22 Best States To Invest In Real Estate

Published on July 31, 2023

Best States to Buy Real Estate

Best States to Buy Real Estate

Thinking about dipping your toes into the real estate market? Location is key! From states experiencing skyrocketing growth in tech and innovation to those boasting population surges and favorable tax climates, investing in the right real estate market can reap substantial financial rewards.

This article will take you on a tour of the top U.S. states for property investments in 2023. Whether you're a first-time investor or a seasoned pro, we've got the scoop on where your real estate dollars can go the furthest!

Factors to Consider When Choosing a State in Rental Property Investing

Factors to Consider When Choosing a State in Rental Property Investing

Real estate investment requires a careful analysis of several critical factors. Understanding these elements can help you make an informed decision about the best states to invest in rental property.

Migration

This factor is critical in determining the demand for rental properties in a state. Migration can be through people moving for jobs, education, or lifestyle changes. A higher migration rate typically leads to increased rental demand, subsequently pushing up rental rates. 

However, the type of migration matters, too; you would want a balance of tenants who can afford to pay the rent and those who would want to stay longer. For instance, states with large university populations might have a high demand for rentals, but the turnover rate could be high, resulting in more vacancies.

Real Estate Market

The health and status of the local real estate market can provide key insights into potential investment opportunities. 

Are home prices increasing, decreasing, or remaining stable? Are there a lot of foreclosures? What's the ratio of renters to homeowners? Are there any significant infrastructure or development projects planned that might affect property values? 

Understanding these market dynamics can help predict the potential return on investment (ROI).

Rent and Property Appreciation

Two primary factors contribute to the profitability of rental property: the average rent you can charge and the appreciation of the property value over time. 

States with a robust rental market often see consistent annual increases in rental rates, leading to higher median household income for property owners. Property appreciation, while not providing immediate positive cash flow, can significantly boost overall returns when the property is sold.

Property Taxes

Property taxes vary significantly from one state to another and can impact the profitability of rental property investments. 

Higher property tax rates may not always be a bad thing if the area is an excellent place for long-term residential rental properties, as the tax costs may be recouped in the rental price. However, investors must factor in these costs when calculating their potential ROI.

Money Magnet

This factor refers to whether the state attracts investments in industries that lead to job creation and economic growth. 

States that are "money magnets" often have a favorable business climate and offer incentives for companies to set up shop. This, in turn, can lead to an increase in the local population and higher demand for rental units.

Investment Property Valuation

This involves assessing the potential investment property's value. Key aspects to consider include the property's location, its current condition, the cost of any necessary repairs or renovations, and its potential rental income. Further, it’s crucial to compare similar properties in the area (comps) to ensure you're not overpaying. 

The aim is to invest in a property that not only can generate a good rental income but also has the potential for value appreciation over time. 

Best State to Buy Investment Property

St Charles IL

Now that you have learned about the factors that you should consider when choosing a state in real estate investing, we will no longer keep you waiting. Here are 

1. Florida

Two of the major factors why Florida is a good state to invest in real estate are its median home price which is around $305,266 and the high property value appreciation in this area which is around 18%.

Florida also has a high population growth rate, which can create a predictable and consistent demand for housing. 

Additionally, Florida is a popular destination for retirees and tourists, which drives the demand for housing in this sunshine state and making it one of the best states to invest in real estate. What’s more, Florida offers a diverse range of rental property types, from beachfront condos to suburban single-family homes, accommodating different investment and rental strategies. 

You'll also appreciate the favorable property and income tax environment in Florida, which allows investors to maximize their returns. Without a doubt, Florida is one of the best states to invest in real estate.

2. Ohio

Ohio boasts steady rental markets with reasonable long term rental property prices, making it accessible for investors at different budget levels. In fact, it has one of the best real estate markets today. Additionally, its diverse economic base, with sectors such as manufacturing, healthcare, and education, attracts a steady influx of workers seeking to buy rental property. 

The state also hosts several large universities, providing a consistent demand for student housing. Moreover, the average rent yield in Ohio is often higher than the national average, promising solid returns on investment. 

3. Georgia

Georgia is recognized for its robust job market, diverse economy, and increasing population, which are key indicators when choosing a state to invest in real estate. Moreover, Atlanta Georgia’s robust job growth is driven by industries like film, television, tech, and logistics, making it a good market to buy rental property.

The state also boasts the headquarters of many Fortune 500 companies, attracting professionals seeking comfortable living spaces. Additionally, the steady influx of students attending Georgia's respected institutions ensures a continuous demand for rental units.

