The 10 Best (and Worst) States to Buy Rental Property in 2026

Most guides ranking the best states to buy rental property in the US leave out the most important part: the “best” location depends entirely on your investing strategy. What works for short-term vacation rentals won’t necessarily work for multifamily or single-family properties.

I built this guide based on my personal favorite method: rent-by-the-room student housing. Why? Because it’s the highest cash-flowing strategy I’ve found for new real estate investors. It’s the exact strategy that helped me build a seven-figure portfolio and retire from my job as a pharmacist at just 31 years old.

In this guide, you’ll learn:

• The top 10 best states for high-cash-flow rental properties in 2026.

• The worst states to avoid (and why their numbers don’t make sense).

• How to apply the rent-by-the-room strategy to maximize your ROI in these markets.

Let’s dive in.

The best states to buy rental property in 2026 (based on data and my own experience)

I created this list based on my own portfolio, my students’ deals, and where I’d invest with current market data in mind. 

Now let’s go through the list state by state. Each state in this list is strong for many types of real estate investment strategies. They work exceptionally well for rent-by-the-room student housing.

For a detailed list of the best cities to invest in, read my guide on the best college towns to invest in. 

The best places to buy rental property in USA for long-term:

1. Texas

Median house sale price: $329,528 | Avg rent: $1,883/mo | Vacancy rate: ~9% | Avg property tax rate: ~1.68% effective | Migration rate: +391,243 residents in 2025, most of any state | Job growth: flat in 2025, forecast to pick up to 1.1% in 2026

Texas is a solid choice because it added more new residents than any other state in the country in 2025. When people are moving into a state faster than anywhere else, that’s the single biggest thing I look for in a state, and Texas has led the nation in raw population growth for three years running.

However, where in Texas you invest depends. A lot of people say Austin, but that’s not my top choice. Austin’s too expensive right now, so your mortgage payment eats your cash flow before you even get started. Appreciation is still strong there, because there are new jobs getting created constantly. 

But if you’re investing for cash flow, look at Houston instead.

Here’s why:

Median home prices in Houston are around $300K, and you can get a solid 1,500+ square foot house in that range. Rent runs around $800 a month, so the numbers work. Property tax is a little over 2%, which is the one drawback. 

And insurance runs higher because of hurricane risk. Houston’s been rebuilt a lot after storms wiped out older housing stock, which is actually why there’s so much new construction now.

If Houston’s inventory gets tight, San Antonio is worth a look too. People are getting priced out of Austin and moving to the smaller Texas cities, and that migration is a great sign for rental property investors. 

If you’re interested in learning more about Texas as a location, take a look at my guide on the best cities to invest in Texas. 

2. Ohio

Median sales price: $218,865 | Avg rent: $1,300/mo | Vacancy rate: 7.2% | Avg property tax rate: 1.59% effective | Migration rate: net domestic migration of +11,926 in 2025, a turnaround from a loss of over 32,000 in 2021 | Job growth: Ohio completed 311 projects worth $12.1B in capital investment in 2025, and the state earned a AAA credit rating for the first time in its history

This is where I own property myself. Ohio’s appeal is simple: the median home price is low, so your mortgage payment is low, so your cash flow can be higher. I’ve seen properties here cash flow $2,000 a month or more just because the entry price is so much lower than elsewhere.

A recent change is migration patterns. Over the last two decades, Ohio lost residents. But in 2025, that reversed and the state posted its highest number of new residents in 25 years. That’s a great signal for rental property investments in this state. 

There is a tradeoff: Ohio has older housing stock in a lot of markets, so expect more maintenance. Before you buy, find out if the seller already replaced things like the HVAC and the sewage line – and see if you can negotiate a lower price if they haven’t. Property taxes run higher than you’d expect for a low-cost state, so take that into consideration. 

For more on the best cities, check out my guide on where to invest in rental property in Ohio.

3. North Carolina

Median sales price: $337,813| Avg rent: $1,895/mo | Vacancy rate: 6.4% | Avg property tax rate: ~0.6% effective | Migration rate: #1 in the country for net domestic in-migration in 2025 | Job growth: The state economy is forecast to keep adding jobs in healthcare, professional services, and tech through 2026

This is one of those states “all real estate investors are talking about,” and for good reason. More people moved to North Carolina from other states in 2025 than moved to any other state in the country. 

I’d look into Charlotte in particular, specifically around UNC Charlotte for student housing investments. The houses are big, newer, and nice, which is exactly what works especially well for the rent-by-the-room strategy.

Rent runs around $700 per room, and you can usually get 7 bedrooms out of a house in that market. That’s $4,900 a month out of a single property. 

Charlotte’s median home price is higher than a market like Houston or Cleveland, around $397K, but when renting a property by the room, the numbers still work out. 

