Choosing the city with the highest return on real estate investment can be difficult in today’s volatile real estate market. What are the current hot spots?
table of contents
- What is the return on investment in real estate?
- Top 10 Highest ROI Sites
- Investment Tools from Mashvisor
- Summary of the above
The popularity of specific locations in the US market will certainly change, and real estate investors should be aware of and monitor these fluctuations.
Return on investment is a financial metric often used in investment planning. It basically indicates whether an investor will make a profit from their strategy. Naturally, real estate investors look for locations with the highest returns on investment. real estate return on investment.
But how do you know where to invest?
It all boils down to looking at the performance statistics of cities that might be profitable in the U.S. Sometimes that’s easier said than done, but we’ll talk about that too.
If you’re looking to invest in real estate, we’ve identified the top 10 locations in the US that you should consider this year, with all the key metrics you should take into account.
With that in mind, you may want to scroll down for the latest updates on the US real estate market.
What is the return on investment in real estate?
Return on investment is a type of financial metric—a formula—that helps investors in strategic planning. In simple terms, it helps real estate investors plan and predict the “financial outcome” of their investments.
As mentioned, by focusing on the return on real estate investment, an investor can see the potential profit margin if he chooses to invest in real estate by buying and renting or selling the property – depending on his preferred strategy. With this in mind, the return on investment is a metric of critical value to an investor – regardless of his previous experience in real estate.
Return on investment is expressed as a percentage and is closely related to return on assets (ROA) and return on equity (ROE). However, our focus today is primarily on helping investors maximize their return on investment, so we will leave the discussion of ROA and ROE for another time.
ROI Calculation Formula
Based on the above points, the next step will be to use the real estate ROI formula practically and learn how to calculate it:
To calculate your return on investment, you basically need to divide the amount of money you earned from the investment — known as your net profit — by the cost of the investment and then multiply that by 100.
Here is the formula explained:
Return on Investment = (Net Profit / Cost of Investment) x 100
It is worth noting that there is another way to calculate the return on investment:
Return on Investment = (Present Value – Cost of Investment / Cost of Investment) x 100
Now that you have the basics of the formula, how do you use it?
Investors use the real estate ROI calculator to evaluate their investment portfolios, or it can be applied to accurately evaluate different types of expenses.
It is also important for investors to know that the ROI result is only as accurate as the numbers you put into the calculation. The ROI formula alone cannot eliminate or take into account risk and uncertainty. So, if you are using real estate ROI to evaluate your future investments, you will need to factor in risk separately. There is no need to be too pessimistic or too optimistic here.
Is there an average return on investment in real estate?
Given the changing climate of the real estate market – especially a large-scale real estate market like the United States – there is no general average return on investment. Rather, it depends on the nature of your investment property, whether it is rental properties, luxury homes, or something else.
Pre-accounting thoughts
Before you proceed with using the real estate ROI calculator, be sure to take a minute to think about it and ask yourself the following questions:
- How much risk can I afford to take at this time?
- Is my financial situation strong enough? What will I do if I lose money?
- How much profit can I expect from this investment?
- What else can I do with the money?
What places in the US offer the highest return on real estate investment??
It’s time to get straight to the point and list the top ten most profitable sites for traditional and Airbnb real estate investments. Here’s an updated list of investors’ favorite places based on the latest Mashvisor data.