4. Maryland

Maryland's robust, diverse economy and high median salaries make it one of the best states when you invest in real estate. Maryland has a consistent stream of employment opportunities, with industries including technology, biosciences, and government services serving as its pillars. 

These lucrative occupations increase the purchasing power of locals, indirectly increasing housing demand and making an excellent climate for real estate investors.

It is impossible to deny Maryland's geographic appeal in addition to economic ones. Being close to important cities like Washington, D.C. It's a sought-after place for people who want to live in the suburbs close to big job markets, such as Baltimore and Washington, D.C. 

These elements have supported a healthy rental market, especially in areas near urban cores or transportation hubs.

5. Arizona

Arizona is appealing to real estate investors because of its quick population growth and booming economy. The need for housing in this state has increased because of the significant migration of the population, notably in areas like Phoenix and Tucson. 

This need is further increased by Arizona's economy, which is expanding significantly in fields like technology and healthcare.

Additionally drawing retirees, Arizona's environment and natural beauty also boost rental markets for retirement homes. Arizona has a healthy market for real estate sales and rentals thanks to this demographic trend and the state's expanding population. 

Arizona offers prospects for profitable returns while maintaining affordable investment property values that in on par with the national average in comparison to other hot rental markets or real estate markets.

6. Connecticut

Connecticut provides promising opportunities for real estate investment due to various factors that is why it is tagged as one of the best states to invest in real estate. For instance, Connecticut, being a part of the Tri-State Area, boasts close proximity to major job markets in New York and New Jersey. This can lead to high demand for rental properties, which could offer investors strong instead of average rent yields. 

The state might also have areas with affordable investment property prices, allowing for potential appreciation in the future and making it one of the best states to invest in real estate.

7. Missouri

Missouri offers an attractive opportunity for real estate investors with its low cost of living and thriving economies in cities such as Kansas City and St. Louis. One of the reasons why it is one of the best states to invest in real estate.

The state hosts several large corporations and educational institutions, generating a consistent demand for rental properties. The state’s promising future growth, primarily from its tech sector, also promises to continually attract new residents, leading to a strong demand for housing and making them a great state to invest in real estate.

Additionally, Missouri's real estate market is relatively stable, providing opportunities for both short-term rental properties, flipping, and long-term rental investment strategies. The average home price or median home value is also relatively low, leading to high rental yields for investors. 

8. Idaho

Idaho is known for its fast-growing population, which can potentially result in high demand for housing and rental properties. 

This, combined with Idaho's developing job market, possibly affordable median home prices, and high rent prices, suggests that the state might provide promising real estate investment opportunities. 

Moreover, the state's low cost of living, coupled with high quality of life, has been attracting new residents from pricier coastal states. Idaho's economy is diversified, with robust sectors in agriculture, manufacturing, and technology. Moreover, its beautiful landscapes make it an attractive location for vacation rentals. You can definitely collect a high rental income when you invest in this state.

9. California

California is a state with a high population, vibrant job markets, especially in tech and entertainment, and an active real estate market. These factors might create high demand for rental properties, which could lead to attractive average rent incomes for investors. 

Despite the state's high investment property prices, the potential for capital appreciation can be significant due to the state's economic growth and the inflow of high-income earners in the California real estate market. However, investors need to consider California's property tax rates and its regulations, as they can impact the overall profitability.

10. Rhode Island

Rhode Island provides an entirely different yet equally appealing landscape when you invest in real estate. The state, though small, boasts of a thriving tourism industry due to its beautiful coastlines and historical significance. This creates a strong market for the vacation rental industry. 

Furthermore, Rhode Island's substantial college student population in cities like Providence assures a steady demand for student housing.

Moreover, with its proximity to major economic hubs like Boston and New York, Rhode Island benefits from spillover growth, and it's not uncommon for professionals to choose to reside in a vacation rental here for the lower cost of living while commuting to these larger cities for work. 

These elements combined present both short-term rental opportunities and long-term capital appreciation prospects for real estate investors.

11. New Hampshire

New Hampshire can be attractive for property investment due to its high quality of life, including low crime rates, good schools, and natural beauty that draws domestic and foreign tourists, and low cost of living potentially providing a market for short-term rentals. 

The state also has no state income tax, which can benefit investors who earn rental income. However, the state does have high investment property taxes, which could affect the overall returns.

12. New Jersey

New Jersey's strategic location between New York City and Philadelphia makes it an ideal residence for those who work in these cities but prefer suburban living. This has resulted in strong demand for both rental and for-sale long-term rental properties, particularly in commuter towns.

