Want to know the best states to buy rental property?
This is the article for you. By focusing on the best places in the country (and avoiding the worst), you’re more likely to succeed as a real estate investor.
I’ve personally built a portfolio that generates multiple six-figures with properties all over the US – and I’ve learned through a lot of trial and error what locations are worth investing in.
I’ll share the top states here below.
Key takeaways
- The best rental markets: States like Texas, North Carolina, and Indiana combine affordable entry points with strong job growth, landlord-friendly laws, and long-term rental demand—making them ideal for both cash flow and appreciation.
- The worst states for landlords: High property taxes, tenant-friendly laws, and weak rental demand make places like Illinois, Mississippi, and Hawaii difficult (and expensive) for new investors to succeed in.
- The smartest investors don’t guess: From rent-to-price ratios and vacancy rates to property taxes, job growth, and migration trends, the best rental markets consistently perform well across multiple data points. Use these metrics as your compass to avoid risky markets.
The best states to buy rental property in 2025
1. Texas
3. Tennessee
4. Indiana
5. Florida
6. Missouri
7. Kentucky
9. Ohio
10. Colorado
Let’s start with understanding what metrics you need to be aware of when analyzing the best places for rental properties.
What factors make a state good for real estate investment?
How do you pick the right state to start real estate investing?
Here are the factors to consider:
- Average property values
- Understand this number to ensure rent covers the mortgage and generates cash flow.
- Look for rent-to-property price ratios of 0.8%–1% or higher.
- Average rental rates
- Determines how much income you can generate.
- Look for areas where rent is high relative to property prices, but still affordable to tenants.
- Rental demand
- Instead of trying to track renter growth directly, look at:
- Job growth: Signals strong economic activity.
- Population growth: Indicates long-term housing demand.
- Median household income
- Higher-income areas support higher rents and more reliable tenants.
- In expensive markets, high-income earners are more likely to rent than buy.
- Average property tax
- One of your largest recurring expenses.
- Lower-tax states often mean better cash flow.
- Compare county-level rates, not just state averages.
- Vacancy rates
- Indicates rental supply versus demand.
- A healthy range is 4%–6%.
- High vacancy indicates there is oversupply or a weak tenant base.
- Rental property regulations
- Vary by state and municipality:
- Rent control laws
- Eviction processes
- Security deposit limits
- Lease enforcement rules
- Fewer rules aren’t always better—some regulation protects you as a landlord.
- Landlord-tenant legal environment
- Understand the ease and cost of:
- Evictions
- Court resolution
- Enforcing lease terms
- Landlord-friendly states (such as Texas and Indiana) offer more protection and predictability.
- Climate and insurance risk
- Natural disaster exposure means rising premiums and coverage limits.
- Check:
- FEMA flood maps
- Wildfire/hurricane risk zones
- Local insurance costs
- High insurance = reduced ROI. Prioritize lower-risk regions when possible.
- Migration trends
- Identify states with strong inbound migration (such as Texas, Florida, and Arizona).
- Use:
- U-Haul Growth Index
- IRS migration reports
- USPS change-of-address data
- More people = more tenants + long-term appreciation.
- Mid-tier market potential
- Don’t overlook smaller cities like Louisville, Huntsville, or Tulsa.
- Benefits:
- Lower property prices
- Higher cap rates
- Out-of-state investment logistics
- If buying remotely, evaluate:
- Quality local property managers
- Reliable contractor availability
- Travel costs and ease of access
- LLC and legal requirements for out-of-state owners
I also look for locations with universities and hospitals in the area because I focus on renting by the room to students and healthcare professionals.
In this video, I share more of my tips on how to choose a location for your first rental property:
Next, let’s look at the best states to buy rental property.
Best states to buy a rental property for long-term investment
If you’re looking to invest in rental property for long-term returns, choosing the right state is critical.
I always recommend that my students consider investing in a city or state they already know well. But this guide will help you narrow down your options based on key real estate investment metrics.
These state rankings are based on up-to-date data from trusted sources and include the most important factors for real estate investors:
- Property listing prices
- Average rental rates
- Vacancy rates
- Property tax (tax on the value of the property)
- Household income (one-person household)
- Cost of living index (cost of living indicates how affordable a state is; the baseline for the US is 100)
- Population
- Job growth
- State rankings (ranking of how well states perform for their citizens)
We’ll also take a look at how landlord-friendly the states are, if climate change poses a big risk, and the states’ migration trends.
