Best Affordable Cities for Real Estate IRA Owners

If you’re a Real Estate IRA owner in or approaching retirement, chances are you’re looking at two things: A reasonable cost of living and housing for yourself, and a decent return on investment for your own real estate holdings. After all, if you’re a rental real estate investor, you need to generate sufficient income for your own property to fund your own retirement lifestyle, while at the same time keeping your own expenses down so that your long-term retirement holdings aren’t depleted.

Forbes came up with its own list of America’s most affordable cities this month – and some of them also match up with some of America’s best markets for real estate.

Here’s how they crunched the numbers: They started with the largest Metropolitan Statistical Areas and Metropolitan Divisions with at least 600,000 residents, and then applied the Housing Opportunity Index, put together by the National Association of Homebuilders and by Wells Fargo. They then ‘factored in an index developed by Sperling’s “Best Places,” which measures the cost of food, utilities, gas, transportation, medical expenses, and other daily expenses in each area.

How Real Estate IRA Owners Can Play It

The ideal situation for a Real Estate IRA owner is to live in an area with a very low cost of living, but also with strong real estate investment returns. Now, as most investors know, there are two components to real estate returns: Income and price appreciation.

If a city has a great track record going back for multiple economic cycles for terrific price appreciation, it’s probably not going to be a fantastically affordable market. So value-oriented Real Estate IRA owners who don’t have a ton of income to live on may be best served by focusing on a modestly-priced area to live in themselves, while also getting a good return on investment as measured by capitalization rate.

Without further ado, here are the top 20 most affordable homes, as ranked by Forbes, but also interfaced with their capitalization rates as measured by, as of Q1 2015.

Forbes Affordability Rank                                    Rental Property Capitalization Ran

  1. San Antonio, TX 5.65 percent
  2. Austin, TX 4.95 percent
  3. Tulsa, OK 8.27 percent
  4. McAllen – Edinburg-Mission TX Not Tracked by AllProperty Management
  5. Grand Rapids, MI 7.5 percent
  6. Akron, OH 11.73 percent
  7. Warren, MI Not Tracked by All Property Management
  8. Louisville, KY 8.35 percent
  9. Greenville, SC Not Tracked
  10. Colorado Springs, CO Not Tracked
  11. Detroit, MI (tie) 8.87 percent
  12. Columbus, OH (tie) 8.43 percent
  13. Indianapolis, IN 8.98 percent
  14. Dayton, OH 11.35 percent
  15. St. Louis, MO 8.59 percent
  16. Memphis, TN 9.26 percent
  17. Cincinnati, OH 8.68 percent
  18. Oklahoma City, OK 6.69 percent
  19. Buffalo, NY 8.65 percent
  20. Knoxville, TN Not Tracked by All Property Management
  21. Birmingham, AL 7.65 percent

It’s worth noting that all these markets were inland. None of them were coastal, though some, like Detroit, Buffalo and Memphis are on large lakes or rivers.

The top markets for Real Estate IRA Owners? All these markets are very affordable – which makes it easy for Real Estate IRA owners to live there, but it also makes it a lot easier to actually collect on the rent! After all, if housing isn’t affordable, you’re going to have more trouble with late or non-payers.

Our favorite markets are the ones with good values, where you can get as much rental income per dollar invested in real estate as possible. For that, Ohio’s cities of Akron and Dayton dominate the field, with average cap rates calculated at north of 11 percent in both cases.

The numbers demonstrate, though, that you don’t have to be in one of those marquee, Tier 1 Gateway cities to do very well in real estate investing. If you happen to hold your real estate within a Roth IRA, those rent yields will come to you tax-free.

Incidentally, for the Real Estate IRA owner, there’s no particular tax advantage to focusing on capital gains versus income investing. In Roth accounts, everything you take out is tax free (as long as it’s been in the account for at least five years), and in tax deferred accounts like IRAs, 401(k)s, SEPs and SIMPLEs, everything you take out is taxed at ordinary income rates, although there is an allowance made for non-deductible IRA contributions.


American IRA, LLC is your go-to expert for all things regarding Real Estate IRA administration and compliance. Please feel free to visit our website at and peruse our extensive resource library of articles and blog posts – or better yet, call us today at 866-7500-IRA(472).

We look forward to working with you.