New Jersey also benefits from its coastal location, offering numerous opportunities for investment in vacation and rental properties. Despite high investment property taxes, the state's strong rental market, high median home price, and rising property values present a positive outlook when you invest in real estate.

13. New York

New York stands as one of the most influential states for real estate investment, mainly due to the high demand and diverse opportunities it offers. 

Despite the high property prices, New York City continues to attract domestic and international investors alike due to its status as a global business, cultural, and financial hub. With a robust job growth, a high concentration of wealth, and high median home price, the demand for real estate in the city is consistently high.

14. Indiana

Indiana is one of the best states to invest in for real estate investors, with affordable property prices, a stable economy, and a steady rental market with high rent prices. 

Cities like Indianapolis and Fort Wayne offer good prospects due to their growing economies and relatively low cost of living, which attracts young professionals and families. Moreover, the state's universities ensure a constant demand for student housing.

Indiana's real estate market also benefits from the state's strong industrial sector. With significant growth in sectors like manufacturing and logistics, job growth is visible, further propelling housing demand. 

These factors, combined with affordable home values or low median home value, low cost of living, and average rent prices, create a favorable environment for both rental and flip investments making Indiana one of the best states to invest in real estate.

15. Virginia

Virginia's real estate market is another attractive destination for investors. The state's diverse economy, which is powered by sectors such as government services, technology, and defense. This means majority of the population rents in this state. 

The growth of the tech sector, particularly in Northern Virginia, has led to significant economic expansion and a surge in housing demand in these areas.

The state also hosts multiple military bases, which ensures a steady demand for rental properties. Moreover, Virginia's rich historical heritage and natural beauty make it a popular tourist destination, providing opportunities for investment in vacation rentals. 

From suburban areas offering family-friendly living near employment hubs to coastal communities attracting tourists and retirees, Virginia's real estate market offers a wide range of investment opportunities.

16. Alabama

Alabama has increasingly become one of the best states to invest in due to its robust economy, affordability, and steady population growth. 

The state's economy is anchored by industries like automotive manufacturing, aerospace, healthcare, and technology, which provide stability and job growth and making it a reliable market for real estate investors.

Alabama also shines when it comes to affordability. Even as the real estate market across the country experiences inflation, Alabama's median property price remain relatively low, which encourages first-time homebuyers and renters. 

Additionally, Alabama boasts a high rental yield instead of an average rent yield, providing excellent returns for vacation rental property investors. Alabama's population is slowly but consistently growing, which guarantees a steady demand for housing.

17. Kansas

Kansas' housing market is characterized by stability, with gradual, consistent appreciation in home values. This makes it one of the best states to invest in if you are looking for steady, long-term growth. 

The state's economy, anchored by agriculture, manufacturing, and an expanding tech sector, supports this stability.

Kansas also benefits from a cost of living that's well below the national average. This affordability extends to the housing market, making home ownership and renting accessible to many. For investors, this translates to a wider pool of potential buyers or tenants. 

Furthermore, Kansas boasts a robust rental market, thanks to the state's significant college student population growth, providing a consistent demand for rental properties with average rent prices that are close to the national average.

18. North Carolina

One of the significant driving factors for real estate investing in North Carolina is the state's booming economy. Home to a thriving tech industry, respected research institutions, and a diverse mix of other industries, North Carolina has a strong job growth that drives demand for people to buy rental property. Majority of the population rents in this area.

Population growth is another factor contributing to North Carolina appeal. This influx of people in North Carolina is creating significant demand for housing, a trend that appears likely to continue in the foreseeable future.

Furthermore, North Carolina's real estate market itself is healthy and vibrant. North Carolina has seen consistent growth in the median home value over the years, offering the potential for significant returns for investors with median income.

Also, despite this growth, North Carolina still boasts relatively affordable housing compared to many parts of the country.

19. New Mexico

The median property price in New Mexico are not increasing as quickly year over year as the national average, but the national median home value reached its highest. This could make New Mexico an interesting choice for property investment. 

Slower price increases could make homes more affordable for investors while still offering the potential for appreciation over time.

20. Tennessee

Tennessee has a diversified economy with strong sectors in healthcare, manufacturing, and entertainment, especially in cities like Nashville and Memphis. This economic diversity supports a strong demand for housing.

Moreover, Tennessee state's population growth and job growth rate is experiencing a significant boost. This increased demand puts upward pressure on both home and rental prices.

Another factor is that despite steady real estate appreciation, Tennessee's property remains relatively affordable compared to many parts of the country. This affordability attracts first-time homebuyers and renters alike.

