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’ll share the top states here below.
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: You need to be able to cover your property mortgage with your rent – and then some, to ensure a good cash flow.
- Rental demand: This is the increase or decrease in the state’s renters. Measuring this is difficult, so I recommend looking at job growth. An increase usually correlates with higher rental demand.
- Median household income: Studies show high-income earners are more likely to rent than buy because of the current housing market. Plus, investing in a state with a medium-high median household income means you can charge higher rent.
- Average property tax: This is one of the large expenses you’ll have as a real estate investor. If you buy in a low property tax area, you’ll make a better return on your investment.
- Rental rates: The average cost of rent helps you to set competitive rents for your properties. Investing in high-rent areas can mean you get a better ROI.
- Vacancy rates: This will show you the percentage of vacant properties in the state, helping you determine the housing demand.
- Rental property regulations: Every state has different ones, including rent pricing control, eviction laws, security deposit limits, and so on. But remember, fewer regulations don’t necessarily mean better. Sometimes, stricter rental property regulations can protect you as a landlord.
I personally use these steps to decide on my rental properties. Over the years, I’ve built a multiple six-figure portfolio with properties all over the US – and I’ve learned through a lot of trial and error what locations are worth investing in.
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
I recommend to my students that they invest in a state and city they are familiar with, but this list will help you narrow down your options.
The rankings below include information on the above factors from the following sources:
- Property listing prices
- Average rental rates
- Vacancy rates
- Property tax (tax on the value of the property)
- Cost of living index (cost of living indicates how affordable a state is; the baseline for the US is 100)
- Household income
- State rankings
- Population
- Job growth
1. Texas
The best state to buy a rental property is Texas. The job growth is one of the highest in the country, making it an attractive place for young professionals and students to settle.
Median property list price: $336,400
Average rental rate: $1,318
Vacancy rate: 10.59%
Average property tax: 1.90%
Median yearly household income: $66,963
Cost of living index: 93.00
U.S. News and World Report Ranking: #35
Population: 30,503,301
Job growth: 4.6%
2. Colorado
Colorado has plenty of opportunities for real estate investors. The low property tax and high rents give you a better return. Denver, in particular, has been a popular place for millennial professionals to relocate.
Median property list price: $586,100
Average rental rate: $1,635
Vacancy rate: 9.50%
Average property tax: 0.52%
Median yearly household income: $82,254
Cost of living index: 105.50
U.S. News and World Report Ranking: #15
Population: 5,877,610
Job growth: 1.6%
3. South Carolina
South Carolina has low property prices and a wide range of renters. Columbia is a famous college town for student housing opportunities. If you want to rent to families, Charleston is a great choice. Plus, the property tax is one of the lowest in the country.
Median property list price: $360,800
Average rental rate: $1,319
Vacancy rate: 15.80%
Average property tax: 0.58%
Median yearly household income: $59,318
Cost of living index: 96.50
U.S. News and World Report Ranking: #42
Population: 5,373,555
Job growth: 2.4%
4. Idaho
Ranking as the third best state to live in the US, Idaho is one of the most popular places for Americans to relocate. That means a booming economy and more rentals. The property tax is very low as well.
Median property list price: $539,000
Average rental rate: $1,170
Vacancy rate: 11.74%
Average property tax: 0.63%
Median yearly household income: $66,474
Cost of living index: 106.10
U.S. News and World Report Ranking: #3
Population: 1,964,726
Job growth: 3%
5. Indiana
Indiana has some of the lowest property prices in the country, making it a great place to invest in real estate. With an average property tax rate and steady population growth, it’s an up-and-coming state with plenty of real estate opportunities.
Median property list price: $242,500
Average rental rate: $1,111
Vacancy rate: 10.15%
Average property tax: 0.83%
Median yearly household income: $62,743
Cost of living index: 91.50
U.S. News and World Report Ranking: #29
Population: 6,862,199
Job growth: 2.3%
6. Delaware
Delaware has the perfect combination of high household income and low property tax – ideal for investing in long-term rental properties. The average rent is also on the higher end in our comparison.
Median property list price: $375,000
Average rental rate: $1,621
Vacancy rate: 13.74%
Average property tax: 0.62%
Median yearly household income: $71,091
Cost of living index: 102.60
U.S. News and World Report Ranking: #18
Population: 1,031,890
Job growth: 2.3%
7. Tennessee
Low property taxes cancel out the higher house prices in Tennessee. Hotspots like Nashville, Knoxville, and Memphis are great places to check out if you want to buy your first rental property.
Median property list price: $418,900
Average rental rate: $1,180
Vacancy rate: 11.85%
Average property tax: 0.65%
Median yearly household income: $59,695
Cost of living index: 90.40
U.S. News and World Report Ranking: #24
Population: 7,126,489
Job growth: 3.2%
8. Florida
Florida has a growing population and a strong economy. The state also offers several tax incentives for business owners.