Top 5 Cities for Traditional Renting
Here are the top 5 cities for real estate investment, ranked in descending order of traditional cash return:
1. Vero Beach, Florida
- Average property price: $779,075
- Average price per square foot:353$
- days in the market:106
- Number of traditional lists:844
- Monthly income from traditional rent:$2,919
- Traditional cash return:4.09%
- conventional capital ratio:4.15%
- Price to Rent Ratio:22
- walking result:78
2. Joplin, Missouri
- Average property price: $558,591
- Average price per square foot:174$
- days in the market:152
- Number of traditional lists:259
- Monthly income from traditional rent: $1,960
- Traditional cash return:4.04%
- conventional capital ratio:4.12%
- Price to Rent Ratio:24
- walking result:77
3. Stewart, Florida
- Average property price: $985,236
- Average price per square foot:407$
- days in the market:106
- Number of traditional lists:520
- Monthly income from traditional rent:$3,125
- Traditional cash return: 3.81%
- conventional capital ratio: 3.87%
- Price to Rent Ratio:26
- walking result:52
4. Tampa, Florida
- Average property price: $763,925
- Average price per square foot:446$
- days in the market:94
- Number of traditional lists: 3,065
- Monthly income from traditional rent:$3,079
- Traditional cash return: 3.68%
- conventional capital ratio: 3.73%
- Price to Rent Ratio:21
- walking result:46
5. Bethlehem, Pennsylvania
- Average property price:$662,755
- Average price per square foot:338$
- days in the market:69
- Number of traditional lists:279
- Monthly income from traditional rent:$2,469
- Traditional cash return: 3.62%
- conventional capital ratio: 3.68%
- Price to Rent Ratio:22
- walking result:84
Top 5 Cities to Rent Apartments on Airbnb
Here are the top 5 cities to invest in Airbnb rentals, ranked from highest to lowest cash back on Airbnb:
1. Bailey, Colorado
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Average property price: $738,226
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Average price per square foot:453$
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days in the market: 125
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Number of Airbnb Listings:119
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Monthly income from Airbnb rentals:$4,906
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Airbnb cash back: 5.09%
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Airbnb maximum rate: 5.14%
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Airbnb daily rate:$225
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walking result:34
2. Scarborough, Maine
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Average property price:$807,098
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Average price per square foot:561$
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days in the market:35
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Number of Airbnb Listings:107
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Monthly income from Airbnb rentals:$6,223
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Airbnb cash back: 5.09%
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Airbnb maximum rate: 5.13%
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Airbnb daily rate:320$
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Airbnb occupancy rate:60%
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walking result:62
3. Erie, Pennsylvania
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Average property price: $307,816
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Average price per square foot:166$
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days in the market:59
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Number of Airbnb Listings:237
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Monthly income from Airbnb rentals: $2,436
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Airbnb cash back: 5.08%
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Airbnb maximum rate: 5.22%
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Airbnb daily rate:$149
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Airbnb occupancy rate: 54%
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walking result:90
4. Ocala, Florida
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Average property price:$352,057
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Average price per square foot: $195
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days in the market:98
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Number of Airbnb Listings: 572
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Monthly income from Airbnb rentals:$2,857
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Airbnb cash back: 5.08%
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Airbnb maximum rate: 5.17%
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Airbnb daily rate:160$
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Airbnb occupancy rate: 57%
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walking result:62
5. Marion, North Carolina
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Average property price:$363,533
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Average price per square foot:227$
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days in the market:86
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Number of Airbnb Listings:101
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Monthly income from Airbnb rentals: $2,776
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Airbnb cash back: 5.08%
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Airbnb maximum rate: 5.18%
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Airbnb daily rate:162$
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Airbnb occupancy rate: 51%
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walking result:65
Investment Tools from Mashvisor
Getting the most out of your real estate ROI calculator – and investing – is ten times easier when you have Mashvisor’s investing tool at your fingertips.
First and foremost, our real estate blog helps you stay up to date with the latest trends in the real estate market, provides you with some additional knowledge about real estate, and shares tips from the experts.
For more advanced tools, real estate investors can access Mashvisor’s Heatmap tool, which allows them to conduct a comprehensive neighborhood search around their desired property. It’s color-coded and displays median listing price, traditional and Airbnb rental income, cash yield, and more.
Mashvisor’s Heatmap tool allows investors to conduct comprehensive research on a desired property and get median values for listing price, traditional rental income, Airbnb revenue, cash return, etc.
In a related context, the Property Finder program helps investors search through investment properties faster and more accurately. You have the opportunity to explore multiple housing markets at the same time.
Summary of the above
Any investor should be armed with knowledge of ROI, how to use the ROI formula and when to use it before deciding where to invest. What’s more, we recommend answering several vital questions before embarking on an investment.
Once you have decided what type of property you want to invest in, it is time to review the possible options and decide which one best suits your needs and budget.
Of course, Mashvisor’s rental property calculator is here to help you choose the best place to invest in real estate to get the highest return on your real estate investment.
To get access to the rental property calculator and other Mashvisor tools, sign up today.
