According to a recent third quarter 2011 update from real estate forecaster Local Market Monitor, Las Vegas is the best market for investment in rental properties. The rest of the top five in descending order were Detroit, Michigan, Orlando, Florida, Warren, Michigan, and Ft. Lauderdale, Florida. Several cities each from California and New York were in the top 20.

"A sharper than expected fall in recent home prices, which are down almost 5 percent in the last year, has led us to lower expectations for future prices," Local Market Monitor president and founder Ingo Winzer said regarding the firm's overall rental market outlook.

He noted steady job growth and the inflation rate as factors expected to boost future rents, resulting in an increase in the risk-return premium of investments in rental properties.

Winzer cautioned that the Las Vegas and Detroit markets were speculative, and that Dallas, Fort Worth and Atlanta are likely safer investments. He also pointed to Florida and Arizona as locations likely to see rents fueled by population growth in the future.