By analyzing these metrics together, you’ll be better equipped to choose the best state for your rental property investment goals—whether you’re looking for cash flow, appreciation, or long-term passive income.
1. Texas – The best state to buy rental property
Texas consistently ranks as one of the top states to invest in rental property. With one of the highest job growth rates in the U.S., continued inbound migration, and landlord-friendly laws, Texas attracts a steady stream of renters—from young professionals to students and families. The drawback? There are areas that are prone to climate and insurance risks. Here’s how Texas stacks up across the most important real estate investment metrics:- Median property listing price: $339,500
- Average monthly rent: $1,318
- Vacancy rate: 9.2%
- Average property tax rate: 1.79%
- Median household income: $41,661
- Cost of living index: 92.7
- Population: 31,290,831
- Job growth rate: 4.6%
- Landlord-friendly? Yes (favorable eviction laws and no rent control)
- Climate & insurance risk: High (especially in coastal and storm-prone areas)
- Migration trend: Strong inbound migration from California, New York, and other high-cost states
- U.S. News & World report ranking: #29
2. North Carolina
North Carolina has fast-growing cities like Raleigh, Charlotte, and Durham and is attracting new residents thanks to its strong job market, moderate housing prices, and high quality of life. The state offers a solid mix of cash flow and appreciation potential, especially in mid-sized metros. Landlord-tenant laws are more balanced than in Texas or Indiana, but they are still favorable for long-term investors. However, some cities (like Asheville) have more tenant-friendly laws. Here’s how North Carolina performs across key real estate investment metrics:- Median property listing price: $380,300
- Average monthly rent: $1,272
- Vacancy rate: 6.4%
- Average property tax rate: 0.74%
- Median household income: $38,073
- Cost of living index: 97.8
- Population: 11,046,024
- Job growth rate: 3%
- Landlord-friendly? Somewhat (balanced laws; improving for landlords in most areas)
- Climate & insurance risk: Low to moderate (some flood zones along the coast)
- Migration trend: Strong inbound migration from Northeastern states and California
- U.S. News & World Report ranking: #13
3. Tennessee
Tennessee has no state income tax, landlord-friendly laws, and affordable housing compared to national averages. That’s why cities like Nashville, Chattanooga, and Memphis are growing in demand. Tennessee is ideal for investors who want strong tenant demand, a friendly legal environment, and solid long-term growth potential. Here’s how Tennessee performs across key real estate investment metrics:- Median property listing price: $389,100
- Average monthly rent: $1,180
- Vacancy rate: 8.2%
- Average property tax rate: 0.58%
- Median household income: $36,264
- Cost of living index: 90.5
- Population: 7,227,750
- Job growth rate: 3.2%
- Landlord-friendly? Yes (fast eviction process, no rent control)
- Climate & insurance risk: Moderate (occasional storms and tornado zones)
- Migration trend: Strong inbound migration from nearby states and California
- U.S. News & World Report ranking: #32
4. Indiana
Indiana is one of the most affordable and investor-friendly states in the country. With some of the lowest property prices, moderate taxes, and steady rental demand, it’s an excellent market. Especially cities like Indianapolis, Fort Wayne, and South Bend are growing in demand. While appreciation is more modest compared to Sunbelt states, Indiana offers long-term stability. Here’s how Indiana performs across key real estate investment metrics:- Median property listing price: $258,900
- Average monthly rent: $1,111
- Vacancy rate: 9.9%
- Average property tax rate: 0.76%
- Median household income: $36,674
- Cost of living index: 90.5
- Population: 6,924,275
- Job growth rate: 2.3%
- Landlord-friendly? Yes (quick evictions, no rent control, favorable legal system)
- Climate & insurance risk: Low (few natural disasters)
- Migration trend: Modest inbound growth from higher-cost Midwest states
- U.S. News & World Report ranking: #33
5. Florida
Florida offers benefits like strong inbound migration, especially from high-tax states like New York and California, no state income tax, pro-business policies, and a large, diverse population. However, there are real trade-offs: high insurance premiums and hurricane risk can significantly impact your bottom line, especially in coastal markets. Here’s how Florida performs across key real estate investment metrics:- Median property listing price: $433,600
- Average monthly rent: $1,687
- Vacancy rate: 10%
- Average property tax rate: 0.83%
- Median household income: $39,438
- Cost of living index: 102.8
- Population: 23,372,215
- Job growth rate: 4.6% (among the highest in the country)
- Landlord-friendly? Yes (no rent control, quick eviction process)
- Climate & insurance risk: High (especially in coastal and hurricane-prone areas)
- Migration trend: Very strong inbound migration
- U.S. News & World Report ranking: #6
6. Missouri
Missouri is one of the most affordable states right now. Cities like St. Louis and Kansas City offer low property prices, solid rental demand, and favorable rent-to-price ratios.
