- Due to increasing costs of home ownership, Millennial and Gen Z households are expected to be long-term renters. This creates an opportunity for those with enough resources to purchase rentals and capitalize on this demand.
- The ideal real estate markets to invest in are those with high rental rates and renter demand. Markets with reasonable home values should also be top of mind.
- Following the real estate disruption of the pandemic, cities like San Diego, Las Vegas, and Denver have become the best real estate markets for investors, allowing you to invest in surf, sand, or snow.
Let’s take a closer look at the best real estate markets to invest in today. In this article, we’ll:
- List the three best real estate markets in the West for those looking for rental investment opportunities,
- Consider the analytical factors that indicate a solid real estate investment market, and
- Explain why these areas are experiencing such high renter demand.
1. San Diego, CA
Home values in San Diego may be expensive, but so are the rental rates. However, there are several good reasons why people still live in this coastal paradise despite the higher cost of living.
- Weather: With low humidity, lots of sunshine, and temps between 50 and 80 degrees Fahrenheit year-round, San Diego has some of the most pleasant climates on the planet.
- Education: Between UCSD and SDSU, San Diegans enjoy quality higher education options. But the public school system is also well-regarded, making San Diego an excellent choice for those valuing education.
- Diversity: San Diego is generally considered a highly inclusive city where you can find a welcome range of ethnicities, religions, and nationalities, as well as a thriving LGBTQ+ community.
- High wages: According to the U.S. Bureau of Labor Statistics, San Diegans make 14 percent more than the average American, which helps to cover the higher cost of living.
- Fitness: San Diego residents enjoy year-round local recreational activities such as surfing, hiking, biking, jogging, skateboarding, golfing, tennis, and skiing.
Given all these local benefits, many renters are willing to pay more to live in San Diego. According to Zumper, the average rental price for a one-bedroom apartment is currently $2,684, while two-bedroom median prices have reached $3,450. This ramps up the average median rental price for all types of properties in San Diego to around $3,756, representing a $654 year-over-year change.
Meanwhile, with the median home sales price increasing by 10.1% compared to last year, recent investors have enjoyed impressive appreciation and equity growth quickly.
Median Rental Rate: $2,684 for a one-bedroom, $3,450 for a two-bedroom
Median Home Sales Price: $875,500
Cost of Living Index: 80.60
2. Las Vegas, NV
Things are heating up in the desert market of Las Vegas, where you can still buy a rental investment property at an affordable price. Rental rates have increased by over 13% from 2021 to 2022, showing solid annual growth.
This development is caused mainly by the rush of new residents from nearby California. As the pandemic pushed many Californians to work remotely, the need to live near the office became obsolete. Consequently, workers realized that they no longer needed to live in a state with a high state income tax rate. So, many decided to relocate to Las Vegas, keeping their California salaries while dramatically decreasing their cost of living. With no state income tax, Nevada has become a famous home for former Californians in the post-pandemic work-from-home era.
Naturally, this influx of residents with high-paying salaries is increasing housing demand and driving rental rates up. For now, home values are still comparatively affordable, given how expensive housing is in most Western cities. With the median home sales price amounting to around $447,597, you can reasonably expect to pay less than half of what you would pay in San Diego for a property in Las Vegas. This makes it much easier for new investors and investors on a tight budget to get started.
Median Rental Rate: $1,300 for a one-bedroom, $1,550 for a two-bedroom
Median Home Sales Price: $447,597
Cost of Living Index: 71.35
3. Denver, CO
Denver rounds out our list of the best real estate markets for investors, sitting between San Diego and Las Vegas. Of all three options, Denver represents the best value for your rental investment dollar.
With the median rental rate for a two-bedroom at $2,407 for 2022, Denver doesn’t command the high rental rates that San Diego does.
With the median home sales price at $643,043 this year, you’ll pay a lot more for a property in Denver than you would in Las Vegas. Denver’s higher rental rates more than offset the higher home prices. However, Denver still witnesses a high rental demand due to several factors:
- Location: Being centrally located, Denver is a good option for people who want to move away from their hometown but don’t necessarily want to move across the entire country.
- Travel access: The Denver airport is a major hub, giving locals lots of flight options and access to international destinations.
- Employment opportunities: Several significant corporations are headquartered in and around Denver, as well as Lowry Air Force Base and the many government contracts that go with it. There are lots of jobs available in the Denver area.
- Lifestyle: Denver has gained a reputation as a destination for trendy restaurants, bars, cafes, and clubs. There’s also the classic outdoor Colorado camping/hiking/fishing option for traditionalists. Trendy or traditional, the Denver lifestyle has something for everyone.
Median Rental Rate: $1,740 for a one-bedroom, $2,395 for a two-bedroom
Median Home Sales Price: $643,043
Cost of Living Index: 80.87
Whether you’re looking for surf, sand, or snow, our three best West Coast markets for real estate investors have you covered. You’re sure to find a good fit for your real estate investment portfolio between San Diego, Las Vegas, and Denver.