North Carolina’s property taxes also run low, around 0.6%, one of the lowest rates of any state on this list, which helps offset the higher purchase price.

4. Georgia

Median sales price: $319,330 statewide | Avg rent: $1,984/mo statewide | Vacancy rate: 6.6% | Avg property tax rate: 0.92% effective | Migration rate: Population up 5.5% since the 2020 census | Job growth: Georgia hit record highs in labor force and employment in early 2026, with unemployment at 3.5%, 0.8 points below the national rate

Georgia’s a growing state, and there’s a lot of nuance in this state. 

Where would I consider investing? Atlanta, specifically near Emory University, works well for rent-by-the-room. The city is among the top inbound metros in the country for domestic migration. 

The median home price in the metro runs around $389K, higher than Houston or Cleveland, but Atlanta’s rent averages $2,100 a month citywide, and that’s before you split a property into individual rooms.

Property taxes statewide run under 1%, one of the lower rates on this list, which helps offset the higher purchase price.

5. Alabama

Median sales price: $234,052| Avg rent: $1,468/mo| Vacancy rate: 9.5% | Avg property tax rate: 0.36% effective, well below the national average of 0.99% | Migration rate: Over 57% of moves into Alabama were inbound as of late 2025, a sixth consecutive year as a top inbound-migration state | Job growth: Alabama attracted $14.6 billion in capital investment in 2025, the highest annual total in state history

Alabama’s a strong cash flow state with low property taxes.

More people have moved into Alabama than out of it for six straight years, while property prices are on the lower side. A $234K median price is one of the lowest on this list, and with an effective property tax rate of just 0.36%, one of the lowest of any state I cover, you pocket a lot of your rent. 

A specific location in this state? The main campus of University of Alabama in Tuscaloosa is worth a serious look.

However, there’s a tradeoff: Alabama’s statewide rental vacancy rate runs at 9.5%, higher than most of the other states on this list. That’s not a dealbreaker, but it means you can’t skip your due diligence on the specific neighborhood. 

A low price with a high vacancy rate can still lose you money if the house sits empty. That said, the rent-by-the-room system is usually less prone to vacancy risks. If one room is empty, you can usually still cash flow by filling the other rooms. 

6. Kentucky

Median sales price: $197,657 | Avg rent: $1,301/mo | Vacancy rate: 6.9% | Avg property tax rate: 0.74% effective | Migration rate: Population up 2.2% from April 2020 to July 2025, modest but positive | Job growth: Non-farming employment up 7,400 jobs (+0.4%) in January 2026 versus a year earlier

The one city I would look into is Louisville. I had a student invest there, and the numbers were very good.

It’s easy to see why. The median home price in Louisville runs around $233K, well under half of a market like Atlanta or Charlotte, and the average rent citywide sits around $1,300 a month. That’s an excellent sign of a city that will cash flow well. 

Property taxes run under 1% effective, one of the lower rates on this list, so more of that rent stays in your pocket.

One note: Kentucky’s population and job growth are both modest, not explosive, the way Texas or Georgia’s are. This isn’t a state I’d pick for appreciation. And I’d be extra careful about where I invest in this state. 

7. Florida

Median sales price: $377,578 statewide | Avg rent: $2,450/mo statewide | Vacancy rate: 10.2% | Avg property tax rate: 0.74% effective | Migration rate: Net domestic migration fell to about 22,500 in 2025, down sharply from over 180,000 in 2023 and 310,000+ in 2022, though still positive | Job growth: Population and economy still growing statewide, though at a much slower pace than the pandemic-era peak

Florida’s had a price correction over the past couple of years, and that’s an opportunity for investors. When a market comes down (in this case, off its pandemic peak), you can get a discounted property and refinance later once rates drop. 

Something else that makes Florida an interesting state to invest in? It doesn’t have any income tax, it’s landlord-friendly, and the population is still growing, just not at the same pace as a few years ago. 

My student owns 2 rentals in Gainesville, near the University of Florida, and they’ve done well. The numbers back it up: Gainesville’s median home price is around $295K, well below the statewide average of $377K, and rent there is closer to $1,550 a month for a whole property, before you even split it by room. 

Overall, something I’d keep an eye on is that migration into the state slowed sharply, from over 300,000 net new residents a year in 2022 down to around 22,500 in 2025. It’s still positive, so it still checks the box for migration patterns, but it’s not where it used to be.

Another orange flag: insurance costs run more than double the national average because of hurricane exposure, so take that into consideration first. 

For more locations, read my full guide on the best places to invest in rental property in Florida.

