Best cities for rental property?

[HeidiO]

   We are up to 3 rental houses now.  In reality, due to downpayment concerns, our next house will probably have to be owner-occupied, therefore in Albuquerque.  However, if you could choose any market, where would it be?
Heidi

[arebelspy]

I like investing in my local market for a few reasons.  (Although I am purchasing a mortgage in Mississippi right now, so I guess there are exceptions.)

But for the sake of the question, if I were living in San Francisco or some place where it was bad to invest in Real Estate, and I still wanted to... probably various places in Texas.  It's a strong market, and while not necessarily as underpriced as some places (which will see appreciation just as a matter of reversion to the mean and becoming valued again at replacement/building costs), I'd be investing for the fundamentals.

[totoro]

Having spent some time researching online I would agree that Texas seems a good spot at the moment. Phoenix and Las Vegas have probably passed the ideal enter date.  There are a bunch of blogs out and online articles discussing this.

http://www.real-estate-entrepreneur.com/index.php/north-america/143-united-states-of-america/733-best-places-to-invest-in-real-estate-market-in-2012

[Another Reader]

I would not invest in any real estate market where I had not spent a significant time in that market, talking to just about everyone I could.  Interested in a specific state?  Do some preliminary research on-line to see if rents and prices fit your criteria in the cities that interest you.  How diverse and strong is the local economy?  Who are the major employers and are they growing or shrinking?  Are there investment opportunities near medical centers or universities?  Search property management companies in the various cities and call them for information.  Then pick the most likely city and take your next vacation there.  Drive around neighborhoods that interest you.  Call on every for rent sign and a representative sample of for sale signs and ask lots of questions.  If there is an active investor's association in that city, get on the mailing list and try to attend a couple of meetings.

Once you think you have found an area that meets your criteria, get referrals for people that work specifically with investors.  You need an agent, a reliable title company, property management, and some other other folks, depending on how hands on you want to be from a distance.

Research in the internet is helpful, but there is NO substitute for first hand, "boots on the ground" knowledge.

[arebelspy]

I agree with basically everything Another Reader said, with that last sentence summing it up nicely.

As far as totoro's comment, I'm not sure it's "too late" anywhere. 

I think inventory is tight everywhere due to banks restricting supply right now because of the upcoming election so that home prices go up for the next few months.  I think we'll see more inventory Q4 2012 and into 2013, and we have years of depressed prices (not least because the eventual rise of interest rates will depress prices, as once people pay more in interest they'll have to pay less principal to afford the same level of payment).

[hardworkingpenguin]

I think until you could really build a management system in place, investing local will be the most ideal. You'd have to factor the costs of your travels and time when you invest out of state. However, you also have to look at whether you can cash flow in the area you are investing in. Demographics and economic trends are important to look at too. Investing in a growing city will reap a lot of benefits in terms of future appreciation and rental demands.
As of right now I am big on distressed cities (cities like Vegas, Phoenix, and not Detroit) because I am banking on a rebound in prices. Should prices ever go up, I'd probably take my investments to a more stable real estate market like Texas.