Median property list price: $405,000
Average rental rate: $1,687
Vacancy rate: 17.13%
Average property tax: 0.89%
Median yearly household income: $63,062
Cost of living index: 102.30
U.S. News and World Report Ranking: #10
Population: 22,610,726
Job growth: 4.6%
9. Arizona
The real estate market in Arizona is strong because of the steady job growth and rock-bottom property taxes. You’ll especially want to check out Phoenix, Tucson, and Scottsdale.
Median property list price: $435,300
Average rental rate: $1,491
Vacancy rate: 11.09%
Average property tax: 0.60%
Median yearly household income: $69,056
Cost of living index: 107.20
U.S. News and World Report Ranking: #37
Population: 7,431,344
Job growth: 2.6%
10. Georgia
With a balance of high rents and reasonable property prices, the real estate industry in Georgia is a great choice for newbies. Georgia also has a wide variety of real estate opportunities, from student housing to luxury penthouses.
Median property list price: $389,500
Average rental rate: $1,365
Vacancy rate: 11.79%
Average property tax: 0.95%
Median yearly household income: $66,559
Cost of living index: 91.00
U.S. News and World Report Ranking: #21
Population: 11,029,227
Job growth: 2.8%
What are the 5 worst states for landlords in 2024?
Now that you know the best states to buy rental property, let’s talk about a few states to avoid.
1. Illinois
Illinois has low property prices and steady job growth. So, why isn’t it a good choice for real estate investors? The property tax. At 2.29%, it’s the second highest in the US, which can make financing your first property much more expensive.
Median property list price: $266,800
Average rental rate: $1,303
Vacancy rate: 9.12%
Average property tax: 2.29%
Median yearly household income: $72,205
Cost of living index: 90.80
U.S. News and World Report Ranking: #36
Population: 12,549,689
Job growth: 2.4%
2. Mississippi
With the lowest median household income in the country, Mississippi isn’t the best place to get a good return on your investment. Rents are low to be in line with the cost of living, and the economy isn’t as strong as the rest of the country.
Median property list price: $232,800
Average rental rate: $1,102
Vacancy rate: 16.26%
Average property tax: 0.81%
Median yearly household income: $48,716
Cost of living index: 85.30
U.S. News and World Report Ranking: #48
Population: 2,939,690
Job growth: 1.5%
3. Louisiana
Though the property taxes are low, Louisiana has had a slow job market for a while, leading to high vacancy rates. Plus, it’s ranked as the worst state to live in.
Median property list price: $243,300
Average rental rate: $1,052
Vacancy rate: 16.21%
Average property tax: 0.62%
Median yearly household income: $52,087
Cost of living index: 92.00
U.S. News and World Report Ranking: #50
Population: 4,573,749
Job growth: 1.9%
4. West Virginia
West Virginia has the lowest rental rates, making it harder for real estate investors to get a good ROI. Low rent demand and slow job growth also explain the high vacancy rate.
Median property list price: $284,000
Average rental rate: $992
Vacancy rate: 18.12%
Average property tax: 0.59%
Median yearly household income: $51,248
Cost of living index: 90.30
U.S. News and World Report Ranking: #46
Population: 1,770,071
Job growth: 0.4%
5. Hawaii
The price is the main reason Hawaii is a bad place to buy for new real estate investors. It’s one of the most expensive states in the country for house values. But, if you have the capital, the property taxes are low, and demand is high, so it might be worth checking out.
Median property list price: $714,100
Average rental rate: $2,418
Vacancy rate: 13.83%
Average property tax: 0.29%
Median yearly household income: $84,857
Cost of living index: 179.00
U.S. News and World Report Ranking: #31
Population: 1,435,138
Job growth: 4%
What rental properties are the most profitable?
Location is just one piece of building a real estate strategy. What are the most profitable rental property types?
I recommend these four:
- Residential: Residential housing tends to have steady appreciation, making it a good long-term investment.
- Multi-family: These properties have several units you can rent to different people, maximizing your return. However, multi-family can be more complicated to manage on your own.
- Commercial: Offices, retail, and industrial units are all examples of commercial real estate. Renting to businesses can be lucrative, but you’ll also have higher upfront costs.
- Student housing: Renting to college students helped me build a seven-figure portfolio and quit my day job. Plus, it’s a growing market worth over $11 billion.
Want to learn more about my journey to financial freedom with student housing? Watch this:
Next steps
Now you know the best states to buy rental property in the US. But if you want to start a thriving real estate investment business and quit your 9-5, there is much more to learn.
Want more guidance?
I started investing in real estate as a total newbie, and now I live a life of financial freedom with a million-dollar portfolio.
If you want help investing in your first property, find out more about my private coaching here.
Read more:
The Average Cash Flow for Rental Properties
