Last month I did an article, “Rental Market Looking Strong;..“, in which I discussed a survey that was done by the National Apartment Association indicating 76 percent of consumers surveyed believed renting to be a better option than home ownership. Well, today Trulia released it’s new “Rent vs. Buy Index” which established a price-to-rent ratio for the 50 largest cities in America (by population), then, based upon that ratio, determined which cities it makes more sense (financially) to rent versus buy.
While the index is geared toward consumers and not investors, I think we can work our way backwards into the report to find good rental markets. The index looks at the total cost of home ownership on a monthly basis in each city, including what the house payment would be on a 2 bedroom home at the average list price, plus the cost of property taxes, homeowners insurance, closing costs at the time of purchase, home-owners associations dues and, where applicable, private mortgage insurance. They then compared this to the average monthly rent in the same city for apartments, condominiums and town-homes, then computed the ratio between the two numbers.
From this data Trulia compiled a list of the top-ten cities for consumers to buy a home vs rent and the top-ten cities to rent vs buy. From an investor standpoint I think we just turn it around; the top ten cities for a consumer to rent vs buy would be the top ten cities for investors to avoid due to the high price to rent ratio, and the top ten cities for a consumer to buy vs rent would be good cities for investors to target due to the low price to rent ratio.
To see the complete report for the 50 largest cities in the US click here. Remember when reviewing the report that a low price-to rent ratio is what you are looking for.