When I think about the best markets for new and aspiring investors, I heavily weigh the factor of having no experience in this business. New investors should be looking for what I like to call base hits or singles on their first deal. Swinging for the fences takes the most amount of effort, and will substantially increase the chances of you striking out.
Okay, enough analogies—you get the point I’m trying to make: If you try to find deals with astronomical returns, you will likely miss out on a great first opportunity by overanalyzing or overleveraging.
As we head into the fall, the real estate market is showing signs of massive excitement, with Fed Chairman Jerome Powell’s recent Jackson Hole speech pointing to the potential of rate cuts in September’s FOMC meeting. Slight decreases in buyer activity are very typical for this time of year, but this year may be the best time for new investors to crack into the market. This fall could be ideal for those ready to make their first move as long as they remain strategic and patient in their search.
Analysis paralysis has to be one of the biggest excuses I see when it comes to first-timers trying to find the perfect property. If nobody has told you yet, there is no perfect property waiting for you out there. Having time in the game of real estate will be your biggest asset, no matter how good a deal may look on paper. The longer you own, the better chance you have of achieving your financial goals.
Instead of letting the fear of not finding the right property ruin your search, the other common mistake I see is overleveraging yourself right out of the gate. Your first deal will not bring in the revenue to consider quitting your day job, yet this hyperinflated expectation still lingers in the minds of many first-timers.
Embrace the grind and learning experiences that will come during your first few years as an investor. Having realistic expectations with a longer time horizon will help keep you level-headed in tough situations and shape your decision-making skills.
Now that I’ve shared some insights into my own investment philosophy, hopefully, you will understand why I have selected the following markets as the best locations for new investors to consider. I am not showcasing completely unaffordable areas with massive appreciation rates nor markets that are “up and coming” and need additional capital for massive upfront improvement costs. Here, I will share the best markets for new investors to start building the foundation of their portfolio, with consideration to long-term, stable, and relatively low-risk properties. I will also provide any reason for hesitancy in investing in these markets, as every metric is not going to be perfect.
Below is a map of the data I collected with all of the important stats included:
Wondering where you should start? Using BiggerPockets’ brand-new Where to Start Download and our latest Market Finder tool has been extremely impactful in my own investments as an out-of-state investor, and I would highly recommend using these resources to assist your market selection process. Let’s dive in!
1. Watertown, New York
Watertown is at the top of my list for numerous reasons. It’s located in Northwest New York near the Canadian border and is one of New York State’s smaller metro areas. Still, it provides many reasons to invest there, including a booming economy, high tourism rates, and a low cost of living.
I love the abundance of investment opportunities that Watertown has to offer, and investors certainly have the option to consider short-term rentals in this market. Watertown allows short-term rentals (30 days or less) of the entire property! This city has a mixture of single-family (62%) and multifamily homes (25%), which could offer amazing rent-by-the-room options.
The only limitation of renting by the room in this market is that you can only rent out a maximum of two rooms to separate tenants at once. With nearly half the properties in Watertown being rental properties, short-term rentals and renting by the room allow investors to take advantage of the area’s tourism market. This market will attract a wide range of tenants, with the median resident age being 34.4, thanks to its proximity to Lake Ontario and the Canadian border.
Watertown’s one-year home value growth and one-year rent growth rates, as well as low taxes and low insurance averages, make this market look like an extremely promising opportunity to get started in. The median home price is an affordable $213,435, but the cherry on top is a YoY home value growth of 8.2%.
This is a staggering number, and rent prices are following a very similar trend. The median rent price is at $1,464, with 5.9% YoY rent growth.
Sounds too good to be true, right? Well, the fixed expenses that you have no control over, taxes and insurance, are very low compared to the national average. The median property tax in Watertown is only $2,642, and New York’s average annual insurance comes in at just $2,349.
I do not like to see a high unemployment rate in the markets I invest in, and Watertown does come in at 4.3%, above our average of 3.7%. To combat this higher metric of unemployment, I am attracted by the industries that Watertown offers, with major employers Fort Drum, regional offices for the New York State government, and Samaritan Medical Center all providing relatively stable income.
2. Grand Junction, Colorado
I’m sure my mentioning a market in Colorado will make you think that affordability is thrown completely out the window in this analysis, with the state seeing such high demand and massive incoming migration trends during and post-pandemic. But hear me out.
