Study Reveals US Cities With The Best ROI On Investment Properties

  • Houma, Louisiana comes out as the US city with the highest ROI for property investors
  • Dothan, Alabama and Johnstown, Pennsylvania take second and third
  • States of Illinois and Louisiana both feature two cities in the top ten

Research has revealed the US cities where properties offer the best proportional Return on Investment (ROI).

Real estate experts at Agent Advice analyzed home value and typical rent prices across the US cities to establish where investors can currently expect the highest ROI.

Zillow Housing Value Index (ZHVI) indicates the typical housing value in a given geography, and Zillow Observed Rent Index (ZORI) measures asking rent prices. This study uses these measures to establish places with the highest rental values, compared proportionally to the cost of a property.

  1. Houma, LA

Houma, located in Louisiana’s Bayou country just 55 miles from New Orleans, is the US city with the highest expected ROI. The housing value index indicates the typical property value to be $149,871, while the observed rent index puts the average cost of rent at $1,441.

Rent equates to 0.96% of property value, meaning the payback period on a typical investment property down payment (20%) could be as short as 20.8 months. This is almost half the national average payback period of 39.6 months.

  1. Dothan, AL

Dothan, in Southern Alabama, comes out second in the list with a typical property value of $166,459. An average monthly rental price of $1,553 means that rent equates to 0.93% of property value.

The potential payback period for the down payment on an investment property here sits at 21.43 months.

  1. Johnstown, PA

The largest city in Cambria County, and just 57 miles east of Pittsburgh, Johnstown offers the third highest ROI in the US.

A low housing value index of just $83,114, accompanied by an observed rental index of $766 means that rent equals 0.92% of property value. The payback period for a 20% down payment on a property here could be as short as 21.68 months.

  1. Beckley, WV

Beckley of Raleigh County, West Virginia has a typical property value of $116,252. The observed rental index of $1,000 is equivalent to 0.86% of property value and makes for a typical investment down payment payback period of 23.25 months.

  1. Decatur, IL

Decatur, the largest city in Macon County and situated along the eponymous lake in Central Illinois, makes fifth on the list. Typical property value sits at just $94,537 and a typical rental price, 0.86% of this at $808. This makes for a potential down payment payback period also just short of two years at 23.39 months.

  1. Shreveport, LA

The third most populous city in Louisiana, Shreveport has a housing value index of $152,712. With an observed rent index of $1,256 equating to 0.82% of property value, the payback period on a typical down payment comes in at 24.32 months.

  1. Peoria, IL

A few hours out of Chicago, Peoria has a typical property value of $135,229. Observed rent index also equates to 0.82% of property value at $1,110, again making for a possible down payment payback period of just 24.35 months.

  1. Sumter, SC

Just 40 miles east of state capital Columbia, Sumter, South Carolina, ranks eighth for ROI in the US. With a typical property value coming in at $163,176 and observed rent index equalling 0.82% of this at $1,337. The potential payback period on a down payment here is 24.4 months.

  1. Texarkana, TX

Straddling the border of Texas and Arkansas, Texarkana makes the penultimate top ten spot for ROI on property. Typical property value lies at $148,518 while the observed rental index of $1,212 equates to 0.82% of this.

  1.  Jackson, TN

Jackson, Tennessee is the final city in the ROI top ten. Located 70 miles east of Memphis, the city has a typical housing value of $170,667. Observed rent index in the city is $1,387, or 0.81% of property price.

As well as the top cities for ROI, the study established the cities at the other end of the scale. With generally higher property values drastically increasing payback periods, here are the ten cities with the least desirable ROI.

  1. San Jose, CA

Silicon Valley’s San Jose has a huge typical property value of $1,428,238. While observed rent of $3,289 would ordinarily be seen as large, it equates to only 0.23% of home value here. A 20% down payment on a property would take as long as 87.46 months, which is over seven years.

  1. Missoula, MT

The city of Missoula in western Montana sees property values averaging $519,169, and rental rates of $1,353. With rent equating to 0.26% of property value, the potential payback period comes in at 76.71 months, almost six and a half years.

  1. San Francisco, CA

The commercial, financial, and cultural center of California, San Francisco, comes in as the place averaging the third worst property ROI in the US. Typical property value sits at $1,116,046 with rent at $3,121. This makes observed rent just 0.28% of property price and a down payment payback period of 71.5 months.

  1. Logan, UT

Logan, Utah, is just 80 miles outside of the state capital, Salt Lake City. It has a typical home value of $429,880 and asking rent of $1,266. This rent equates to 0.29% of property values and makes for a down payment payback period at 67.89 months.

  1. Boulder, CO

Boulder, located in the foothills of the Rocky Mountains, has a typical property value of $747,964 and rent comes in at $2,229, 0.30% of total value. This makes for a potential down payment payback period of 67.08 months.

Chris Heller, co-founder of Agent Advice commented on the findings: “It’s certainly interesting to see which real estate markets are currently showing as strong investments. With this top ten revealing some of the best cities for rental property investment, investors and realtors should keep their eyes on these cities for strong growth”

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