The state’s landlord-friendly legal environment makes it easier to manage properties and resolve tenant issues quickly.
However, economic growth is slower outside of major cities.
Here’s how Missouri performs across key real estate investment metrics:
- Median property listing price: $263,300
- Average monthly rent: $1,050
- Vacancy rate: 8.7%
- Average property tax rate: 0.92%
- Median household income: $36,283
- Cost of living index: 88.7
- Population: 6,245,466
- Job growth rate: 2%
- Landlord-friendly? Yes (strong eviction rights, no rent control)
- Climate & insurance risk: Low to moderate (tornado zones, but low insurance costs)
- Migration trend: Modest, with steady demand in metro areas
- U.S. News & World Report ranking: #31
7. Kentucky
In Kentucky, cities like Louisville offer low property prices, steady rental demand, and surprisingly strong cash flow.
The state also benefits from low climate risk, making it a safer long-term bet compared to hurricane- or wildfire-prone regions.
Kentucky doesn’t see the explosive population growth of Sunbelt states, but it offers affordability and stability.
Here’s how Kentucky performs across key real estate investment metrics:
- Median property listing price: $270,200
- Average monthly rent: $999
- Vacancy rate: 6.9%
- Average property tax rate: 0.83%
- Median household income: $31,483
- Cost of living index: 93
- Population: 4,588,372
- Job growth rate: 2.2%
- Landlord-friendly? Yes (streamlined eviction process, no rent control)
- Climate & insurance risk: Low (minimal natural disasters)
- Migration trend: Modest but steady
- U.S. News & World Report ranking: #39
8. South Carolina
South Carolina offers investors a blend of solid appreciation in coastal cities and diverse rental audiences.
Markets like Charleston and Greenville are benefiting from strong influxes of remote workers and retirees, while college towns such as Columbia deliver reliable student–housing demand.
The state also has one the lowest property tax rates nationally and favorable tax treatment. However, flood-zone insurance costs can be steep.
Here’s how South Carolina performs across key real estate investment metrics:
- Median property listing price: $403,600
- Average monthly rent: $1,319
- Vacancy rate: 10.6%
- Average property tax rate: 0.54%
- Median household income: $36,564
- Cost of living index: 95.9
- Population: 5,478,831
- Job growth rate: 2.4%
- Landlord-friendly? Yes (no statewide rent control; efficient eviction processes)
- Climate & insurance risk: High in flood-prone and coastal areas
- Migration trend: Steady inbound from Northeast and Midwest retirees
- U.S. News & World Report ranking: #13
9. Ohio
Ohio remains one of the most accessible states for new investors looking to build a rental portfolio. I’ve personally invested in several properties in the state.
There is strong rental demand in cities like Columbus, Cleveland, and Cincinnati and Ohio offers low property prices, a relatively low cost of living, and high gross rental yields.
Ohio’s consistent cash flow, landlord-friendly laws, and low entry costs make it an ideal state for those who want a good monthly income.
That said, some areas are still recovering from economic stagnation.
Here’s how Ohio performs across key real estate investment metrics:
- Median property listing price: $248,600
- Average monthly rent: $1,073
- Vacancy rate: 5.8%
- Average property tax rate: 1.43%
- Median household income: $36,615
- Cost of living index: 94.2
- Population: 11,883,304
- Job growth rate: 1.4%
- Landlord-friendly? Generally yes (strong lease enforcement, quick evictions in most areas)
- Climate & insurance risk: Low (few natural disasters)
- Migration trend: Modest, with steady internal demand
- U.S. News & World Report ranking: #38
10. Colorado
In Colorado, the Denver metro area continues to attract millennial professionals and remote workers. And with landlord-friendly policies, low property taxes, and relatively high rents, investors can achieve solid returns.
