Picking a city with the highest real estate ROI can be challenging in today’s fluctuating real estate market. What are the current hotspots?
Table of Contents
- What Is ROI in Real Estate?
- Top 10 Locations With the Highest ROI
- Mashvisor’s Investment Tools
- Summing Up
The popularity of specific locations across the US market is bound to change, and real estate investors should be aware of and monitor these fluctuations.
Return on investment is a financial metric that is often used in investment planning. It essentially indicates whether the investor will generate profit from their strategy. Naturally, real estate investors are on the lookout for locations with the highest real estate ROI.
How to know where to invest, though?
It comes down to following the performance statistics of the potentially profitable cities in the US. It’s sometimes easier said than done, but we’ll get to that as well.
If you are set on investing in real estate, we’ve identified the top 10 US locations you should consider this year, complete with all the key metrics you must consider.
With that in mind, you might want to scroll down for the latest updates on the US real estate market.
What Is ROI in Real Estate?
Return on investment (ROI) is a type of financial metric—a formula—that helps investors with strategic planning. In simple terms, it helps real estate investors plan for and predict the “financial outcome” of their investment.
As noted, by focusing on ROI real estate, the investor can view their potential profit margin if they choose to invest in real estate by buying property and renting it out or flipping houses—depending on their preferred strategy.With that in mind, ROI is a metric that is of crucial value to the investor—regardless of their previous experience in real estate.
Return on investment is realized in percentages and is closely related to Return on Assets (ROA) and Return on Equity (ROE). However, our focus today is mainly on helping investors maximize their ROI, sowe’ll leave the discussion about ROA and ROE for another time.
The Formula for Calculating ROI
Given our previous points, the next step will be using the real estate ROI formula in practice and seeing how it is calculated:
To calculate your return on investment, you essentially need to divide the amount of money you’ve earned from the investment—commonly known as your net profit—by the cost of the investment and then multiply that by 100.
Here’s the formula outlined:
ROI = (Net Profit / Cost of Investment) x 100
It’s worth noting that there’s another way of calculating the ROI:
ROI = (Present Value – Cost of Investment / Cost of Investment) x 100
Now that you get the foundations of the formula, how do you use it?
The ROI calculator for real estate is used by investors in order to evaluate their portfolios—or it can be applied to precisely assess different types of expenditures.
What’s also essential for investors to know is that the ROI result is only as accurate as the numbers you put into the calculation. The return on investment formula alone can’t eliminate or take into account risk and uncertainty. So, if you’re using the real estate ROI to assess your future investments, you will need to take into account the risk factor separately. You need not be too pessimistic or too optimistic here.
Is there an average ROI in real estate?
Bearing in mind the changing climate of the real estate market—especially a large-scale one like the US—there is no general overall average for ROI. Contrarily, it’s more about the nature of your investment property, be it rentals, luxury houses, or something else.
Pre-Calculation Thoughts
Before you go forward with the real estate ROI calculator, be sure to take a minute to think it through and ask yourself the following questions:
- How much risk am I able to take on at the moment?
- Is my financial situation strong enough? What will I do if I lose money?
- How much profit am I expecting from this investment?
- What else can I do with the money?
What Places in the US Offer the Highest ROI Real Estate?
It’s time to cut to the chase—and list down the ten most profitable locations for traditional and Airbnb real estate investments. Here’s an updated list with hotspots for investors based on Mashvisor’s latest data.