8. Arizona

Median sales price: $420,310| Avg rent: $2,140/mo statewide | Vacancy rate: 8.4% | Avg property tax rate: ~0.63% effective, among the lowest in the country | Migration rate: Population grew 1.3% in 2025, still positive but decelerating to a forecast 1.2% in 2026 | Job growth: Forecast to rise from just 0.1% in 2025 to 0.5% in 2026, slow by historical standards

Arizona, just like Florida, has seen price corrections over the past few years. Statewide home values in Arizona are down 6.8% over the past year.

That means properties here are discounted right now. You can buy at the lower price, then refinance when rates come down later. 

One caveat: Job growth in Arizona is sluggish. It was just 0.1% in 2025, though it’s forecast to pick up to 0.5% in 2026. 

But if you’re picky about location, you can find good, cash-flowing deals. 

Take Glendale, for example. Just like elsewhere in Arizona, home values in Glendale are down 8.3%.

Glendale’s median home price sits around $406K with average rent around $2,075 a month. A dental school in the area provides potential tenants for the rent-by-the-room strategy. 

9. New York

Median sales price: $508,154 | Avg rent: $3,295/mo | Vacancy rate: 5.3% | Avg property tax rate: 1.55% | Migration rate: Nearly flat in 2025 (+1,008 people) | Job growth: Healthcare and social assistance grew 63.3% statewide from 2000–2024 and is projected to add over 500,000 more jobs by 2032 (+27.8%); the state’s Department of Labor also projects continued growth in accommodation/food services (+21%) and educational services (+18.6%) through 2032, while manufacturing is projected to decline 12%

New York probably isn’t where you’d expect to find a good rental market, but you can. The entire state actually gets written off because of New York City with its sky-high prices, tenant-friendly laws, and people leaving the city. But NYC and upstate New York are completely different markets. 

I have a client who bought enough rentals in Troy to reach financial freedom. Meaning: He doesn’t work anymore. He just runs his real estate business.

Troy is upstate, home to Rensselaer Polytechnic Institute, and the median home price there runs around $256K, a fraction of the statewide number, which is dragged up by NYC. Rent averages around $1,331 a month for a whole property before you even split it into rooms.

However, property taxes here run high, both statewide (1.55% effective, one of the highest in the country) and in Rensselaer County itself, so build that into your numbers even in an affordable market like Troy. 

Also, this is a state with real net out-migration overall. That doesn’t disqualify Troy or other similar locations, since a strong local market can outperform a struggling statewide trend, but it means you’re focusing on the city, not the state.

10. Iowa

Median sales price: $231,585 | Avg rent: $1,100/mo | Vacancy rate: 7.9% | Avg property tax rate: ~1.49% in the Iowa City area, above the roughly 0.9% national average | Migration rate: The state added about 8,000 residents in 2025, its third straight year of growth, but that growth is coming from immigration, not domestic migration — Iowa actually ranked 39th nationally, and 11th of 12 Midwestern states, for net migration, and was the 7th most outbound state for movers in the same period | Job growth: Described as stable, though no statewide percentage is confirmed

Iowa can be a good state to invest in if you know where to look. Specifically, Iowa City has potential. 

A student of mine, Christian, did really well here. However, he used the rent-by-the-room strategy a bit differently. 

I usually advise my students to go for year-long leases, but Christian found tenants through Furnished Finder, and most of them were travel nurses on midterm leases. 

Iowa has potential to be a great rent-by-the-room location: the University of Iowa and University of Iowa Health Care are both located in Iowa City, which means the city has a steady stream of healthcare workers and students looking for housing. 

The numbers support it. Iowa City’s median home price runs around $284K, and rent averages $1,350 a month. Local vacancy is tight, under 6% and falling, which tells you demand is high.

The downsides: property taxes in the Iowa City area run around 1.49%, above the national average, so this isn’t a low-tax state the way Ohio or Alabama are. 

And more importantly if you’re looking at other places in Iowa: Iowa is actually losing people to domestic migration. 

The only reason the state’s population is still growing at all is immigration, not people moving in from other states. That goes against my own rule that a state has to be growing to be an interesting opportunity. Iowa City is an exception. 

The worst states to own rental property

You have a list of the best states to buy rental property. What about the worst? This depends on your goals – and as you’ve seen, even if a state by itself isn’t the best opportunity, there can be great exceptions within a state.

However, in general, these are the worst states to invest in: 

• California. I actually own property in Sacramento and Stockton. As California is my home state, I bought my first property here. However, cash flow is brutal almost everywhere else in the state. While you will get appreciation in California, you might not be able to cash flow from day one. 
• Illinois, especially around Chicago. Property taxes are so high they will eat into your returns, so cash flowing here is tough. 
• Any state or metro with net out-migration. If people are leaving a city or state, rents go down or stay flat, vacancies get harder to fill, because there just aren’t enough people to fill the housing supply. And appreciation probably suffers too. 

That said, everything is relative. I had a student, Wahyudinata, who achieved $5,500 cash flow in San Jose. So even if a state is generally not attractive, the numbers can work out. 

