Where Is the Highest ROI in Real Estate?

Are you a real estate investor looking for properties with the highest ROI, or return on investment? The key is to choose property types in advantageous markets in America (and beyond).

When your investment property has consistent demand at a price that promises enough rental income or profit after a flip, you maximize your potential to become a successful property investor. But where is the highest ROI in real estate?

TL; DR: The answer is constantly changing.

As opportunities change according to the fluctuating real estate market, once “bad” areas and property types may become in demand. In addition, interest rate trends can influence buyer and renter behavior, increasing rental rates or even suppressing the national average for buyer demand. Career opportunities and lifestyle upgrades can also draw people to a new location, too.

For example, right now, Florida is booming with new residents who enjoy the prospect of no property taxes and more affordable housing. Likewise, select cities like Charlotte and Augusta metro areas are thriving in other parts of the American South. Trends like these constantly change the goalpost of what is profitable.

Or, you may have a rental in an up-and-coming area that does well for a decade, then the population declines, reducing demand, or the area declines due to crime rates. Your cash-on-cash return dwindles as times progresses. What was once an excellent investment turns into a liability, which you should sell off quickly to cut your losses.

In short, the highest ROI today may be moderate or not-so-great ROI tomorrow. So how can you ensure that you pick the best housing markets, best cities, and properties with the most advantageous home prices?

Stay on top of the game by being up to date.

When you are vigilant about your next steps and monitor your existing properties’ performance, you can protect yourself against common risks like changes in the rental market, increased vacancy rates, and much more.

Research hot markets with a real estate expert.

The best way to do this is to work with a realtor that knows how to help investors find great markets. With so many areas to choose from, it can be difficult knowing which one is likely to give you the most profits — if you work alone.

However, working with a financial advisor who understands real estate investments will help you identify good investment opportunities, rule out bad ones, and help you see which ones to cull from your portfolio, and where to invest more.

Realtors can help investors of all levels find the highest profit potential with their investments — whether they want to buy and hold or flip. They can research important figures like average rent rates to help you when you speak to your financial advisor.

Certain regions may provide greater ROI than others, and certain areas or property types within the same city or town will be more lucrative too.

Typical hot markets/property types:

• Popular tourist areas (think Virginia Beach condos)

• States with a general trend of new residents, like Texas, Florida, and Georgia.

• Cities with population growth like Atlanta, Augusta, and Charlotte.

• Areas with ample career opportunities and development like Tampa and Orlando.

• Properties in good locations (i.e., near amenities, especially if within walking distance).

• Affordable and safe properties for renters (single-family and multifamily)

• Rental properties in popular architectural styles like ranch or colonial.

• Properties that are in good condition with well-maintained interiors and exteriors.

• Markets with rising or stable home values.

• Markets that have ample homebuyer demand.

Always audit your existing properties.

It’s also important to keep a close eye on how your entire portfolio is performing. Is an investment property due a rental price increase because of the growing cost of living?

Is a one once-booming area starting to decline? Are you able to get enough cash flow from your investments like you were in years past or do you need to make some adjustments? Answers to these questions can influence your current investment strategy.

General Tips for finding High ROI Properties

• Pay with cash or a line of credit if possible.

• Buy low and sell high.

• Pay attention to important metrics like the property’s cap rate.

• Don’t limit yourself to one property/ real estate asset type.

• Diversify your investments to mitigate risk.

1. Pay with cash or a line of credit if possible.

Elevated mortgage rates are making it more difficult for landlords to profit from rental property investments, especially when median home prices in many markets are still high. Paying with all cash or a line of credit takes a mortgage off your plate or positions you to a more manageable HELOC/ILOC repayment plan.

2. Buy low and sell high.

Buying quality properties (or those with potential with renovations) at a low price maximizes your chance to profit. The easiest way to do this is to invest in distressed properties. Finding short sales, foreclosures, and off-market homes in need of rehab can score you some amazing deals.

The less you spend on your investment, the easier it is to make a profit. Find areas with high rental demand and consult your real estate agent for the best locations! Also, if you notice a property in danger of losing value, sell while housing prices are still high to reap maximum returns.

3. Pay attention to important metrics like the property’s cap rate.

Before you even buy a property, analyzing how much money you can make from it through popular formulas like the 1% rule can help you greatly. This will make it easier to negotiate the best purchase price and determine whether a property is better suited for short-term or long-term gain.

4. Don’t limit yourself to one market or property/ real estate asset type.

The real estate market is always on the move. Check out what areas have property values within your affordability range and what markets are stable or growing.

You may first fix and flip houses in one area but then later find that owning single-family rentals or multifamily units is more profitable in that market. You may also find that different assets, like reits (real estate investment trusts), can be a good supplement to your portfolio!

5. Diversify your investments to mitigate risk.

We have a whole other article about diversifying your investment portfolio in many ways as a protection against the inevitable ups and downs in different markets and property types. Some places may be experiencing job growth while another may be declining in their job market.

For example, you can not only have a property management company manage your rentals, but you can also invest in commercial properties, vacation rentals, overseas real estate, or raw land in areas slated for potential development.

Where is the highest ROI in real estate?

Investing in real estate can offer some excellent rewards, such as a good return on your investment. Whether you’re looking to invest in distressed properties or rental properties, commercial real estate or land banking, vacation rentals, or overseas markets – there are plenty of opportunities for those willing to take on the challenge. You just need to do your homework to find the one that works best for you!