That said, entry prices and cost of living are among the highest on this list and it might not be the best state for upfront cash flow.
Here’s how Colorado performs across key real estate investment metrics:
- Median property listing price: $640,000
- Average monthly rent: $1,635
- Vacancy rate: 4.5%
- Average property tax rate: 0.50%
- Median household income: $49,447
- Cost of living index: 102
- Population: 5,957,493
- Job growth rate: 1.6%
- Landlord-friendly? Yes (favorable eviction process, no statewide rent control)
- Climate & insurance risk: Low to moderate (wildfire risk in some areas)
- Migration trend: Strong inbound from California and Texas
- U.S. News & World Report ranking: #11
Honorable mentions
- Idaho (Boise): High appreciation, but low yields and higher entry point
- Georgia (Atlanta): Growing demand and landlord-friendly, but rising prices
- Alabama (Huntsville, Birmingham): Good yields and landlord laws, but less population growth
- Arizona (Phoenix): Migration and appreciation strong, but heat + insurance risks are rising
What are the 5 worst states for landlords in 2025?
Now that we’ve covered the best places to buy rental property, let’s look at the states landlords may want to avoid—especially if you’re a new investor. These markets tend to have high taxes, low rental returns, high vacancies, or economic challenges that can make profitability much harder to achieve.
1. Illinois
Illinois may have low home prices and a solid job market, but it’s widely considered one of the worst states for landlords, mainly due to property taxes.
At 2.18%, Illinois has one of the highest property tax rate in the U.S., which can significantly reduce your cash flow, especially in lower-priced markets like Chicago’s suburbs or Rockford.
Here’s how Illinois performs on key investment metrics:
- Median property listing price: $285,600
- Average monthly rent: $1,303
- Vacancy rate: 6.5%
- Average property tax rate: 2.18%
- Median household income: $41,888
- Cost of living index: 94.4
- Population: 12,710,158
- Job growth rate: 2.4%
- U.S. News & World Report ranking: #36
2. Mississippi
Mississippi ranks at the bottom for real estate investment due to low rental income, sluggish economic growth, and the lowest median household income in the U.S.
Housing is cheap, but rents are proportionally low and vacancy rates are among the highest. In other words, your property may sit empty more often than not.
Key investment data for Mississippi:
- Median property listing price: $255,100
- Average monthly rent: $1,102
- Vacancy rate: 7.6%
- Average property tax rate: 0.77%
- Median household income: $27,205
- Cost of living index: 87.9
- Population: 2,943,045
- Job growth rate: 1.5%
- U.S. News & World Report ranking: #48
3. Louisiana
Louisiana offers low property taxes and affordable homes, but investors should be cautious.
The state has consistently high vacancy rates and limited job growth, especially outside of New Orleans and Baton Rouge.
Louisiana’s investor profile:
- Median property listing price: $253,200
- Average monthly rent: $1,052
- Vacancy rate: 9.4%
- Average property tax rate: 0.59%
- Median household income: $29,921
- Cost of living index: 92.2
- Population: 4,597,740
- Job growth rate: 1.9%
- U.S. News & World Report ranking: #50
4. West Virginia
West Virginia ranks as one of the least favorable states for real estate investing due to its extremely low rents, limited economic growth, and high vacancy rates.
Even with low property prices, ROI is hard to achieve in a state where demand is weak and job growth is virtually flat.
Here’s the data on West Virginia:
- Median property listing price: $258,800
- Average monthly rent: $992
- Vacancy rate: 9.8%
- Average property tax rate: 0.57%
- Median household income: $29,140
- Cost of living index: 84.1
- Population: 1,769,979
- Job growth rate: 0.4% (lowest in the U.S.)
- U.S. News & World Report ranking: #46
5. Hawaii
Hawaii has one of the highest rental rates and lowest property taxes. But overall, this is a difficult market for most landlords.
With a median property price of over $900,000, Hawaii is simply out of reach for many investors.
Key metrics for Hawaii:
- Median property listing price: $975,500
- Average monthly rent: $2,418
- Vacancy rate: 7.4%
- Average property tax rate: 0.27%
- Median household income: $44,402
- Cost of living index: 186.9
- Population: 1,446,146
- Job growth rate: 4%
- U.S. News & World Report ranking: #28
What rental properties are the most profitable?