So what makes a state a good investment? Let’s find out. 

How to choose a state to invest in 

Price, ROI, and appreciation aren’t the only factors you should consider when investing in rental property. I personally look at three main things. A location has to attract good tenants, protect my cash flow, and avoid expensive surprises.

Specifically, I look at these factors when I filter a location: 

1. I won’t buy in states where taxes and insurance get too high. Rent can look great on paper and still lose you money if fixed costs keep creeping up. A $2,000-a-month rental doesn’t mean much if property taxes and insurance eat up $600. 
2. I avoid states with unpredictable eviction timelines. I want enforceable leases and clear rules. If removing a non-paying tenant turns into a months-long court process, that’s a hard no for me, no matter how good the rest of the numbers look. A great cash flow projection means nothing if you can’t actually collect the rent, or get your unit back when you need to.
3. I prioritize demand first, especially close to colleges and hospitals. My rent-by-the-room system works best where there’s a constant flow of students and healthcare professionals. 
4. I avoid markets where prices are rising faster than rents. Those markets look exciting from the outside because of appreciation. But they usually don’t cash flow well.
5. I don’t invest in a state until I have a local team. Realtor, contractor, insurance agent, and a lawyer. If I don’t have boots on the ground, I’m not buying. 

Here’s a quick breakdown of all my criteria:

Example: 

I recently analyzed a duplex where the numbers almost worked on paper.

Demand was great. Rental prices were great. But one of the tenants refused to leave, and the property wouldn’t be delivered vacant. 

On top of that, the price only worked if I could convert it into six bedrooms.

Because of tenant protections and the high purchase price, I had no clear path to actually execute my rent-by-the-room strategy. So I passed.

As you can see, you actually have to choose your strategy before choosing a location. This post is based on the one I use – and this is by far the most profitable and simplest one for new investors. Here’s how it works: 

What is the rent-by-the room student housing strategy? 

Rent-by-the-room means you rent out individual bedrooms instead of the whole house to one family.

Here’s why it’s so profitable: if a house rents for $2,100 a month as a single unit, but you can get 6 students paying $700 a room, that’s $4,200 a month out of the exact same property. One of my students, Sydney, got seven students into a house and was making $4,600 a month. And often, you can increase cash flow by adding a bedroom to your property.

It doesn’t have to be students, either. Like Iowa City, where Christian filled his rooms with travel nurses instead of undergrads, using the exact same room-by-room model. 

This works best in a bigger house, close to campus or a hospital, where you can fit 5, 6, or 7 bedrooms. I call that close-in radius the golden circle. If you’re outside it, students and healthcare workers who need to walk or bike to class or work won’t want to rent there.

And it only works where your city lets it. Some cities cap how many unrelated tenants can legally live in one house at just two. 

For the full breakdown of how this strategy works, take a look at my guide on how to invest in student housing.

And if you’re unsure if you should get into traditional rentals or rent-by-the-room, take a look at this quick video: 

Should you invest out-of-state?

If none of these ten states on this list is where you live, that’s fine. Most of my students don’t invest locally either. Most of my own portfolio is out-of-state.

You don’t have to live near your rental to manage it well. Sure, there are drawbacks. Your knowledge of the local market might be lacking and managing a property remotely does require you have a system. 

But with the right advice and research, it can be done. 

I have a full guide on how to buy and manage a rental out of state:

FAQs

Where should I invest $500,000 right now? 

Depends on your strategy, but $500K goes a lot further in a state like Ohio or Kentucky than it does in Arizona or Florida right now. In a lower-cost state, that budget could get you two or three rent-by-the-room properties instead of one, which spreads your risk and multiplies your cash flow.

What is the 2% rule for rentals? 

It’s a quick screening test. Take the monthly rent a property could bring in, divide it by the purchase price, and if that number is 2% or higher, it’s worth a closer look for cash flow. A $200,000 house renting for $2,000 a month hits it exactly. Most markets don’t hit 2% anymore, which is exactly why rent-by-the-room is such a great strategy. It’s often the only way to get there.

Where is the highest demand for rental properties? 

Wherever people are moving to, not away from. Migration patterns are the single biggest signal I use, more than price, more than something called a “growing state.”

What’s the biggest legal mistake investors make picking a state?

Not checking the unrelated-tenant occupancy limit before they buy. I almost made this mistake myself in Lubbock, Texas. A great price and a great location mean nothing if the city won’t let you rent to more than 2 unrelated tenants.

Want to get started today? 

If you have a downpayment ready and you’d like to learn the exact steps to turning your first real estate investment into an asset that can help replace your salary so you can live a more fulfilling life, you can click here to learn more about my real estate investing coaching services, so we can discuss how I might be able to help you.

This blog post is for informational purposes only and does not constitute investment advice.