Grand Junction offers the second-highest rent-to-price (RTP) ratio in the entire state, just behind Pueblo (0.46%) at 0.41%, and beats the national average of 0.3%. And while Pueblo has Grand Junction beat when it comes to RTP, let’s dive into the numbers further to see what is driving such favorable RTPs in a very desirable state.
Grand Junction boasts a median home value of $408,239, with a median rental income of $1,657, while Pueblo’s median home value is $294,149, with a median rental income of $1,344. Still looks to be in Pueblo’s favor, right?
Well, home value and rent growth may change your opinion! The thing that excites me most about Grand Junction is the 4% YoY home value growth and 7.9% YoY rent growth. Pueblo falls short on both of these metrics, with a -1.4% YoY home value decrease and 3.2% YoY rent growth. What this tells us is that Grand Junction not only has a very strong appreciation rate for home values, but rent growth is actually outpacing the rate of home values.
As a rental owner, having both of these metrics move in a positive direction is imperative. The value of your home steadily increasing allows numerous opportunities with your equity, while the rent growth increase allows you to have stable cash flow for the long term.
Employment trends in Grand Junction are stable, with a median income of $45,900 and one-year job growth rate of 0.5% making the market an exciting opportunity for continued growth. With major employers, including St. Mary’s Medical Center and Colorado Mesa University in Grand Junction, you could explore short-term or medium-term rentals based on the dense population of young professionals and college students. I would always recommend making sure your numbers work as a long-term rental to always fall back on if shorter-length leases or vacation rentals are heavily regulated.
My biggest negative with Grand Junction, and likely the entire state of Colorado, is the high insurance prices. Wildfires and hail, to name a few of the reasons why rates come in well above the national average at $4,662 annually, do give me minor hesitancy, meaning control is out of any investor’s hands if premiums continue to rise rapidly.
Overall, Grand Junction is at the top of my list for Colorado markets, and its offerings of high quality of life, cultural attractions, and ongoing development projects make it an extremely attractive destination for new real estate investors.
3. El Paso, Texas
Everything is bigger (and maybe better) in Texas! El Paso comes in at No. 3 on my list for new investors to get started in. If you are an investor looking to find deals that come close to the 1% rule, then look no further than El Paso.
Of the almost 400 markets we have analyzed in the Where to Start download, the average rent-to-price (RTP) ratio is 0.51%. El Paso boasts an impressive 0.72% RTP, showcasing that this is a market where you will be able to find plenty of deals that will cash flow right out the gate. The numbers behind a much higher-than-average RTP nationally are due to the fact that El Paso’s median home value is just $219,498.74. Though home values are low, median rent holds strong with a $1,576 benchmark, making this a really exciting market with wider margins.
El Paso’s economy is another driving factor in finding your first deal, with job growth trending in a positive direction at a 1.7% increase YoY. Increases in very stable sectors are very attractive metrics to me, and the city’s economy is supported by many reliable sectors such as defense, healthcare, and manufacturing, with major employers including Fort Bliss and the University of Texas at El Paso. Military and student housing provide unique opportunities for investors to explore shorter lease options, as both demographics tend to relocate more frequently.
What I don’t like to see is margins becoming wider with consideration to home value increases and rental price increases. As a first-time investor, seeing both trend in a positive direction is vital. If your home values are dramatically outpacing rental increases, you may begin to see your cash flow level out or even begin to decrease over a long time horizon, with factors like property tax and insurance rising.
Speaking of insurance, Texas has a relatively expensive average insurance rate of $4,643, which, with steady increases outpacing rent, can turn a great deal into an underperforming return.
I am a big fan of El Paso and I think it presents itself as a strong candidate for a new investor to start off their real estate journey. Ongoing urban revitalization projects and infrastructure improvements enhance El Paso’s rank in my book, with very exciting cultural attractions, an affordable housing market, and a strategic location for new investors.
4. Gulfport, Mississippi
Famous for its white sandy beaches and casinos, Gulfport is an ideal market for short- and long-term real estate investors, offering diverse property options and a robust economy. Gulfport is the second-largest city in Mississippi and offers a variety of eateries, entertainment, recreation adventures, and industry pillars.
