/value ratio and the area with the highest ratio determines the area with the best potential return on investment. In computing the ratio I multiplied the median rent by 12 to get the annual rate, then reduced that amount by the vacancy rate and divided the result into the median property value.
As the table below shows, the city of St Louis came out on top with the highest rent to value ratio, 6.48% followed by St Louis County with a 5.45%.
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