Becoming a real estate investor and a landlord is one of the important business and financial decisions you will make in life. There are so many questions to ask and answer before you can start a real estate business, and one of them is no doubt: What are the best places to invest in rental properties?
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The Importance of Location in Real Estate Investing
As we all have heard many, many times, location is one of the most important factors in any real estate investment decision, including buying a rental property. The location of your investment property is a feature that you cannot change. Location determines the price you will have to pay for your property, the rental rate you can charge, the optimal rental strategy (traditional or short-term rental), the type of tenants you can attract, and eventually the return on investment you will get from your rental property. So, real estate investors should take care when choosing where to invest in rental properties.
While New York State is definitely a great real estate market to buy a rental property, this is not enough to know where exactly to invest. There are hundreds of possible options when it comes to where to buy a rental property in New York State.
To help you make the best real estate investment decision, we will show you the best places to invest in rental properties in New York State.
You must be wondering what exactly we mean when we say “THE BEST PLACES TO INVEST IN RENTAL PROPERTIES.” We simply mean the locations where you will yield the highest return on investment in terms of cap rate and thus the locations where you will make the most money as a real estate investor.
What Is Cap Rate?
If you are a beginner real estate investor, you must be wondering what cap rate is. No worries, the cap rate, or short for capitalization rate, is simply a measure of return on investment for real estate properties. It is calculated using the following formula:
Cap Rate = Net Operating Income (NOI)/Property Asset Value
This profitability metric has one significant drawback when compared to cash on cash return, namely that it doesn’t take into consideration the financing method for the rental property. However, when choosing where to buy a rental property, this drawback can turn into a benefit as it allows investors to compare return on investment across locations irrespective of how they will end up paying for their investment property.
What Are the Best Places to Invest in Rental Properties in New York State?
Following is a list of the most profitable locations for investing in long-term (traditional) rentals and short-term rentals in New York State, i.e., the towns with the highest cap rate. The cap rate, as well as the average property price and rental income, has been calculated by Mashvisor, an advanced real estate analytics tool which helps real estate investors find the most profitable long-term and short-term rental properties in the US real estate market. Mashvisor takes its investment properties data from the MLS and other public sources; the traditional rental comps from Rent Jungle, Hotpads, MLS, and Zillow; and the short-term rental comps from Airbnb.
Places with the Highest Cap Rate for Long-Term Rentals in New York State
| Town | Long-Term Rental Cap Rate | Average Property Price | Average Long-Term Rental Income |
| Otisville | 6.48% | $143,900 | $1,880 |
| Wyandanch | 3.87% | $234,900 | $2,290 |
| Elmira | 3.57% | $114,500 | $860 |
| Kingston | 3.34% | $283,600 | $1,740 |
| Ticonderoga | 3.31% | $182,300 | $1,260 |
| Baldwinsville | 3.27% | $99,200 | $880 |
| Roosevelt | 3.26% | $347,900 | $2,610 |
| Mastic Beach | 3.13% | $205,500 | $1,890 |
| Massapequa Park | 3.01% | $625,000 | $3,860 |
Data Source: Mashvisor, May 2018
Places with the Highest Cap Rate for Short-Term Rentals in New York State
| Town | Short-Term Rental Cap Rate | Average Property Price | Average Short-Term Rental Income |
| Shirley | 5.47% | $266,100 | $2,880 |
| Wappingers Falls | 5.34% | $306,600 | $3,370 |
| Niagara Falls | 5.08% | $93,180 | $880 |
| Mastic Beach | 4.25% | $205,500 | $2,240 |
| Oneonta | 4.07% | $184,400 | $1,180 |
| Poughkeepsie | 3.49% | $302,200 | $2,380 |
| Gloversville | 3.48% | $133,400 | $1,030 |
| New Paltz | 3.44% | $486,700 | $2,930 |
| Saugerties | 3.31% | $294,600 | $1,760 |
Data Source: Mashvisor, May 2018
An experienced real estate investor might look at this number with a skeptical eye. After all, real estate experts traditionally consider a good cap rate for rental properties to be above 8%. However, the real estate investing world has become so competitive in recent years, especially with the emergence of short-term rental platforms, that a cap rate of 3-4% or more is an excellent return on investment. Moreover, when you look at the numbers above, you have to remember that these are city level averages, and you have to conduct neighborhood analysis to find out the particular locations within each city where you can get the highest cap rate.
Is There Another Way to Push Up Your Return on Investment?
In conclusion, we would like to offer you a way to gain even more return on investment for your rental properties in these top places in New York State. Return on investment is inversely proportionate to the price you pay for a real estate property. As you can see from the figures above, some of these top locations in New York State can be quite pricey, especially for a first-time real estate investor. While the rental income is excellent in most of these places, the return on investment is not double-digit simply because property prices are high. So, if you manage to buy your rental property for cheap, the return on investment will automatically go up. But how to do that?
By buying a foreclosure, a bank-owned property, or a short sale!
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Daniela Andreevska is Content Marketing Director at Mashvisor, a real estate analytics tool which helps real estate investors quickly find traditional and Airbnb investment properties. A research process that usually takes 3 months can now take 15 minutes. We provide all the real estate information in easy to understand visualizations.
