Top 20 Zip Codes with the Fastest Repaying Investment Properties

As homeownership costs skyrocket, new data from Estated reveals multiple zip codes in the Midwest boast the fastest repaying investment properties across the US for savvy real estate investors looking for their next purchase.

In a recent report released by John Burns Real Estate Consulting, data reveals that owning a home now costs almost $900 more per month on average than it does to rent that same home.

This disparity between rent and homeownership costs is almost $200 higher than it has been at any point over the past 20+ years.

And while rent has risen at a record pace alongside home prices to historically high levels, returns on single-family rentals have started to slow as home price growth outpaces rental growth.

Real estate investors who own single-family rental properties have felt their margins shrink over the past year as home prices have risen faster than rental rates. However, there are still areas across the country that offer incredible value as real estate investment properties.

While the short-term outlook on investment properties is bearish, property owners should remain bullish that their yields will improve as annual rental rates increase and their real estate investment properties appreciate in value over time.

A recent report from Redfin revealed that while real estate investors did slow their buying pace during the first quarter of 2022, investor activity still amounted to the biggest share of home purchases in US history—well above pre-pandemic levels.

However, investor home purchases are falling for the very same reason why overall home sales are stalling—a result of surging interest rates and higher prices that have made it exponentially more expensive to obtain a mortgage and purchase a home.

Most savvy real estate investors are on the hunt for deals, targeting low-priced single-family homes that have remained on the market for a while.

But it's not all doom and gloom for real estate investors in the US. In fact, there are many zip codes where real estate investors can take advantage of the fastest repaying investment properties across the country to recoup their investment costs quicker than ever before.

New property data from Estated reveals that 11 of the top 20 zip codes with the fastest repaying investment properties are located in the Midwest:

• 6 of the top 10 zip codes are located in Ohio;
• 9 of the top 20 zip codes overall are located in Ohio;
• 6 different zip codes within the city of Cleveland, Ohio itself are on the list;
• Other cities with multiple zip codes on the list include Flint, MI (2); Columbus, GA (2); Dayton, OH (2); and Memphis, TN (2).

In comparing the median price for properties (1-4 beds) with the equivalent Small Area Fair Market Rents (SAFMRS) or what the average renter can expect to pay in the same zip code, we're able to divide the price by its equivalent rent to determine the time (in months and years) that an investor can expect to recoup the price they paid for their property.

Analyzing this data, these are the top 20 zip codes or cities where real estate investors can expect to recover their investment the fastest in the United States:

*How do we calculate the payback period?

The Department of Housing and Urban Development (HUD) uses the metric Small Area Fair Market Rent (SAFMR) as its best estimate for what the average rent seeker can expect to pay in each zip code. These rates are calculated separately for one, two, three, and four bedroom dwellings. 

We use HUD's latest SAFMR's (published in April 2022) along with an estimation of the median property price for each category between the months of January and March 2022 to determine a rent to price ratio for each zip code with a predetermined minimum number of sales (>20 sales). Lastly, we selected the category (one, two, three, or four bedrooms) with the lowest price to rent ratio to represent each region before selecting the best ones.

At the top, the fastest repaying investment properties on average in the country are located in Desert Hot Springs, CA—where real estate investors can expect to recoup their entire investment on a 2-bedroom property in just 33 months or 2.7 years!

Rounding out the rest of the top 3 is Toledo, OH and Dayton, OH, respectively, where on average investors can expect to repay their 3-bedroom investment property in as little as 3.4 years!

But as mentioned above, it appears that Cleveland, OH is a hotbed for fast repaying investment properties in the US—with 4 areas in the city landing in the top 10 and 6 in the overall top 20.

What can you do with this data?

For savvy real estate investors looking for higher yields and fast repaying investments, SFR properties located in the zip codes above, especially in Midwestern states like Michigan and Ohio—and more specifically cities like Cleveland—present incredible opportunities for expedited returns on investment. 

Only time will tell what the market has in store for real estate investors but there is a current and very real market opportunity for investors to make low risk property investments and recoup their money extremely quickly in the areas outlined above.

We hope you enjoyed reading about the top 20 zip codes with the fastest repaying investment properties in the United States.

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