Foreword by Dave Meyer
In a brand new period of actual property investing, the outdated guidelines of thumb not work.
Again within the day of low-cost properties and excessive rents, you may confidently use rent-to-price ratios (one month of lease divided by the acquisition worth) to estimate money move. Should you hit the magical 1% goal for rent-to-price or at the very least obtained near it, you have been good to go.
Sadly, in right this moment’s period of upper rates of interest, insurance coverage prices, taxes, and just about greater the whole lot, these metrics not minimize it. We want new metrics to determine good offers, so I created one and ranked the most important U.S. cities by it. I’m calling it the Lease-to-Fee Ratio, and the components is to divide one month’s lease by one month’s whole mortgage fee (principal, curiosity, taxes, and insurance coverage, aka PITI).
By evaluating your whole fee quite than buy worth, you higher account for rate of interest modifications and the way a lot insurance coverage prices and taxes range by state.
After rating each metro by rent-to-payment, we will set up new benchmarks for money move estimates right here in 2026, and the gold normal continues to be round 1.0. Something that hits 1.0 or greater ought to have robust money move, however 1.0 will not be some magical quantity.
In accordance with my analyses, something with a rent-to-payment ratio of 0.75 or above ought to nonetheless supply money move alternatives, and any market with a rent-to-payment ratio under that quantity will make money move troublesome however not unattainable to search out.
The rankings are supposed to determine money move potential however shouldn’t be seen because the be-all and end-all of money move analysis. Keep in mind that even in a metropolis that averages 0.6 rent-to-payment, by rule, half the properties nonetheless have a rent-to-payment above that quantity!
These are averages on a metro stage, not an analysis of particular person properties. It’s your job as an investor, regardless of the market, to search out offers that exceed these averages every time potential.
One different reminder: Lease-to-payment ratios, my ranks, or every other guidelines of thumb are usually not meant as correct deal analyses. These are instruments that can assist you slender down your potential markets or offers. You continue to must run a correct evaluation earlier than shopping for something, which you are able to do with the BiggerPockets calculators.
All that being mentioned, I discover these outcomes encouraging! There are a number of cities within the U.S. with rent-to-payment ratios above 1.0—which is nice—and loads of others with robust earnings potential for buyers.
So, get to it! Check out the checklist, discover some nice cash-flowing markets, after which get on the market and discover a deal.
– Dave Meyer, Chief Funding Officer at BiggerPockets
The New Benchmark: Money Circulation Is Not a Default—It Must Be Found
Throughout the 54 tracked metros, the common rent-to-payment ratio is roughly 0.80, with a median of 0.76, which means that within the “typical” big-city deal, market lease covers solely 76%-80% of the total month-to-month value of possession (PITI).
A ratio of 1.0 was normal. Now it’s the gold normal—the place lease covers principal, curiosity, taxes, and insurance coverage—whereas 0.75-1.0 stays workable, and something under 0.75 is an uphill wrestle for money move that can require both below-market home pricing, above-market rents, or aggressive value-adds to spice up rents, which is able to value buyers.
For stylish buyers, the hunt is framed not when it comes to money move however quite by which metros the deal averages near break-even and the place they will use their expertise in sourcing, underwriting, and value-add to maneuver the needle.
The place Money Circulation Lives: Midwest and Northeast Workhorses
A sample exists in most of the “cash-flow metros”: Residence costs stayed low-cost, whereas rents both held up or reset greater as nationwide affordability shrank.
On the prime of the desk, Detroit posts a powerful rent-payment ratio of 1.99, which means that common market lease is sort of double the modeled all-in month-to-month value of proudly owning a city-limit property.
Right here’s the total prime 10, clustered round break-even stats:
Residence Values
Detroit has a mean dwelling worth of about $72,000. Nonetheless, with a $1,280 month-to-month lease and modest principal-and-interest funds, together with comparatively low taxes and insurance coverage, there’s a vast internet working earnings margin even after bills. For an investor, the hole between lease and PITI is a buffer in opposition to emptiness, capital expenditures, and future tax charge will increase.
Midwest markets corresponding to Cleveland, St. Louis, Cincinnati, Indianapolis, Columbus, Chicago, and Kansas Metropolis all sit within the workable vary—usually between 0.81 and 1.19—with taxes and insurance coverage excessive sufficient to make a distinction however not so excessive as to cripple the fee. In these cities, underwriting will rely extra on rental quantities, tenant high quality, and neighborhood choice than on whether or not PITI has surpassed the lease ceiling.
What the Knowledge Doesn’t Inform You
What the info doesn’t inform you is what sort of home you might be getting for below $80,000 in Detroit—or in any metropolis—and in what neighborhood. Theoretical money move is one factor, however real-world expertise, factoring in crime and socioeconomic circumstances, additionally performs a component and might devour revenue immediately.
That is the place microdata and skilled, reliable companions/brokers and brokers are important. Money move on paper doesn’t at all times translate in actual life, so don’t take the info as sacrosanct. This can be a basic overview. All the time do your due diligence.
On the Powerful Finish: When Money Circulation Is a Nonstarter
On the backside of the checklist, excessive costs, not weak rents, drive down the ratios. San Jose, with a rent-to-payment ratio close to 0.39; San Francisco at 0.52; Los Angeles at 0.49; Seattle at 0.49; and San Diego at 0.56 all present robust rents—however their dwelling values and ensuing PITI merely outpace what tenants can fairly be anticipated to pay.
