The US cities that offer the best returns on investment properties have been identified through recent research, highlighting specific markets where property investors can expect favorable financial outcomes.
An analysis conducted by real estate experts at Agent Advice evaluated home values and typical rental prices across numerous US cities to determine which locations currently provide the highest return on investment (ROI).
The study utilized the Zillow Housing Value Index (ZHVI), which indicates the typical housing value in a given area, and the Zillow Observed Rent Index (ZORI), which measures asking rent prices. These metrics were used to establish the cities with the highest rental yields relative to property costs.
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Top Cities for Real Estate Investment ROI
Houma, Louisiana
Located in Louisiana’s Bayou country, approximately 55 miles from New Orleans, Houma has emerged as the US city with the highest projected ROI for property investors. The typical property value in Houma is reported at $149,871, with an observed rent of $1,441 per month. This rent represents 0.96% of the property value, suggesting that the payback period for a 20% down payment could be as short as 20.8 months. This is nearly half the national average payback period of 39.6 months.
Dothan, Alabama
Dothan, situated in southern Alabama, ranks second on the list with a typical property value of $166,459. The average monthly rent is approximately $1,553, which equates to 0.93% of the property value. Consequently, the potential payback period for a 20% down payment in Dothan is around 21.43 months.
Johnstown, Pennsylvania
As the largest city in Cambria County and located about 57 miles east of Pittsburgh, Johnstown offers the third-highest ROI in the United States. The city has a low typical housing value of just $83,114, with an observed rent of $766 per month. This rent accounts for 0.92% of the property value, resulting in a potential payback period of approximately 21.68 months for a 20% down payment.
Beckley, West Virginia
Beckley, located in Raleigh County, West Virginia, has a typical property value of $116,252. The observed rent index shows an average monthly rent of $1,000, which is equivalent to 0.86% of the property value. This translates to a typical payback period of about 23.25 months for an investment property down payment.
Decatur, Illinois
Decatur, the largest city in Macon County and situated along Lake Decatur in Central Illinois, secures the fifth position on the list. Typical property values in Decatur are around $94,537, with an average monthly rent of $808, representing 0.86% of the property value. This results in a potential down payment payback period of approximately 23.39 months.
Shreveport, Louisiana
Shreveport, the third most populous city in Louisiana, has a housing value index of $152,712. With an observed rent index of $1,256 per month, rent equates to 0.82% of the property value. The payback period for a standard down payment in Shreveport is approximately 24.32 months.
Peoria, Illinois
Located a few hours from Chicago, Peoria has a typical property value of $135,229. The observed rent index also indicates that rent accounts for 0.82% of the property value, with average monthly rent at $1,110. This results in a potential down payment payback period of about 24.35 months.
Sumter, South Carolina
Sumter, South Carolina, situated about 40 miles east of the state capital, Columbia, ranks eighth for ROI in the US. The typical property value in Sumter is approximately $163,176, and the observed rent index shows rent at 0.82% of this value, averaging $1,337 per month. The potential payback period for a down payment in Sumter is approximately 24.4 months.
Texarkana, Texas
Texarkana, which straddles the border between Texas and Arkansas, holds the ninth spot for ROI on property investments. The typical property value in Texarkana is around $148,518, and the observed rent index indicates that rent accounts for 0.82% of this value, with average monthly rent at $1,212. This results in a potential down payment payback period of about 24.5 months.
Jackson, Tennessee
Jackson, Tennessee, completes the top ten list for ROI. Located 70 miles east of Memphis, the city has a typical housing value of $170,667. The observed rent index in Jackson is $1,387 per month, which represents 0.81% of the property price. This yields a potential down payment payback period of approximately 24.6 months.
| Rank | City | Ave. home value ($) | Observed rent value ($) | Rent as % of value | Payback period on 20% down payment (months) |
|——|——|———————|————————-|——————-|———————————————|
| National Average | | 319,325.99 | 1,562.89 | 0.53 | 39.64 |
| 1 | Houma, LA | 149,871.66 | 1,441.39 | 0.96 | 20.80 |
| 2 | Dothan, AL | 166,459.92 | 1,553.33 | 0.93 | 21.43 |
| 3 | Johnstown, PA | 83,114.14 | 766.67 | 0.92 | 21.68 |
| 4 | Beckley, WV | 116,252.50 | 1,000.00 | 0.86 | 23.25 |
| 5 | Decatur, IL | 94,537.33 | 808.33 | 0.86 | 23.39 |
| 6 | Shreveport, LA | 152,712.70 | 1,256.08 | 0.82 | 24.32 |
| 7 | Peoria, IL | 135,229.02 | 1,110.83 | 0.82 | 24.35 |
| 8 | Sumter, SC | 163,176.76 | 1,337.50 | 0.82 | 24.40 |
| 9 | Texarkana, TX | 148,518.34 | 1,212.25 | 0.82 | 24.50 |
| 10 | Jackson, TN | 170,667.30 | 1,387.76 | 0.81 | 24.60 |
Cities with Lower Rental Property ROI
The study also identified cities at the other end of the spectrum, where higher property values result in longer payback periods and less favorable ROI for investors.
San Jose, California
Located in Silicon Valley, San Jose has a very high typical property value of approximately $1,428,238. While the observed rent of $3,289 per month is substantial, it represents only 0.23% of the home value. Consequently, a 20% down payment on a property in San Jose could take as long as 87.46 months, or over seven years, to recoup.
Missoula, Montana
Missoula, situated in western Montana, has average property values of around $519,169. The rental rates in Missoula average $1,353 per month, which equates to 0.26% of the property value. This results in a potential payback period of approximately 76.71 months, or nearly six and a half years.
San Francisco, California
As a major commercial, financial, and cultural center in California, San Francisco ranks as the third city with the lowest property ROI in the US. The typical property value in San Francisco is approximately $1,116,046, with average rent at $3,121 per month. This makes observed rent just 0.28% of the property price, leading to a down payment payback period of about 71.
