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Aug 08, 2023 PropStream

Top 10 Most Affordable Cities in the U.S. in 2023

When an investor considers buying a rental property in a particular area, the median monthly rent is a determining factor. Many investors prefer to purchase property in a metro area with high rents, but some investors buy where rents are low. Buying in an affordable city with low rent may seem counterintuitive from an investment standpoint. Still, economic research suggests that low-rent markets often provide investors with cash flow stability and future rent growth.

Affordable rents tend to attract and retain more tenants, which keeps rental income stable. As long as median home price appreciation is growing in the location you've invested in, you can consistently raise rents. Savvy investors who can identify up-and-coming areas within these affordable markets will likely see promising returns.

In this article, we'll discuss some of the lesser-known benefits of investing in affordable rental markets and what investors should consider before purchasing an investment property in one of these markets.

  1. Unknown Benefits of Investing in Affordable Cities
  2. Raising Rents May Be Easier
  3. Minimal Vacancies Due to High Demand
  4. Potential for Short-Term Rentals
  5. Landlord-Friendly Policies
  6. Most Affordable Cities for Rentals
  7. What Investors Should Consider About Low-Rent Areas
  8. Identify Investment Opportunities in Affordable Markets with PropStream's Lead Generation Technology
  9. Key Features in PropStream to Help Investors

Unknown Benefits of Investing in Affordable Cities

Investing in affordable-rental markets comes with unique advantages that aren't always obvious to real estate investors. Here are four key benefits to investing in markets with cheaper rent:

Raising Rents May Be Easier

You'll notice that the average rents in the cities listed below are substantially lower than their median household incomes. Disparities in median household income and rental prices indicate high disposable income levels among residents, which suggests renters can handle rent increments over time. This is excellent news for investors looking to raise the rent consistently.

Minimal Vacancies Due to High Demand

Most of the cities mentioned below don't just boast housing affordability but also thriving job markets. This usually secures an influx of new residents with reliable incomes, so you won't have to worry about your units remaining vacant for extended periods. Renting is better than buying in areas where the rent-to-price ratio is above 16. This creates high rental demand among young professionals who prefer to rent rather than buy in the area.

Potential for Short-Term Rentals

Affordable rental markets also have a lot of potential for short-term rental owners, specifically those interested in capitalizing on local tourism trends. Many cities mentioned below attract local, interstate, and even international visitors yearly. These markets are great places to host Airbnbs and Vrbos without worrying about strict laws regulating STRs in significant cities.

Landlord-Friendly Policies

Landlord-Friendly Policies

Another benefit to owning property in areas where rents are low is the fact that many of these properties are located in landlord-friendly states. This makes it so that if you have issues with tenants, there's a higher chance the law will protect your interests as a property owner. The real estate tax rate is also often lower in these states.

Most Affordable Cities for Rentals

Don't discard the possibility of investing in affordable cities just yet. There are plenty of opportunities for investors in low-rent markets. Look at our list of the top 10 most affordable cities in the U.S. and why investing in them might be a good idea.

According to the U.S. Census Bureau, the national median household income is $69,021. The national average cost of rent is $1,702, making the cities listed in this blog affordable for most renters.

Springfield, Missouri

While it's hard to say which city is the most affordable in the U.S., Springfield, Missouri, strongly claims the title. Downtown Springfield has an average housing cost of just $801 per month and a median household income of $43,778. Known for its growing healthcare industry, lively arts scene, and stunning view of the Ozark Mountains, it's a beautiful and affordable place to live.

Like the education sector powers Salt Lake City, Springfield's economy, the city is home to Missouri State University, which boasts a student population of over 24,000. This provides investors a unique opportunity for student rentals and traditional, long-term rentals once students graduate and enter the workforce.

Wichita, Kansas

Wichita has an average monthly rent of $832 and a median household income of $56,374. Known for its aviation industry and prestigious medical institutions, Wichita is home to large companies such as Spirit AeroSystems and Textron Aviation. The presence of these corporations attracts new talent looking for affordable living options.

Green Bay, Wisconsin

Green Bay has a median monthly rent of $851 and an average annual salary of $51,510. Home to national corporations such as Schneider National, Humana Insurance Company, and Associated Bank, the city of Green Bay boasts a stable employment landscape. Strong job growth paired with a low cost of living makes Green Bay an attractive destination for young professionals and families.