Austin—as soon as a pandemic-era hotbed—has joined these low-ratio ranks, with a rent-to-payment ratio of about 0.40, as costs have reset solely partially and rents have softened.
In these expensive metros, buyers are shopping for for appreciation and as a secure place to park money. Thus, shopping for all money right here is the sensible approach to go, except you might be an owner-occupant and might cowl the mortgage fee. The one different possibility is a value-add state of affairs—including bedrooms or ADUs—to convey money move to a break-even level or to flip.
Within the fashionable funding period, worth will not be the whole lot. Taxes and insurance coverage have soared in recent times, a lot in order that they will derail what would as soon as have been a superbly whole lot, cost-wise. That is no extra evident than in Oklahoma Metropolis, the place the rent-to-payment ratio of 0.56 is so low partially as a result of house owner’s insurance coverage alone accounts for roughly 40% of PITI, making it one of many highest shares within the nation.
In Houston, Miami, Dallas, and different cities susceptible to excessive climate—notably storms and hail—elevated insurance coverage and property tax prices considerably constrain the unfold, submerging money move uncertainty below the burden of excessive bills.
The Regional Divide: Why The Midwest Wins—on Common
One underlying theme is unmistakable from the info: The Midwest is the one area that money flows, posting a imply rent-to-payment ratio of about 1.01—simply above break-even. The Northeast follows at roughly 0.89, the South at 0.78, and the West lags far behind at 0.61. Which means that in main western metros, the standard deal is almost 40% underwater on PITI—even earlier than upkeep and reserves are factored in.
For buyers, these regional demarcations clearly have main implications:
- Midwest: Buyers must drill down to look at submarkets, and typically particular streets, property varieties, and funding methods, to maximise sturdy, scalable money move from a usually favorable dataset.
- Northeast: With sturdy, populous, high-demand cities like New York, Boston, and Philadelphia, the trade-off is decrease ratios for tenant demand and tight provide, with most money move and steady appreciation.
- South: The map is uneven, with unglamorous, blue-collar cities corresponding to Memphis and Birmingham giving off robust money move. Conversely, extra upscale cities with fashionable companies, like Austin, Atlanta, Nashville, Tampa, and Houston, are too expensive—like California cities—to generate any money move from rents.
- West: It’s good for parking money and long-term appreciation, however money move, with leveraged debt, is a nonstarter.
Why Fee Beats Value: Underwriting in a Excessive-Value World
In 2026, a key shift in skilled underwriting has been lengthy overdue—as a result of rent-to-price ratios are not sufficient. Taxes and insurance coverage, as we’ve seen, usually represent a big chunk of an investor’s bills. By calculating month-to-month rent-to-payment ratios utilizing the total month-to-month PITI at 6.5%, a 30-year fastened charge, and a 20% down fee—together with city-level taxes and insurance coverage—the dataset captures the true publicity for buyers when charges and non-loan prices spike.
The affect is most dramatic when taxes and insurance coverage deviate wildly from nationwide norms. We already checked out Oklahoma Metropolis, the place insurance coverage is 40% of the fee. In Houston and Miami, excessive wind and flood dangers have pushed up annual premiums to a mean of $7,860 and $6,000, respectively. Conversely, in locations like Birmingham and Indianapolis, very low efficient tax charges and reasonable insurance coverage hold PITI in examine, permitting lease to soak up extra of the prices.
For a complicated investor, a correlation between your fee composition and your market choice is crucial if money move is your final objective. There’s extra to it, nevertheless. Wanting on the total image holistically, there must be an equilibrium between worth and non-mortgage-related prices.
Attempt to choose markets the place taxes and insurance coverage have scaled fairly with worth, leaving room for lease development to translate into money move. Equally, be cautious of markets the place coverage or local weather threat has inflated non-loan prices. In these situations, negotiating an ideal deal on worth might not rescue a weak rent-to-payment ratio profile.
Investor’s Lens: Utilizing the Rankings to Deploy Capital
Should you’re constructing or increasing a portfolio in 2026, this dataset presents a sensible funding roadmap however not a definitive information, as costs and prices usually range by neighborhood.
That mentioned, sure pointers are useful:
- Use high-ratio metros: Detroit, Cleveland, Memphis, Birmingham, Hartford, St. Louis, and their friends are main money flow-hunting grounds.
- Deal with mid-range metros: Many within the Northeast and inside South are balanced performs, the place money move exists, however you usually tend to discover a mixture of modest money move and appreciation.
- Method low-ratio metros corresponding to Austin and West Coast cities as specialty markets: These are locations the place short-term leases or money purchases are for long-term fairness appreciation and tax write-offs.
Closing Ideas
The optimistic observe right here is that even at 6.5% curiosity, excessive costs, and hovering taxes and insurance coverage in lots of markets, there are massive swathes of the U.S. the place money move—or at the very least breaking even—has not disappeared. Through the use of this rent-to-payment information, you have got a sensible software that’s not constructed on actual property agent or wholesaler hype or misdirection however on concrete numbers that even the enjoying area.
It’s first step—there are lots of extra to take—however at the very least you’re dealing with in the best route.
Editor’s Observe: Thanks for studying! As a particular supply for our readers, save $100 in your ticket to BPCON2026—BiggerPockets’ annual actual property investing convention—utilizing code MYRE100 at checkout.
