Andrew Merry

Best suburbs to invest in real estate in 2022

The top 10 U.S. suburbs for real estate investing in 2022.

Logan Sachon

By

Logan Sachon

Logan Sachon

Senior Managing Editor, News & Research

Logan Sachon is the senior managing editor of news and research at Policygenius, where she oversees our insurance and financial news, surveys, and data studies. As a journalist, her work has appeared in The Guardian, Business Insider, CNN Money, BuzzFeed, Money Under 30, VICE, New York Magazine, and elsewhere.

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Earlier this year, we found the best cities to invest in real estate in the U.S. by looking for cities where home ownership costs are low and home value appreciation is high, among other factors. But what about suburban real estate? According to our analysis, the best suburbs in the U.S. to invest in real estate are right outside cities like Huntsville, Boise, Kansas City, Chicago, and Phoenix. 

Using data from Zillow and the U.S. Census, we looked at the largest 1,300+ cities in the U.S. and crunched the numbers to find the best places for investing in real estate in 2022. Then we pulled out the top-scoring suburbs — defined as a community within commuting distance of a major city — to create this list of the best suburbs to invest in real estate. 

The 10 best suburbs to invest in real estate in 2022

1. Madison, Alabama

Suburb of: Huntsville

Typical home value: $361,106

Five-year home value appreciation: 66.4%

Effective property tax rate: 0.5%

Rental vacancy rate: 2.8%

Rent to home value ratio: 3.3%

Rent to income ratio: 12.6%

The top city on our list of the best suburbs to invest in real estate is Madison, Alabama, which is outside Huntsville. While typical home values in Madison are 5% above the national average, the five-year home value appreciation is 8% above average. Effective tax rate is 53% below average, and the rental vacancy rate is 52% below average.

2. Meridian, Idaho

Suburb of: Boise

Typical home value: $573,882

Five-year home value appreciation: 115.9%

Effective property tax rate: 0.7%

Rental vacancy rate: 0.5%

Rent to home value ratio: 2.5%

Rent to income ratio: 18.8%

Meridian’s typical home value is 67% above the national average, but its five-year home value appreciation is, too (88% above average, actually). Low effective property taxes (77% below average) and a low rental vacancy rate (92% below average) contribute to its status as a good suburb to invest in real estate. 

3. Independence, Missouri

Suburb of: Kansas City 

Typical home value: $186,183

Five-year home value appreciation: 72.0%

Effective property tax rate: 1.3%

Rental vacancy rate: 4.6%

Rent to home value ratio: 5.6%

Rent to income ratio: 20.6%

Independence has a typical home value 46% below the national average, making it easier to get into the market, and a five-year appreciation 17% above average. Effective tax rate 15% above average, but rental vacancy is 21% below average. 

4. Hammond, Indiana

Suburb of: Chicago

Typical home value: $161,681

Five-year home value appreciation: 93.50%

Effective property tax rate: 1.22%

Rental vacancy rate: 3.80%

Rent to home value ratio: 6.60%

Rent to income ratio: 22.60%

The typical home value in Hammond is 53% below the national average, and the five-year appreciation is 52% above it. While effective property tax is 11% higher than average, the rental vacancy rate is 34% below average.

5. Gilbert, Arizona

Suburb of: Phoenix

Typical home value: $588,886

Five-year home value appreciation: 95.80%

Effective property tax rate: 0.58%

Rental vacancy rate: 4.30%

Rent to home value ratio: 3.20%

Rent to income ratio: 19.10%

Gilbert’s typical home value is 71% above the national average, and its five-year appreciation is 56% above the national average. Effective property taxes are 47% below average, and rental vacancy is 26% below average.

6. Layton, Utah

Suburb of: Salt Lake City

Typical home value: $547,538

Five-year home value appreciation:102.10%

Effective property tax rate: 0.63%

Rental vacancy rate: 3.20%

Rent to home value ratio: 2.40%

Rent to income ratio: 16.00%

Typical home value in Layton is 59% above the national average, and the five-year appreciation rate is 66% above average. Effective property taxes are 43% below average, and rental vacancy is 45% below average. 

