🏢 🛋️ 5 Best (and 5 Worst) U.S. Cities to Invest for New Landlords for Cash-Flow, Using the Price-to-Rent Ratio

👋 🗓️ Happy New Month! We hope you’re reading this as you ease back in from a well-deserved holiday weekend. 

A couple of weeks ago, we sent an opt-out email to our audience. While a handful of folks respectfully unsubscribed, more than 2,100 of you chose to stay and allow us to keep bringing you value into 2026—and for that, we say a big thank you.

2026 is going to be an incredible year, and here’s a preview of what’s ahead. In today’s issue, we break down the top markets to invest in.

Whether you’re a first-time real estate investor or already have a few deals under your belt, one thing remains true: the core rules of thumb haven’t changed.

🍽 So, here it goes:

A good landlord’s market is one where residents have to rent, want to rent, and can afford your rents far more easily than they can afford a mortgage.

If you are looking to invest in real estate, it is important to look at why renting is winning across parts of the U.S., and how price-to-rent ratio works. Here are the 5 best and 5 toughest big-city markets for cash-flow-minded investors right now.

What actually makes a “good landlord’s market”?

For landlords and buy-and-hold investors, a strong market usually has four things working in your favor:

🛋️ Homeownership is expensive relative to renting, so households are pushed toward renting.

🏛️ Property prices are still reasonable relative to rent, so your yield (cap rate / cash-on-cash) is healthy.

🌃ִ Local economies are creating jobs and attracting new residents, which supports occupancy and rent growth.

⚖️ Landlord-tenant rules and property taxes are manageable, not punitive.

The core quantitative tool that ties the first two together is the price-to-rent ratio.

Price-to-rent ratio in plain English (with a quick example)

Definition. The price-to-rent ratio compares the purchase price of a property with the annual rent it can earn. It is:

Real-estate and housing analysts use this to see whether a market leans toward renting or buying.

Typical rule of thumb from several analyses:

• Below about 15: buying is generally more cost-effective for an owner-occupant. Higher risk of vacancies as renter can afford to buy, so why rent?

• Roughly 15–21: balanced.

• Above 21: renting is usually cheaper than buying for residents, and ownership looks expensive. Less cash flow as mortgage servicing is higher (Victor Steffen)

𝞹📈🧠📚 Example 1: Investor-friendly ratio

Imagine City A:

• Median home price: 240,000

• Typical monthly rent: 1,500 (18,000 per year)

Price-to-rent = 240,000 ÷ 18,000 = 13.3

For residents, buying might make sense. For you as a landlord, your acquisition price is fairly low compared to rent, so gross yields and cash flow can look strong.

𝞹📈🧠📚 Example 2: Renter-dominated, tricky for cash flow

City B:

• Median home price: 900,000

• Typical monthly rent: 3,000 (36,000 per year)

Price-to-rent = 900,000 ÷ 36,000 = 25

Here, renting is clearly cheaper than buying. That means huge renter demand, but your purchase price is so high relative to rent that cash-flow yields are often razor thin unless you buy at a discount, add massive value, or bet on appreciation.

Read more: Price-to-rent ratio explained (Investopedia)

Why renters are winning (and why that’s good for landlords)

Recent nationwide data show just how skewed things have become:

• Since 2019, home prices have risen roughly 39% faster than rents across the U.S. (Clever Real Estate)

• A 2025 report based on Realtor.com data found that renting is cheaper than buying in 48 of the 50 largest U.S. metros when you compare monthly costs. Only Detroit and Pittsburgh favor buying. (Investopedia)

• In expensive markets like Los Angeles, owning can consume around three-quarters of a median income, versus roughly the mid-30% range for renting. (Investopedia)

Layer on high mortgage rates, student debt, and lifestyle preferences (flexibility, low maintenance, ability to move for work), and you have millions of households who:

• Cannot afford a down payment

• Cannot qualify for today’s mortgage payments

• Or simply do not want to lock in long-term debt and maintenance risk

All of this creates a durable renter pool, which is exactly what you want as a landlord.

To ground this in numbers, we lean primarily on:

• A 2025 analysis of price-to-rent ratios in 52 major U.S. metros, using Redfin (home prices) and Zumper (rents).

That dataset gives us median home prices, median one-bedroom rents and the price-to-rent ratio for each metro as of late 2024 / early 2025. We’re selecting cities that look particularly favorable or challenging for cash-flow-focused landlords based on:

• Price-to-rent ratio

• Entry price level

• Broader affordability context

This is a screening tool, not a replacement for deal-level underwriting.

Read more: Price-to-rent ratio in 52 U.S. cities (Stacker)

🏆✨🌟⭐ Top 5 big-city markets for landlords focused on cash flow

These are metros where home prices are relatively low compared with rents, so the numbers can pencil more easily for buy-and-hold landlords (again, you still need to underwrite neighborhood by neighborhood and asset by asset).

1. Detroit, Michigan

• Median home price: about 97,200

• Median annual rent (1-bed): about 12,600

• Price-to-rent ratio: roughly 8 (one of the lowest in the country) (Stacker)

Landlord angle: Extremely low entry prices with solid rent levels can produce very strong gross yields. The trade-off is volatility and neighborhood risk: you must underwrite submarket quality, crime, and long-term employment carefully. For experienced operators with strong local teams, Detroit can be a cash-flow machine.

2. Memphis, Tennessee

• Median home price: about 170,000

• Median annual rent: about 12,960

• Price-to-rent ratio: around 13 (Stacker)

Landlord angle: Logistics, healthcare, and distribution keep rental demand resilient. A ratio near 13 means your acquisition price is still quite low relative to rent, which is attractive for investors seeking mid-teens gross yields and strong cash-on-cash once stabilized.

