Many investors search the internet for the best states to buy rental property. However, they may get confused because they see so many options and wonder which is best.
If you are an investor considering investing in rental property, this article is for you. Here, we highlight the 10 best states to buy rental property and also discuss the factors to consider before diving into the real estate market.
10 best states to buy rental property
To help you out, we have compiled a list of the 10 best states to buy rental property in the US. This list was chosen after considering the state’s population, strategic location, investment potential, crime rate, and household income for the people living there.
People nicknamed Idaho the Gem State because it has plenty of minerals and precious stones. This state also has low crime rates and a population of less than two million. Therefore, Idaho State is a great option for rental property investors looking for affordable homes near beautiful scenery.
Besides, Idaho’s low cost of living and growing economy make it an attractive option for renters. If you invest here, you will have a higher chance of attracting tenants to your property.
The median household income in Idaho is $59,000 a year. Besides, the employment rates are generally high in this state compared to other states in the US.
Additionally, 28% of Idaho residents are renters who pay at least $900 in rent every month. Therefore, you can buy a rental property in Idaho and target this market segment. Since property value in the state is increasing steadily, you will reap big in the next few years if you buy a rental property in Idaho.
They say Texas is a Lone Star state in the Southern region of America. This state is a popular destination for renters due to its booming economy and job growth. Texas also has a low cost of living, making it an attractive option for renters.
Texas is so extensive and culturally diverse. Many people come to this state for education because of its good schools. Therefore, the market for rental property in Texas is always high, considering the number of new people who come here every year.
One unique thing about Texas is that about 40% of its population rent houses. They pay an average of $1,200 for a studio and $2,600 for a 4-bedroom rental.
These figures would probably make you smile as an investor. However, you need to know that Texas has some of the highest property taxes in the US. Therefore, you will spend a large portion of your income to pay state property taxes.
Florida is nicknamed the Sunshine State because it receives sunshine for most of the year. It also has beautiful sandy beaches and a warm climate that attracts more Americans and international tourists.
It is one of the best states to buy rental property because it is the third most populated state in the country. Buying rental property here is an advantage to investors because the demand is always high.
The state has a thriving tourism industry. Therefore, you will be targeting tourists and the 34% of the Florida residents who rent houses.
The good thing about Florida is that it has no state income tax, which makes it an attractive option for renters. The renters will have more disposable income to rent the houses.
Colorado has a breathtaking outdoor landscape that is suitable for skiing. Property renters in this state will definitely love the sand dunes, waterways, and rock formations spread across the state.
Investors looking for a mix of urban and rural rental properties should invest here. Another reason to buy a rental property in Colorado is its strong job market. On average, workers in Colorado earn $77,000 a year.
The household purchasing power is also high because the state has very low poverty levels. Additionally, property taxes here are capped at 0.51% and 4.55% income tax. Therefore, you will benefit immensely if you invest in rental property in Colorado.
Georgia is one of the most affordable states in the US. This Peach State is a great option for investors seeking to invest in affordable rental properties because of its friendly business laws and cultural and racial diversity.
The 3.7 million Georgia residents want affordable houses. Therefore, when investing here, it would be better to target low-cost rental properties to appeal to a larger market.
Georgia has a property tax of about 0.99%, but it varies greatly between locations. Nevertheless, it should be among the best states to buy rental property, especially the low-cost houses and apartments.
This Southwestern state is also a good place to buy rental property. The state is famous for its steep-sided Grand Canyon that stretches 277 miles through the Colorado River and adjacent lands.
On top of its 7.2 million residents, Arizona has become a popular destination for retirees and snowbirds who also rent property. Therefore, it is a good option for rental property investors.
Arizona’s warm climate due to the plenty of sunshine for most of the year makes it attractive to renters. The people who live here earn an average of $61,500 a year, which is enough to rent a moderate house.
The property taxes in Arizona are capped at 0.66%, making it one of the states with the best property rates. Property value in this state is also increasing steadily. Therefore, your investment will surely pay off if you do it correctly.
Some people call Tennessee the Volunteer State because it produced so many volunteers who fought during the War of 1812. Rental property investors who are looking for affordable homes should consider this state.
It has a growing job market, making it an attractive option for renters. Although the median household income in this state is $54,000, which is lower than other states, the employment rates are high.
Property tax in Tennessee is set at 0.71%, and there is no income tax. Therefore, households have high disposable income to spend. Investing in rental property in Tennessee could be a masterstroke for investors because the returns will be good.