7. Decatur, Alabama

Suburb of: Huntsville

Typical home value: $183,632

Five-year home value appreciation:57.30%

Effective property tax rate: 0.42%

Rental vacancy rate: 9.20%

Rent to home value ratio: 4.50%

Rent to income ratio: 16.80%

Decatur’s typical home value is 47% below the national average, and its five-year appreciation rate is 7% below the national average. The effective property tax rate is 62% below the national average, but rental vacancies are 59% above average.

8. Covington, Kentucky

Suburb of: Cincinnati

Typical home value: $166,637

Five-year home value appreciation: 70.00%

Effective property tax rate: 1.29%

Rental vacancy rate: 2.90%

Rent to home value ratio: 5.20%

Rent to income ratio: 18.80%

Covington’s typical home value is 52% below average, and five-year home value appreciation is 14% above average. The effective property tax rate is 17% above average, and the rental vacancy rate is 50% below average. 

9. Independence, Kentucky

Suburb of: Cincinnati

Typical home value: $264,353

Five-year home value appreciation: 53.40%

Effective property tax rate: 1.16%

Rental vacancy rate: 1.20%

Rent to home value ratio: 4.30%

Rent to income ratio: 14.20%

Independence has a typical home value 23% below the national average, and its five-year appreciation rate is 13% below the national average. The effective property tax rate is 5% above average, and the rental vacancy rate is 79% below average. 

10. Alabaster, Alabama

Suburb of: Birmingham

Typical home value: $264,125

Five-year home value appreciation: 52.30%

Effective property tax rate: 0.50%

Rental vacancy rate: 5.70%

Rent to home value ratio: 5.20%

Rent to income ratio: 16.90%

Typical home value in Alabaster is 23% below average, and five-year home value appreciation is 15% below average. The effective property tax rate is 55% below average, and the rental vacancy rate is 2% below average. 