Tulsa, Oklahoma

Tulsa has an average rent of $909 and a median household income of $52,438. Located in a landlord-friendly state with a booming economy, Tulsa is a great place to invest. The local economy boasts thriving sectors across aerospace, energy, manufacturing, telecommunications, technology, and finance.

The oil industry in Tulsa is doing exceptionally well, which has helped attract a diligent workforce to the metro area over the last few years. Industry diversification in Tulsa has promoted economic stability in the city and ultimately increased income levels, all of which are conducive to rental growth.

Knoxville, Tennessee

Knoxville, Tennessee

Knoxville has a median monthly rent of $920 and an average annual salary of $49,290. The city's robust healthcare, education, and retail job market consistently attracts young professionals seeking long-term housing. Knoxville is also home to the University of Tennessee, which ensures regular demand for rental properties among students.

Brownsville, Texas

Brownsville has an average rental cost of $952 and a median household income of $43,174. The city's strong job market and proximity to Mexico make it an attractive location for real estate investment. Located just two miles from the Mexican city of Matamoros, Brownsville sports a unique blend of American and Mexican cultures, attracting tourists all year. This unique cultural aspect of the community allows investors to tap into the short-term rental market.

Alexandria, Louisiana

Alexandria has an average rent of $953 and a median household income of $43,760. The surrounding metro area boasts a stable economy anchored by the healthcare, education, and military sectors. The city's vibrant culture, rich history, and natural beauty also make it an attractive place to live, further driving rental demand.

Des Moines, Iowa

Des Moines, Iowa

The average rent in Des Moines is $1,005. Its median household income stands at $58,444 and is growing steadily due to its strong agribusiness sector and booming tech industry. As the state's capital city, Des Moines attracts professionals from various industries looking to settle in a vibrant yet low-cost area.

Fort Wayne, Indiana

Fort Wayne has an average rent of $1,077 and a median household income of $53,978. Home to a thriving technology sector and renowned companies like Costco Wholesale and Northwestern Mutual, Fort Wayne has a versatile and thriving economy. The city hosts a variety of attractions, including acclaimed theaters, art galleries, and the popular Fort Wayne Children's Zoo, making it an appealing place to host STRs.

Huntsville, Alabama

Huntsville has an average rent of $1,182 and a median household income of $60,959. The city's booming aerospace and defense sectors contribute to its robust economy. Huntsville also offers attractions like the U.S. Space & Rocket Center and the Huntsville Botanical Garden, enhancing its appeal to potential visitors.

What Investors Should Consider About Low-Rent Areas

Buying rental properties in low-rent areas can lead to higher rental returns and lower initial investment costs. However, as with any investment, it's essential to do your due diligence to ensure success. Here's what property owners should consider before purchasing in a low-rent area:

  • Rental Demand and Tenant Profile: Before buying a rental property, you'll want to ensure adequate rental demand. Consider proximity to employment centers, public transportation, and other amenities important to potential renters. Also, try to build a tenant profile based on other renters in the area.
  • Property Condition: While low-rent areas may have cheaper properties, be careful not to invest in a property that requires extensive renovations. This can easily eat into your profits and delay filling your units.
  • Tenant Screening: Although many cities mentioned above attract workers with reliable incomes, that's not the entire population. Ensure you properly screen potential tenants to minimize the risk of payment issues or property damage.

Identify Investment Opportunities in Affordable Markets with PropStream's Lead Generation Technology

Finding investment properties in areas you've never visited or perhaps even heard of can be tricky. Most cities mentioned above are located in the South and Midwest and have smaller populations than larger cities along the East and West Coasts.

Suppose you're coming from a more densely populated area with high housing costs, such as New York, San Francisco, or Boston. In that case, you must readjust your selection criteria when investing in affordable places. PropStream has lead generation software that can help you do just that.

Key Features in PropStream to Help Investors:

  • Heat Maps: use PropStream's heat map tools to locate up-and-coming rental opportunities
  • Comps: use the comp section to evaluate properties in the area  - searching for properties with a rental price range can help you find comparable properties. If the listing includes photos, you can use the images to quickly assess the property of interest or comparable properties.
  • Rehab calculator: The rehab calculator offers insight into how much any potential renovations will cost so you can consider these costs in your rental property evaluation.

Using advanced filtering capabilities, investors can target investment properties located in different parts of the country and use real estate data practically within one convenient platform. Sign up for a 7-day free trial to find out why real estate investors trust us with their real estate lead generation.

Published by PropStream August 8, 2023