The Rise of Secondary Markets: Where to Invest Beyond Major Metros

For decades, real estate investors have focused on major metropolitan areas like New York, Los Angeles, and San Francisco. These cities have historically been seen as prime locations for property appreciation, job growth, and rental demand. However, as affordability declines, investors are increasingly turning their attention to secondary markets—smaller, rapidly growing cities that offer strong investment potential without the high price tags.

Secondary markets are becoming the new frontier of real estate investing, thanks to their affordable home prices, high rental yields, and booming economies. With the rise of remote work, corporate relocations, and infrastructure improvements, these cities are quickly transforming into some of the best places for long-term real estate investment.

This guide explores why secondary markets are surging in popularity, what makes them ideal for investors, and which markets are expected to perform well in 2025 and beyond.

Why Investors Are Moving Beyond Major Metros

As home prices in primary markets reach record highs, investors are facing tighter margins, lower returns, and increased competition. Here’s why more investors are shifting their focus to secondary markets:

Affordability & Lower Barriers to Entry

In cities like San Francisco, New York, and Los Angeles, real estate has become almost unattainable for many investors, with median home prices exceeding $900,000 to $1 million.

In contrast, secondary markets offer:

• Lower home prices – Investors can buy in for as little as $200,000 to $400,000 instead of $800,000+ in major metros.
• Lower upfront capital requirements – Smaller down payments mean investors can spread their capital across multiple properties.
• Higher potential for cash flow – Lower purchase prices allow rents to cover mortgage payments more easily, creating positive cash flow from day one.

This affordability makes secondary markets particularly attractive for first-time investors and seasoned investors looking to scale faster.

Higher Rental Yields & Cash Flow Potential

High property values in major metros often mean rental income struggles to cover expenses, leading to low cap rates of 3-4%. In contrast, many secondary markets offer cap rates between 6-10%, making them far more attractive for rental investors.

For example:

• Memphis, TN consistently sees rental yields above 8-10%, far outperforming coastal cities.
• Cleveland, OH has an average cap rate of 9.2%, while New York City sits at 4% or less.

For investors focused on passive income and cash flow, secondary markets present far stronger investment opportunities.

Population Growth & Migration Trends

One of the biggest drivers of secondary market growth is migration away from expensive cities into more affordable, business-friendly locations.

Current trends show that:

• The South and Midwest are experiencing the fastest population growth.
• Florida, Texas, Tennessee, and North Carolina are seeing the highest inbound migration due to lower taxes, affordability, and job growth.
• Tech companies, financial institutions, and manufacturers are moving operations to cheaper, tax-friendly states, creating demand for housing.

Cities like Austin, Raleigh, and Phoenix have exploded in recent years, but now investors are looking beyond these already-booming areas to find the next wave of high-growth secondary markets.

Top Secondary Markets for Real Estate Investment

With so many secondary markets showing strong potential, let’s explore a few that are leading the way in affordability, population growth, and rental demand.

1. Columbus, OH – The Rising Star of the Midwest

Columbus has quietly emerged as one of the most attractive investment markets in the U.S. Thanks to steady job growth, affordable home prices, and a booming rental market, this Midwestern city is becoming a real estate hotspot.

• Median Home Price: $290,000
• Rent Growth (YoY): 7.2%
• Vacancy Rate: 4.3%

Columbus benefits from a diversified economy, with strong tech, finance, and healthcare sectors. Companies like JPMorgan Chase, Nationwide Insurance, and Intel have expanded operations in the area, bringing thousands of new jobs. The city’s affordability compared to other Midwest hubs like Chicago or Minneapolis makes it particularly attractive for investors looking for stable long-term appreciation and cash flow.

2. San Antonio, TX – The More Affordable Alternative to Austin

San Antonio has long been overshadowed by its high-profile neighbor, Austin. But with Austin’s home prices skyrocketing, investors are realizing that San Antonio offers similar job growth, population expansion, and demand—but at a fraction of the cost.

• Median Home Price: $320,000
• Rent Growth (YoY): 6.8%
• Vacancy Rate: 5.1%

The city is experiencing rapid population growth, driven by corporate relocations, military employment, and expanding healthcare sectors. With significantly lower housing costs than Dallas, Houston, and Austin, San Antonio presents a prime opportunity for investors looking for high rental demand and long-term appreciation.

3. Huntsville, AL – A Booming Aerospace & Tech Hub

Huntsville is quickly becoming one of the most exciting secondary markets in the country. Often called “Rocket City” due to its deep ties to the aerospace and defense industries, Huntsville is attracting high-income professionals and growing rental demand.

• Median Home Price: $315,000
• Rent Growth (YoY): 8.4%
• Vacancy Rate: 3.9%

Thanks to investments from NASA, Boeing, and the Department of Defense, Huntsville has one of the fastest-growing job markets in the South. This has fueled demand for both short-term and long-term rentals, making it a top pick for buy-and-hold investors.

4. Chattanooga, TN – The Outdoor & Tech Capital of Tennessee

Chattanooga is best known for its scenic mountain views and outdoor lifestyle, but it’s also an emerging tech hub with a rapidly expanding economy.

• Median Home Price: $285,000
• Rent Growth (YoY): 7.1%
• Vacancy Rate: 4.0%

Chattanooga has positioned itself as a tech-friendly city, offering one of the fastest internet speeds in the country and attracting remote workers and startups. The city’s affordability and high quality of life are driving new residents and rental demand, making it an excellent market for investors.

5. Boise, ID – A Small City with Big Growth Potential

Boise has undergone an economic transformation in recent years, shifting from a quiet city to a growing business and tech center.

• Median Home Price: $410,000
• Rent Growth (YoY): 9.5%
• Vacancy Rate: 3.7%

Thanks to an influx of residents from California, Oregon, and Washington, Boise’s housing market has boomed. It remains one of the top-performing real estate markets in terms of appreciation and rental demand.

Final Thoughts: Why Secondary Markets Are the Future of Real Estate Investing

As affordability continues to decline in major metros, secondary markets offer investors better cash flow, stronger appreciation potential, and a lower cost of entry. These cities are attracting businesses, remote workers, and long-term residents, making them prime locations for rental property investments.

For investors looking to finance rental properties in high-growth secondary markets, American Heritage Lending specializes in DSCR loans, fix and flip or fix to rent loans, and ground-up construction financing to help scale real estate investments.

Call today or get prequalified to start investing in secondary markets today!