Look, choosing the right state is important, but it’s only half the equation. The type of rental property you invest in matters just as much (if not more) when you’re trying to build serious cash flow.
Here are four of the most profitable types of rental properties I recommend, especially if you’re just getting started:
- Residential single-family rentals: Single-family homes tend to appreciate steadily over time, are easy to finance, and attract long-term tenants like families and professionals. They’re also one of the easiest types of properties to manage—especially if you’re investing out of state.
- Multi-family properties: Think duplexes, triplexes, or small apartment buildings. You get multiple income streams from one property, which means you’re maximizing ROI. The only downside? More tenants = more management. But if you’re open to hiring a property manager or learning the ropes, this can be a solid path to scaling.
- Commercial rentals: Offices, retail, and industrial spaces can deliver high returns—but come with higher upfront costs and sometimes longer vacancies. Commercial investing isn’t beginner-friendly, but it can pay off big if you’re playing the long game and want to diversify your portfolio.
- Student housing (my favorite): Student rentals are part of an $11+ billion industry and growing. This is the strategy that helped me build a 7-figure portfolio and quit my job. And the benefits are clear. With the rent-by-the-room model, you get higher cash flow and areas close to colleges tend to have a steady, high rental demand.
If you want to see how I did it step by step, check out this breakdown of my student housing strategy:
Investing in another state — Is it worth it?
I started out investing in my home state, California. But over time, I started investing out of state. And today, some of the best deals I’ve ever done were in other states, including states like Ohio and Florida.
But like anything in real estate, there are trade-offs. Let’s break it down:
Benefits of investing out of state
If you live in a high-cost area (like I do in California), investing out of state can unlock way more opportunities:
- Better cash flow: You’ll often find higher rent-to-price ratios in Midwest or Southern markets.
- Diversification: You’re not tied to just one economy, city, or tenant pool.
- Strategic tax advantages: States like Texas and Florida have no state income tax, which can seriously boost your returns.
Challenges of investing out of state
I’m not going to sugarcoat it—investing remotely takes more planning. Here’s what to keep in mind:
- Tenant issues: You can’t just drive over if something breaks or a tenant stops paying.
- Local laws: Every state and city has different rental regulations.
- Travel and emergencies: If your property needs immediate repairs, you’ll need a system in place to handle it fast.
How to make remote investing work
This is where systems and partnerships come in. Here’s what’s worked for me:
- Build a local team: Find a solid real estate agent, contractor, and handyman you can trust.
- Use tech tools: I use tools like Google Drive and Zoom to keep everything running smoothly.
- Do site visits (at least once): Before I buy, I always fly in to walk the property and meet the team in person.
FAQs about the best states to buy rental property
What is the best state to own a rental property in?
Texas is often considered the best state to own rental property thanks to its strong job growth, no state income tax, landlord-friendly laws, and high rental demand in cities like Austin, Dallas, and Houston.
Which state has the highest real estate ROI?
Indiana consistently ranks as one of the top states for ROI due to low property prices, high rent-to-price ratios, and low property taxes, making it ideal for cash flow-focused investors.
What are the best states to buy rental property for taxes?
The best tax-friendly states for rental property investors include Florida, Texas, and Tennessee, all of which have no state income tax and relatively low property tax rates.
What are the best cities to buy rental property?
Top cities for rental property investing in 2025 include:
- Austin, TX: Tech-driven growth and high demand
- Raleigh, NC: Strong appreciation and population growth
- Louisville, KY: High cash flow and low entry costs
- Indianapolis, IN: Excellent ROI and stable demand
What is the 2% rule for rental investments?
The 2% rule says a rental property is a good deal if the monthly rent is at least 2% of the purchase price. Example: A $100,000 property should rent for $2,000/month to meet the 2% rule. This rule helps screen for high-cash-flow properties, but it’s harder to meet in today’s market.
Get started right now!
Now you know the best states to invest in rental property…but location is just the beginning.
If you want to go from researching deals on your lunch break to owning cash-flowing properties that cover your bills (and then some), you need more than just data. You need a roadmap.
I started out just like you, working a 9-5, no real estate background, no family money.
Fast forward a few years, and I’ve built a seven-figure rental portfolio that runs mostly on autopilot… and gave me the freedom to walk away from my day job for good.
If you’re ready to take action and want step-by-step guidance to buy your first property with confidence, check out my private coaching program:
👉 Click here to learn more and apply.
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