Over the past several years, real estate rental properties have been the prime target for many real estate investors. Years of historically low interest rates and low-cost financing have produced strong investment returns. Although demand for rentals remains high in many areas, some investors could face problems if they buy in markets with low demand. To help avoid some of the rental markets with the lowest demand, here is a look at some of the hottest rental markets in the country.

Millennial Demand Drives Rental Markets

Millennials, whose ages range from 20 to 34, typically drive rental markets. Many in this generation typically make good money but are not ready financially to buy their own homes. Some Millennials prefer to rent in the current market as home prices and interest rates continue to rise. The thinking among many in this generation is the cost to rent is much lower than the overall cost of buying a house. Therefore, many investors looking for rental properties tend to target markets with a heavy population of Millennials.

Hottest Rental Markets

Orlando, Florida, the home of Disneyworld, tops the list as the hottest rental market in the country, according to research released by Roofstock, an online marketplace that lists single-family homes for rent. Second on the list is Raleigh, North Carolina, which is home to three of the top universities in the country within a few miles of each other. Real estate investors often consider universities with a heavy population of Millennials as a hotspot for buying rental properties. Third on the list is Austin, Texas, which is a popular location for many big tech companies to set up shop.

Local Economies and the Rental Market

The strength of local economies typically drives demand for rentals. Although the U.S. economy overall is strong, many of the new jobs driving employment are not well-paying. With rising home prices and interest rates, many residents of local communities cannot afford to buy a home. Therefore, they are forced to rent and real estate rental investors recognize this trend.

The real estate rental market in the U.S. is red hot. Home prices are on the move, especially for single-family homes. This rising trend forces many Americans to rent, and that signals profits for investors who recognize the income potential from rental properties.