8. North Carolina
North Carolina is a state with good weather, attractive sceneries like mountains, and developed amenities. This Tar Heel State has some of the best schools and colleges in the Southeastern region of the United States.
If you are an investor looking for affordable rental properties with a strong job market, North Carolina is the place to go. North Carolina’s 34% of the 10 million inhabitants spend at least $1,234 per month on rent.
The state boasts of a thriving job market accelerated by the industrialized economy. The cities in this state are home to some of the most profitable Fortune 500 companies that attract top talents.
Therefore, there are millions of employees seeking rentals in this state. If you capitalize on the city’s high demand for houses, you will have a good return on investment if you invest in rental property in North Carolina.
Utah is a landlocked state of about 3.3 million inhabitants. This state is a great option for investors who are looking for rental properties near outdoor recreation opportunities.
Besides, Utah’s strong economy makes it a popular destination for renters. The employment rate in the state is among the best in the country, and the median household income is $86,000.
The state charges a property tax rate of 0.58%, which is way below the national average of 1.1%. Additionally, the state offers attractive tax benefits for real estate developers who follow certain regulations like installing solar power. Therefore, Utah should be among the first choices for any serious investor in the rental property market.
10. South Carolina
South Carolina is widely known as the Palmetto State in honor of its state tree, The Palmetto. This state is home to approximately 5.1 million Americans from all walks of life. With such a large population, you expect a high demand for housing.
The state has about 2870 miles long coastline, littered with pristine beaches. Therefore, this state is a great option for investors who are looking for rental properties near the beach.
South Carolina’s warm climate also makes it a desirable location for renters. You can build or buy apartments near the coastline cities because there is a high demand for houses in those regions.
One good thing about South Carolina is that it offers a business-friendly environment. The state government offers incentives and favorable taxes to investors to encourage them to do business. Property taxes in this state are as low as 0.57%. Therefore, investing in rental property in this state is a good investment move.
Worst states to buy rental property.
Now, let us look at the worst states for buying rental property. These states are considered the worst because they have unattractive property taxes, low incomes, social issues, or a low population of renters.
Louisiana has the lowest job growth in the country. It also has low education and healthcare facilities, making it unattractive to skilled employees. Therefore, it is not a good place to invest in real estate.
Hawaii has the highest cost of living in the United States, making rental houses unaffordable to some residents. Access to the islands is also limited, and the job opportunities are minimal. Therefore, it is not a good place to invest in rental property.
3. New Mexico
New Mexico State has many social issues, including high crime rates, low education levels, and poverty. Therefore, it is not recommended to invest in rental property in this state.
In Mississippi, chances of succeeding in real estate investment are low due to the state’s high poverty level and low median household income. Additionally, the property values are low.
Michigan State was once a manufacturing hub, but people are leaving for other states. Therefore, you may struggle to get tenants for your rental property.
Factors to consider when buying rental property
One of the most important factors is location. Location can make or break your rental property investment. The location of the property can significantly impact the rental income and the appreciation potential of the property.
You want to choose a location that is in high demand and has a low vacancy rate. Look for properties that are in close proximity to public transportation, schools, shopping centers, and other amenities.
2. Property condition
Another important factor to consider when buying a rental property is the condition of the property. Choose a property that is in good condition and does not require significant repairs or upgrades.
This will help you avoid costly repairs and maintenance expenses in the long run. Make sure to hire a professional inspector to assess the condition of the property before making a purchase.
3. Rental income
The primary purpose of buying a rental property is to generate rental income. Therefore, it is important to consider the potential rental income of the property. Look at the average rental rates in the area and compare them to the rental income of the property.
Make sure that the rental income of the property is sufficient to cover your expenses and generate a profit.
4. Cost and expenses
When buying a rental property, it is important to consider the expenses associated with owning and managing the property. Some of the expenses to consider include property taxes, insurance, maintenance, repairs, and property management fees. Make sure to factor in these expenses when calculating the potential rental income of the property.
5. Tenant screening
Choosing the right tenants is critical to the success of your rental property. You want to choose tenants who are reliable, responsible, and have a good track record of paying rent on time. Make sure to conduct a thorough tenant screening process, which may include credit checks, background checks, and rental history verification.
When it comes to investing in rental property, location is key. These 10 best states to buy rental property offer great opportunities for rental property investors who are looking for affordable homes, strong job markets, and beautiful scenery.
At the same time, investors should avoid buying rental property in the listed 5 worst states to buy rental property. Investing in these worst states is risky and could lead you to financial oblivion.