Low home prices and relatively strong rents are expected to make real estate investors in these cities some healthy profits over the next few years. Here are the top 10 markets ranked highest in investment return.Las Vegas
Average home price (2011): $130,100
Projected home price (2014): $120,000
Gross rent (2011): $922
Projected gross rent (2014): $966
Las Vegas has the highest foreclosure rate in the nation -- and many of those former homeowners now rent. Part of the problem is unemployment, which reached 12.4% in May, one of the highest rates of any U.S. metro area.
Detroit
Average home price (2011): $97,800
Projected home price (2014): $94,600
Gross rent (2011): $681
Projected gross rent (2014): $764
The auto industry's troubles, which began in the mid-2000's, helped send unemployment soaring and Detroit area home prices plunging some 37% from their peak. Rents, though, are expected to rise about 12% over that time. Winzer said the average return on rentals will be about 4.4% higher than the national average.
Warren, Mich.
Average home price (2011): $106,400
Projected home price (2014): $105,200
Gross rent (2011): $648
Projected gross rent (2014): $736
Warren is home to a major automotive research facility, which used to employ a large percentage of the population. Many of the homes for rent here are well-kept and located in tidy neighborhoods, making them attractive for renters.
Orlando, Fla.
Average home price (2011): $165,200
Projected home price (2014): $166,200
Gross rent (2011): $980
Projected gross rent (2014): $1,148
The area's ties to tourism should help as the economic recovery gains traction, he said. Visitors keep coming to the theme parks here, despite the lukewarm national job picture. If employment ever heats up, the area will attract even more visitors and that means more jobs for local residents. Rents, on the other hand, are expected to climb by a healthy 17%.
Bakersfield, Calif.
Average home price (2011): $131,000
Projected home price (2014): $128,500
Gross rent (2011): $736
Projected gross rent (2014): $829
The local economy, which had previously relied on the rich farmlands nearby, became dependent on real estate development during the boom. When that industry vanished, it took a lot of jobs with it. Home prices have been cut in half since 2006. With employment improving slowly but surely -- the unemployment rate fell a half point over the past 12 months -- rents are estimated to climb higher.
Tampa, Fla.
Average home price (2011): $152,700
Projected home price (2014): $147,200
Gross rent (2011): $832
Projected gross rent (2014): $933
As home to many of Florida's retirees, rents in Tampa have bounced up and down a little, but have remained basically flat the past three years. Rents are expected to take off, increasing about 12% over the next three years, according to Local Market Monitor.
Phoenix
Average home price (2011): $155,600
Projected home price (2014): $148,200
Gross rent (2011): $834
Projected gross rent (2014): $936
Phoenix was the poster child for the housing bubble: Speculation sent home prices soaring by annual double-digit increases for three years until the bubble popped in 2007 and they have fallen more than 47% since. Foreclosures have been a big problem here and many people who lost their homes are now renting. As a result, rents are on the rise. Local Market Monitor estimates rents will increase by more than $100 a month over the next three years.
Fort Lauderdale, Fla.
Average home price (2011): $200,500
Projected home price (2014): $189,200
Gross rent (2011): $1,090
Projected gross rent (2014): $1,195
Even though home prices in this pricey part of Florida are expected to fall further, rental rates are going strong. Like much of the state, Fort Lauderdale was severely overbuilt during the housing boom and the inventory overhang has depressed markets for years. That inventory will have to be worked through before the market will turn positive again.
Rochester, N.Y.
Average home price (2011): $150,500
Projected home price (2014): $155,500
Gross rent (2011): $825
Projected gross rent (2014): $947
The Rochester area, however, is a slow-growth place with many of its old industrial powerhouses, like Eastman Kodak, employing far fewer workers than in the glory days. Even during the down years, rents have held up fairly well and are projected to get stronger rising about 15% by 2014 as unemployment eases over the next few years.
Stockton, Calif.
Average home price (2011): $157,100
Projected home price (2014): $150,000
Gross rent (2011): $821
Projected gross rent (2014): $915
Stockton is a Central Valley city where speculation pressure spilled over from more expensive coastal markets and drove local prices into a frenzy during the bubble. Rising rents, forecast to go up 11% over the next three years, should add to investor gains but buyers won't turn a profit on sales for many years. Home prices are expected to fall another 4% or so by 2014.
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