Demand may be high in your area, but is the potential revenue for rental property investments worth the entry costs? HomeUnion analyzed the top cities for single-family investment properties to find out.

  • With 25 percent down on a $400,000 purchase, investors are likely to find condos with lower monthly returns in costly rental markets.
  • In Austin and Dallas, rental investors can purchase two single-family homes at the same price point.
  • In Oakland, a $400,000 condo rents out for $2,200 per month.
Ksenia Ragozina / Shutterstock.com

Ksenia Ragozina / Shutterstock.com

Demand may be high in your area, but is the potential revenue for rental property investments worth the entry costs? HomeUnion analyzed the top cities for single-family investment properties to find out.

The real estate investment site found that leveraging 25 percent of a $400,000 single-family rental (SFR) home, or $100,000 down, provides larger monthly returns in southern cities like Austin, Dallas, Jacksonville, Atlanta and Charlotte.

“Our study confirms that investors’ dollars go much further in the South and one of the biggest metros in Texas than they do in Oakland, New York, Seattle, Washington D.C. and Denver,” Steve Hovland, director of research for HomeUnion, said in a statement.

“Not only do investors get more for their money; they can buy a larger home or homes in a nicer neighborhood, allowing for the potential to capture higher rental income in the Austin, Charlotte, Atlanta, Jacksonville and Dallas markets.”

Where does your metro stack up?

In pricier coastal markets, investors are mostly looking at condos on a $400,000 budget, the report shows.

In New York City, a 395-square-foot condo for $399,000 brings in just $2,000 per month when rented. The Big Apple features the highest price per square foot for rental property investments among all 10 cities surveyed, at $1,010.

Although San Francisco takes the cake in terms of rent, Oakland’s market is growing more competitive by the week, according to HomeUnion.

With 25 percent down, Oakland rental property investments for $400,000 rent out for $2,200 per month. At 535 square feet and $748 per square foot, investors in the area pay premiums for small condo living areas that might not be as attractive to potential tenants.

In D.C., an investor in this situation could afford a $390,000 condo that runs a little larger, at 761 square feet, bringing the price per square foot to a softer $512. Nonetheless, HomeUnion says rent would likely provide around $2,200.

In Texas, however, investors can go much farther with their dollar, according to the report. Both Dallas and Austin allow investors to purchase a two-property SFR portfolio on a $400,000 budget, both of which bring in combined sums larger than a single-rental income from a condo in a costly city.

A double SFR portfolio in Dallas that costs $395,000 with 25 percent down collects $3,370 in rental income combined. The total square footage spans a massive 5,364 square feet across both properties, bringing the price per square foot to a cost-effective $74.

In Austin, two rental property investments for a total $370,000 yields $2,800 in potential monthly income, HomeUnion says. At $120 per square foot, Austin investors have 3,083 square feet across two properties to attract renters looking to spread out.

Email Jennifer Riner

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