Best Cities for Real Estate Investment by GRM (Price/Rent Ratio) in Q4 2024

The Big Picture On The Best Cities for Real Estate Investment By GRM:

• • As of the start of Q4 2024, the national average GRM in the U.S. stands at 13.78, though this figure varies significantly across different regions, highlighting the importance of local market analysis.
  • Cities with lower GRMs often present better investment opportunities, as they suggest higher rental income relative to property prices, enhancing potential returns.
  • Investors considering long-distance real estate investments might explore turnkey properties through platforms like Roofstock or Norada, which facilitate purchasing properties without needing in-person visits.

U.S. home prices went on quite a ride—going from $250,000 to $400,000 during the pandemic years before cooling off in late 2022. 

By the end of Q3 2024, U.S. median home prices were at $420,400, roughly a 3% decrease from last year. This compares with the annual pace of 3.13% seen in 2023 and is more normal than the frothy 7.45% growth in 2022. Over the last year, however, over 100 cities across the U.S. saw cooling home prices.

While certain cities have seen price declines, the national median home price has remained relatively stable, with slight fluctuations.

All that said, some cities offer far better yields than others. Investors looking for cities with the best price-to-rent ratio should pay close attention to local market dynamics. Below, you’ll find the top 300 cities in the U.S. by population, mapped with their GRM, median rent, and median home price.

What Is GRM (Gross Rent Multiplier)

Gross rent multiplier is one of those real estate terms that sounds more complicated than it is. It’s actually one of the easiest concepts in real estate investing.

Quite simply, the gross rent multiplier is the ratio between a home’s price and gross annual rental income. Just divide the price by the gross annual rents, and you get the ratio:

GRM = Price of Property/Gross Annual Rental Income

For example, if a property costs $150,000 and it generates a gross rental income of $15,000 per year, the GRM is 10 ($150,000 / $15,000 = 10). Lower is better for GRM, indicating higher rents and lower prices.

Here’s a quick GRM calculator in case you don’t love math:

Another way to think of GRM is the number of years it would take for a property to pay for itself in gross rent. If a property generates $15,000 per year and costs $150,000 to buy, it would take 10 years to pay for itself, not including expenses.

This makes an important point: GRM doesn’t include expenses the way cap rates do. That makes it a simpler—but less accurate—calculation.

What Do GRM Numbers Tell You?

Generally, a GRM below 10 suggests strong rental income relative to purchase price, while numbers above 13 warrant careful analysis.

Best Cities for Real Estate Investing by GRM

The following map shows the top 300 cities in the country by population:

Note that many smaller cities and towns in the US have higher cap rates. These are simply the 300 most populated U.S. cities I used because Zillow makes this data easily available.

While home prices shot upward in the pandemic and rents held steady during the eviction moratorium, rents later leaped to catch up to soaring home prices. In many markets, rents shot up faster than the market fundamentals and have since drifted back down to earth.

Nationwide, the average gross rent multiplier in the U.S. is 13.78 at the end of the third quarter of 2024. However, this figure varies significantly across different regions, with some cities with the lowest price-to-rent ratio offering particularly attractive investment opportunities.

If you want to invest in real estate long-distance, consider buying turnkey properties through a platform like Roofstock or off-market seller like Norada. The majority of the investors there buy the properties sight-unseen, and feel comfortable doing so given the massive amount of third-party data provided with each listing.

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More Maps for Gits & Shiggles

If you couldn’t tell, I love interactive maps.

Here are some useful and relevant maps for real estate investors looking for the perfect investment place.

Top 100 Fastest Appreciating Cities in the US

Where are home prices rising the fastest?

Most of these are smaller cities or towns or satellite towns near larger metropolitan areas.

Remember, past performance does not indicate future results, yada yada yada. But it does indicate faster demand growth in these cities than anywhere else in the country. 

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Property Taxes by County

Property taxes aren’t your only ongoing expense as a real estate investor, but they can impact your bottom line. Especially in areas with other high taxes (like income and sales taxes) and especially in states where more Americans are moving out than in. See our data analysis comparing the total state tax burden with US migration patterns.

Investment Approaches for Different Market GRMs

Although GRM helps identify promising markets, different cities call for different investment strategies. Buy-and-hold strategies often work well in markets with low GRMs (4-10) since strong cash flow can help weather market fluctuations. Investors in these areas typically focus on single-family homes and small multi-family properties because they tend to offer the best balance of management overhead and returns.

For markets showing higher GRMs (11-13), investors might consider value-add strategies to boost returns. This could mean purchasing properties that need moderate renovation to increase rents and property value. In these markets, multi-family properties often make more sense as they allow investors to spread costs across multiple units.

Markets with GRMs above 14 generally require more creative approaches. These might include house hacking (where you live in one unit while renting others) or focusing on luxury rentals where premium rents can offset high acquisition costs. Some investors in these waters also explore commercial properties or mixed-use developments, which often operate under different pricing dynamics than purely residential properties.

Understanding Market Fundamentals Beyond GRM

The most successful real estate investments often align with strong economic indicators and positive demographic trends. We’re talking about:

• • Job markets (and not just one big employer – you want diversity)
  • Population trends (especially those rental-loving millennials and Gen Zs)
  • Huge developments coming to town (new transit lines or something similar)

The reality is that some markets look amazing on paper with their low GRMs, but dig deeper, and you might find they’re one-factory towns or losing population faster than a leaky faucet loses water. On the flip hand, some “expensive” markets with high GRMs might actually be worth every penny because they’re growing like crazy with new jobs and infrastructure projects.

In simple terms, what works in Austin might bomb in Buffalo, even if the GRM numbers look similar. Use the GRM data above as your starting point, but don’t stop there. Your best bet is to match your strategy to what’s happening in your target cities.

Final Thoughts

Gross rent multiplier doesn’t tell you the whole story about the best places to invest in real estate. No one data point can.

But GRM does help you find cities with relatively higher rents and lower home prices. It can help you identify promising cities to start your hunt for ideal neighborhoods and stellar deals on rental properties.

Check back frequently, as we continue updating this interactive map and data set!♦

Where are you currently investing in rental properties? How did you choose those cities?