Gulfport is on the more affordable side of the national average, with a median home price of $213,976.14. I really like the stability in price and rent growth, not boasting massively high increases of 3.7% and 2.9%, respectively. The margins are not too wide, and both, in my opinion, are realistic appreciation averages to use for long-term projections as a buy-and-hold investor.
The cherry on top is the RTP in Gulfport, which comes in at 0.66%, crushing our average of 0.51% across all markets in the analysis and proving you will have much higher chances of acquiring cash-flowing assets.
Topping Realtor.com’s 2023 list of the most affordable beach towns, beating out cities like Newport News, Virginia; Corpus Christi, Texas; and Navarre, Florida, makes Gulfport a location that excites me, with a lower barrier to entry and massive upside potential.
If you don’t believe how affordable this beach town is, I have already done the legwork for you if you’d like to see what today’s market is offering! With this search, I found 273 homes (single-family, condos, townhomes, multifamily) listed for under $300,000, proving Gulfport not only checks off the affordability box but has an abundance of supply in ranges well below the national median average.
I may sound like a broken record at this point, but I again am not the most fond of the insurance averages of Gulfport, with our analysis of Mississippi showing an annual average of $3,941.
I dug a little bit deeper on rates, specifically in Gulfport, due to its being on the coast and likely having a higher average than some other markets in the state, further from the increased risk of tropical storms. What I found was that Gulfport homeowners pay an average of $411 a month, based on our rate analysis—$116 more than the state average of $295 and $210 more than the national average—bringing their annual average to $4,929 per year. It’s not the most exciting figure, but it’s also not a big surprise, considering Gulfport’s location.
I love the options that Gulfport presents with its economic opportunities and low cost of housing, making it an easy choice to include in my top five. With a strong military presence, rich cultural history, and a large selection of affordable properties, Gulfport provides first-time investors with confidence and peace of mind in selecting this market as a place to set up shop!
5. Goldsboro, North Carolina
Though it comes in at No. 5 on my list, Goldsboro should certainly not be overlooked and has had a lot of success regarding its real estate market over the last few years.
Goldsboro is a midsized city located in eastern North Carolina, best known as the home of Seymour Johnson Air Force Base, which plays a significant role in the local economy and community. The city has a rich history, with roots dating back to the 18th century, and features a mix of historic sites and modern amenities.
Goldsboro comes in as the lowest median home price at just $182,266.15, making it an extremely affordable market with massive upside potential to continue increasing. Though Goldsboro has a much lower barrier to entry than most markets in the U.S., its increase in value YoY and rental increases make it an extremely attractive market, in my opinion. Goldsboro had 6% YoY price growth and 7.9% YoY rent growth, which means it’s an exciting time to still buy here when affordability is on the low end.
I love the RTP in Goldsboro coming in at 0.79%, making it one of the closest markets I have seen come close to a 1% rule, or in this case, a 100% rule.
Goldsboro’s unemployment rate creeps just above our national average at 3.8% but has been relatively combated with a job growth rate of 1.9%. What makes this market so affordable is the median income of $37,480.
Goldsboro’s Southern charm, vibrant arts scene, and a growing downtown area that offers a variety of dining, shopping, and cultural experiences make this market a very exciting place to begin your investment journey. The surrounding area of Goldsboro includes scenic parks and access to outdoor activities, making it a hub for both residents and visitors seeking a blend of history, culture, and recreation.
Final Thoughts
I know how overwhelming it can be to select your market as a first-time investor, but honing in on specific metrics that will impact the real estate market will make you feel much more confident in your selection process if the five markets I’ve discussed do not give you a warm, fuzzy feeling inside like I get, not to worry! Our very own Dave Meyer, Ashley Kehr, and Henry Washington all selected markets different from the ones I highlighted and may have better fits for your buy box.
As an investor only a few years into my career, I am at a very fragile point in my journey, and any wrong decision can lead to more catastrophe than an investor who is far more established. If you look for markets that expose you to substantial risk, you may not create the most solid foundation and will be scrambling to find exit strategies early on. And if you look for markets that have a stagnant economy, you may not be creating the wealth you anticipated.
There is time, effort, and specific direction required in selecting the right market for your journey, and I firmly believe that if you do not master the principles of market analysis as an investor, you are shooting blindly at a moving target and praying for the best outcomes.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