The best suburbs to invest in real estate, summed up

Rank

City

Suburb of

Typical home value

5-year home value appreciation

Effective tax rate

Rent/home value ratio

Rental vacancy rate

Rent/income ratio

1

Madison, AL

Huntsville

$361,106

66.4%

0.5%

3.3%

2.8%

12.6%

2

Meridian, ID

Denver

$573,882

115.9%

0.7%

2.5%

0.5%

18.8%

3

Independence, MO

Kansas City

$186,183

72.0%

1.3%

5.6%

4.6%

20.6%

4

Hammond, IN

Chicago

$161,681

93.5%

1.2%

6.6%

3.8%

22.6%

5

Gilbert, AZ

Phoenix

$588,886

95.8%

0.6%

3.2%

4.3%

19.1%

6

Layton, UT

Salt Lake City

$547,538

102.1%

0.6%

2.4%

3.2%

16.0%

7

Decatur, AL

Huntsville

$183,632

57.3%

0.4%

4.5%

9.2%

16.8%

8

Covington, KY

Cincinnati

$166,637

70.0%

1.3%

5.2%

2.9%

18.8%

9

Independence, KY

Cincinnati

$264,353

53.4%

1.2%

4.3%

1.2%

14.2%

10

Alabaster, AL

Birmingham

$264,125

52.3%

0.5%

5.2%

5.7%

16.9%

11

Spring Hill, FL

Tampa

$302,932

115.8%

0.8%

4.3%

4.7%

24.8%

12

Brownsburg, IN

Indianapolis

$324,366

64.3%

0.9%

4.2%

2.8%

15.4%

13

Pine Hills, FL

Orlando

$262,108

110.2%

0.7%

5.0%

4.7%

30.3%

14

North Las Vegas, NV

Las Vegas

$411,868

103.8%

0.6%

3.7%

4.6%

24.7%

15

Lincoln Park, MI

Detroit

$132,842

84.3%

2.2%

7.7%

1.8%

21.7%

16

Greenwood, IN

Indianapolis

$310,348

67.9%

0.8%

4.0%

4.5%

18.9%

17

Kettering, OH

Dayton

$209,320

62.5%

2.1%

4.8%

3.6%

16.2%

18

Moore, OK

Oklahoma City

$194,426

41.1%

1.2%

6.6%

2.6%

18.8%

19

Nampa, ID

Boise

$432,713

144.0%

0.8%

2.7%

2.9%

21.9%

20

Security-Widefield, CO

Colorado Springs

$416,748

99.3%

0.5%

3.9%

1.1%

22.7%

21

Lehigh Acres, FL

Fort Myers

$300,873

97.3%

0.8%

4.7%

4.0%

28.0%

22

Cayce, SC

Columbia

$179,625

63.6%

0.6%

6.8%

2.0%

23.3%

23

Mesa, AZ

Phoenix

$432,246

96.1%

0.5%

3.1%

5.5%

21.5%

24

Aiken, SC

Augusta

$247,935

51.3%

0.5%

4.7%

3.0%

20.7%

25

Niles, OH

Youngstown

$107,732

59.7%

1.5%

7.7%

1.8%

18.3%


Insurance and personal finance tips for real estate investing

Consider if property investing is in your best financial interest.

Getting in on the ground floor of a rising real estate market can be tantalizing, but real estate investment of any kind really only makes sense once you’ve maxed out other safer investments, advisors say. 

“I don't recommend that people usually put their money into any taxable investment until they have maxed out their tax-advantaged vehicles,” says Nathan Bender, lead planner at Black Bishop Financial Group. “That's nearly $70,000 per year for anybody with self-employment income.” Tax-advantaged investments include IRAs, 401(k)s, and annuities. 

Budget for renovations (and then budget more).

You’ll likely be making at least some cosmetic changes to your house to increase your rental price. If you’re going to DIY it, don’t forget to factor in your own labor costs. 

“The majority of people that engage in [investment property] tend to do a lot of the labor themselves and don't factor their time into the profit/loss statement,” says Bender. Doing the work yourself may mean you’re not paying labor costs, but it also means you’re not doing other things to earn income during those hours. 

Daniel Johnson III, certified financial planner with Refocus Financial Planning, also reminds investors to budget for contingencies. “Just as most things in life, renovation projects rarely come in on budget,” he says. “It is very important to have reserves and to be prepared to spend more than initially thought to get the project complete and sold.

Don’t forget about insurance.

When you buy an investment property, you need rental property insurance, also known as landlord insurance. And if you spend time doing renovations on the house, you may need special coverage, like vacant and unoccupied home insurance, which protects a home that is vacant for more than 30-60 days, or builder’s risk insurance, which protects homes being built or undergoing major renovation.

Methodology 

To find and rank the best suburbs to invest in real estate for 2022, we looked at 3,100 largest cities and towns in the United States over six data points: 

  • Home value: Typical home value from April. 2022 (Zillow data)

  • Home value appreciation: Percentage increase in home value in the last five years, April. 2017 to April. 2022 (Zillow data) 

  • Effective property tax rate: Median annual property taxes divided by median annual home value (Census data) 

  • Rent to home value ratio: Median annual rent divided by home value (Zillow and Census data) 

  • Rental vacancy rate: Percentage of the city’s rental inventory that is vacant for rent (Census data) 

  • Rent to income ratio: Median annual rent divided by median household income (Census data)

We weighed each factor equally and scored cities based on these factors. Our top suburbs are characterized by low home values (you want to be able to afford property there); high home value appreciation (you want your house to go up in value, making your investment worth more both for future sale and future rental value); low effective property tax rate (lower taxes mean better margins); high rent to home value ratio (you’ll recoup your money sooner because rents are high compared to what you’ll spend on the house); low rental vacancy (so you can definitely find tenants at the price you want); and low rent to income ratio (because tenants who can better afford rent are probably less likely to default or miss payments). 

U.S. averages as of April 2022:  

Typical home value (want low): $344,141

Five-year home value appreciation (want high): 61.5% 

Effective property tax rate (want low): 1.1%

Rental vacancy rate (want low): 5.8%

We also looked at the rent to home value ratio and rent to income ratio as indicators of how rental-friendly cities were. National data was not available for those numbers, but for the 1,300+ cities in our study, the averages were 6.2% and 25%, respectively. 

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Author

Senior Managing Editor, News & Research

Logan Sachon

Senior Managing Editor, News & Research

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Logan Sachon is the senior managing editor of news and research at Policygenius, where she oversees our insurance and financial news, surveys, and data studies. As a journalist, her work has appeared in The Guardian, Business Insider, CNN Money, BuzzFeed, Money Under 30, VICE, New York Magazine, and elsewhere.

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