Top 5 Cities for Traditional Rentals
The following are the top 5 cities for real estate investment, arranged in descending order in terms of traditional cash on cash return:
1. Vero Beach, FL
- Median Property Price: $779,075
- Average Price per Square Foot: $353
- Days on Market: 106
- Number of Traditional Listings: 844
- Monthly Traditional Rental Income: $2,919
- Traditional Cash on Cash Return: 4.09%
- Traditional Cap Rate: 4.15%
- Price to Rent Ratio: 22
- Walk Score: 78
2. Joplin, MO
- Median Property Price: $558,591
- Average Price per Square Foot: $174
- Days on Market: 152
- Number of Traditional Listings: 259
- Monthly Traditional Rental Income: $1,960
- Traditional Cash on Cash Return: 4.04%
- Traditional Cap Rate: 4.12%
- Price to Rent Ratio: 24
- Walk Score: 77
3. Stuart, FL
- Median Property Price: $985,236
- Average Price per Square Foot: $407
- Days on Market: 106
- Number of Traditional Listings: 520
- Monthly Traditional Rental Income: $3,125
- Traditional Cash on Cash Return: 3.81%
- Traditional Cap Rate: 3.87%
- Price to Rent Ratio: 26
- Walk Score: 52
4. Tampa, FL
- Median Property Price: $763,925
- Average Price per Square Foot: $446
- Days on Market: 94
- Number of Traditional Listings: 3,065
- Monthly Traditional Rental Income: $3,079
- Traditional Cash on Cash Return: 3.68%
- Traditional Cap Rate: 3.73%
- Price to Rent Ratio: 21
- Walk Score: 46
5. Bethlehem, PA
- Median Property Price: $662,755
- Average Price per Square Foot: $338
- Days on Market: 69
- Number of Traditional Listings: 279
- Monthly Traditional Rental Income: $2,469
- Traditional Cash on Cash Return: 3.62%
- Traditional Cap Rate: 3.68%
- Price to Rent Ratio: 22
- Walk Score: 84
Top 5 Cities for Airbnb Rentals
Listed below are the top 5 cities for investing in Airbnb rentals, arranged from the highest to the lowest Airbnb cash on cash return:
1. Bailey, CO
Median Property Price: $738,226
Average Price per Square Foot: $453
Days on Market: 125
Number of Airbnb Listings: 119
Monthly Airbnb Rental Income: $4,906
Airbnb Cash on Cash Return: 5.09%
Airbnb Cap Rate: 5.14%
Airbnb Daily Rate: $225
Airbnb Occupancy Rate: 65%
Walk Score: 34
2. Scarborough, ME
Median Property Price: $807,098
Average Price per Square Foot: $561
Days on Market: 35
Number of Airbnb Listings: 107
Monthly Airbnb Rental Income: $6,223
Airbnb Cash on Cash Return: 5.09%
Airbnb Cap Rate: 5.13%
Airbnb Daily Rate: $320
Airbnb Occupancy Rate: 60%
Walk Score: 62
3. Erie, PA
Median Property Price: $307,816
Average Price per Square Foot: $166
Days on Market: 59
Number of Airbnb Listings: 237
Monthly Airbnb Rental Income: $2,436
Airbnb Cash on Cash Return: 5.08%
Airbnb Cap Rate: 5.22%
Airbnb Daily Rate: $149
Airbnb Occupancy Rate: 54%
Walk Score: 90
4. Ocala, FL
Median Property Price: $352,057
Average Price per Square Foot: $195
Days on Market: 98
Number of Airbnb Listings: 572
Monthly Airbnb Rental Income: $2,857
Airbnb Cash on Cash Return: 5.08%
Airbnb Cap Rate: 5.17%
Airbnb Daily Rate: $160
Airbnb Occupancy Rate: 57%
Walk Score: 62
5. Marion, NC
Median Property Price: $363,533
Average Price per Square Foot: $227
Days on Market: 86
Number of Airbnb Listings: 101
Monthly Airbnb Rental Income: $2,776
Airbnb Cash on Cash Return: 5.08%
Airbnb Cap Rate: 5.18%
Airbnb Daily Rate: $162
Airbnb Occupancy Rate: 51%
Walk Score: 65
Mashvisor’s Investment Tools
Making the most out of your ROI real estate calculator—and investment—is ten times easier when you have Mashvisor’s investment tool at your disposal.
First and foremost, our real estate bloghelps you stay up-to-date with what is currently trending in the real estate market, provides you with some additional knowledge on real estate, and shares tips from experts.
For the more advanced tools, real estate investors can access Mashvisor’s Heatmap tool, which allows them to conduct thorough neighborhood research on the desired property. It is color-coded, showing the average values for listing price, traditional and Airbnb rental income, cash on cash return, and more.
Mashvisor’s Heatmap tool allows investors to conduct thorough neighborhood research on their desired property and obtain the average values for listing price, traditional and Airbnb rental income, cash on cash return, etc.
On a related note, our Property Finder helps investors search through investment properties faster and more accurately. You get the opportunity to explore multiple housing markets—all at the same time.
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Summing Up
Any investor should be armed with knowledge of ROI and how and when to use the ROI formula before deciding on a location. Even more so, we recommend answering several vital questions before proceeding with the investment.
Once you’ve decided on the type of real estate you want to invest in, it’s time to review the possible options and decide which one suits your needs and budget.
Of course, Mashvisor’s Rental Property Calculator is there to help you pick the best place to invest in real estate for the highest real estate ROI.
To get access to the Rental Property Calculator and other Mashvisor tools, sign up today.
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