3. Philadelphia, Pennsylvania

• Median home price: about 260,000

• Median annual rent: about 18,600

• Price-to-rent ratio: about 14 (Stacker)

Landlord angle: For a major East Coast city, entry prices are modest. A ratio in the mid-teens suggests you can still achieve reasonable cap rates, especially in working-class and value-add neighborhoods. Regulatory environment and property taxes need to be studied submarket by submarket.

4. Baltimore, Maryland

• Median home price: about 224,000

• Median annual rent: about 15,840

• Price-to-rent ratio: about 14 (Stacker)

Landlord angle: Similar story to Philadelphia: urban, job-rich, and still relatively affordable to acquire. The math works if you buy right and manage well. As always in older East Coast cities, block-by-block selection matters, as do taxes and crime trends. The local landlord-tenant laws should also be reviewed carefully, as Maryland is not known to be the friendliest to landlords.

5. Indianapolis, Indiana

• Median home price: about 243,450

• Median annual rent: about 14,160

• Price-to-rent ratio: about 17 (Stacker)

Landlord angle: Indianapolis combines reasonable purchase prices, healthy rents, and strong space value for tenants. One recent analysis noted that a 2,000 rent budget in Indianapolis buys significantly more square footage than the national average, reflecting strong affordability for renters and solid value perception. (Axios)

That combination often translates to:

• Tenants happy to rent rather than stretch to buy

• Landlords able to maintain good occupancy without aggressive concessions

✋🏻🛑⛔️ 5 difficult markets for cash-flow investors (but great examples of renter pressure)

On the opposite end, here are large metros where price-to-rent ratios are extremely high, meaning homes are very expensive relative to local rents. These cities often have fantastic long-term fundamentals, but near-term cash flow for new acquisitions is tough.

1. San Jose, California

• Median home price: about 1,455,000

• Median annual rent: about 32,640

• Price-to-rent ratio: roughly 45 (off-the-charts high) (Stacker)

Landlord angle: From a resident’s perspective, renting is dramatically cheaper than taking on a million-plus mortgage. For a new landlord, however, yields are compressed; you’re mostly betting on long-term tech-driven appreciation and extremely high incomes, not day-one cash flow.

2. Long Beach, California

• Median home price: about 855,000

• Median annual rent: about 22,200

• Price-to-rent ratio: roughly 39 (Stacker)

Landlord angle: Strong coastal demand and high rents, but purchase prices are so high that cap rates are typically low. It is a prime example of a market where residents overwhelmingly choose to rent, yet investors see modest cash-on-cash returns unless they execute heavy value-add or development strategies.

3. San Francisco, California

• Median home price: about 1,350,000

• Median annual rent: about 37,920

• Price-to-rent ratio: around 36 (Stacker)

Landlord angle: Despite rent growth resuming in 2025 and vacancy tightening, the capital stack is heavily front-loaded. You are paying premium prices for each dollar of rent. Great for long-term appreciation and trophy assets, but challenging for mid-size landlords seeking high cash-on-cash returns.

4. Seattle, Washington

• Median home price: about 835,000

• Median annual rent: about 23,400

• Price-to-rent ratio: around 36 (Stacker)

Landlord angle: Tech employment and lifestyle demand drive rents, but home values have run even further. Again, residents are pushed toward renting, but the investor trade is more about stability and appreciation than robust income.

5. Los Angeles, California

• Median home price: about 1,010,000

• Median annual rent: about 28,800

• Price-to-rent ratio: about 35 (Stacker)

Landlord angle: A national study highlighted Los Angeles as a case where homeownership costs can absorb roughly 75% of a median income, while renting sits closer to the mid-30% range. (Investopedia)

For you, that means huge renter demand and long-term upside, but only modest yields unless you buy significantly below market or leverage creative strategies (ADUs, microunits, redevelopment).

How affordability and psychology keep your units full

Across both the “easy” and “hard” cash-flow markets, one pattern repeats:

1. Home prices and mortgage costs are outpacing wages in many metros. (Clever Real Estate)

2. Renting is cheaper than a comparable mortgage payment in most large cities. (Investopedia)

3. Many residents value mobility, low maintenance, and the ability to move for work or family without selling a home.

For landlords, that translates into:

• Larger, more stable renter pools

• Longer average tenancy in many markets

• More pricing power when you offer updated units, amenities and professional management

In short, low home affordability is the backbone of a strong landlord’s market.

🛠️ How to use this as a landlord or small-to-mid-size investor

Here is a practical way to plug this into your underwriting:

1. Start with metro-level price-to-rent ratio
   Look up the city’s ratio and ask: “Am I in a high-yield environment (low ratio) or a thin-yield environment (very high ratio)?”

2. Layer in rent-versus-buy math
   Study how much of a median income it takes to rent vs to own. Markets where renting is clearly cheaper usually support deeper renter pools and lower turnover risk. (Investopedia)

3. Drop down to neighborhood and asset level
   Metro averages hide submarkets. In “tough” metros, you may find submarkets where acquisition prices lag rent growth, giving you decent cash flow in otherwise high-ratio cities.

4. Combine with your own return targets
   Use the price-to-rent ratio as a first filter, then underwrite to your own DSCR (Debt Service Coverage Ratio), cap rate and cash-on-cash thresholds. In some markets (Detroit, Memphis, Indianapolis), you will likely hit your numbers with less leverage. In others (San Jose, CA), the same return targets may be unrealistic without very special circumstances.

🤔❓ Are you in a tough market?

Creative strategies like Alternative Dwelling Units (ADUs), microunits, redevelopments, house hacking, seller financing) can make doing deals in these markets lucrative as well. Keep an eye on this space as we will be discussing these strategies and many more in our future issues.