Tennessee also has landlord-friendly laws, including non-existent state or low property taxes, which is attractive for investors. It also has a relatively straightforward eviction process compared to other states, reducing potential headaches for landlords.

21. Texas

Texas boasts a robust and diverse economy. The state is a leader in sectors such as energy, technology, healthcare, and manufacturing, providing a stable base for job growth. This economic stability results in a reliable demand for housing, a critical element for real estate investment.

In terms of Texas state's population growth, Texas is among the fastest-growing states in the country. The state's diverse and vibrant cities, such as Austin, Dallas, Houston, and San Antonio, are significant magnets for new residents, in turn driving up the demand for homes.

Moreover, Texas stands out for its affordability. Despite the steady appreciation of the median property values, property in Texas remains relatively inexpensive when compared to other parts of the United States. 

This affordability is attractive to both first-time homebuyers and renters, maintaining a steady demand in the housing market.

22. Utah

Utah has one of the fastest-growing economies in the United States, with significant contributions from technology, healthcare, and financial sectors. This strong economy generates a thriving job market, which continues to attract people from different regions, thereby bolstering the demand for housing. In other words, majority of the population rents.

Moreover, Utah is experiencing a population growth rate that is nearly double the national average. This population growth creates further demand for both ownership and long term rental properties, driving up the median property price and boosting the rental income.

Beyond these numbers, Utah consistently scores highly in quality-of-life metrics. The state's beautiful outdoor recreational opportunities, low crime rates, and tight-knit communities make it an attractive place to live, indirectly influencing the housing market and rent prices positively.

The dynamics of Utah's real estate market itself are also favorable to investors. The strong demand coupled with relatively low supply has led to consistent increases in median home values over the years. The state also presents a good environment for landlords, given its high occupancy rates and steadily rising rents.

Types of Real Estate Investment Properties

Types of Real Estate Investment Properties

Depending on an investor's finances, risk tolerance, and investing methods, real estate investments can take many different shapes and offer a variety of opportunities. The various categories of real estate investment properties are shown below.

  • Residential Properties: These are properties where individuals or families live, like single-family homes, townhouses, condominiums, and multifamily houses (e.g., duplexes, triplexes). Investors typically make money by collecting rent from tenants or by renovating the property and quickly reselling it for a profit, known as house flipping.
  • Commercial Properties: These are properties used for business purposes, such as office buildings, shopping centers, restaurants, and hotels. Investors can earn high rental income from businesses that lease space within these buildings and these are usually higher than the median household income.
  • Industrial Properties: These properties include warehouses, factories, and distribution centers. Investors can earn high rental incomewhen they buy investment properties because businesses can rent these spaces for operations. They can earn a great rental income, especially in areas where the cost of living is high and rental rates are higher.
  • Vacant Land: This includes undeveloped, early-development, or reuse properties. Investors can make money by selling the land after it appreciates, developing it, or leasing it to businesses for use, such as farming or ranching.

What to Do After Identifying the Best States for Real Estate Investing?

What to Do After Identifying the Best States for Real Estate Investing?

Once you've identified the best states for real estate investing, your journey is just beginning. You can then start finding leads on the best deals and negotiating! Here are the steps to get started on real estate investing after identifying your target state:

Step 1. Define Your Real Estate Investment Goals

Are you looking for a short-term profit through 'flipping' properties, or are you interested in long-term rental income? Are you ready to invest in residential properties, or do commercial properties seem more appealing? 

Step 2. Choose Your Specific Market Within the State

After you've identified a state, drill down to specific cities or neighborhoods that align with your investment goals. Look at local factors like employment rates, crime rates, school ratings, and amenities that could impact the desirability of the property.

Step 3. Formulate a Budget

Determine how much you can comfortably invest, taking into account potential unforeseen expenses. Don't forget to factor in ongoing costs such as maintenance, insurance, high and low property taxes, projected rental income, and potential property management fees.

Step 4. Assemble a Real Estate Team

This team should include a local real estate agent, an attorney, a lender, a home inspector, and possibly a property manager. They can provide valuable assistance and advice throughout the process.

Step 5. Secure Financing

Decide whether you'll buy the property outright or finance it with a mortgage. If you're going for the latter, preapproval can make your offer more attractive to sellers.

Step 6. Identify Potential Properties

Use your goals, market, and budget to guide your property search. Consider working with a realtor or other investors who know the local market well. They can help you find properties and negotiate deals.

Step 7. Perform Due Diligence

Thoroughly research any potential property before making an offer. This includes understanding the condition of the property (possibly with the help of a professional inspection), understanding the local rental market (average rents, vacancy rates), and calculating the expected return on investment.

Step 8: Make an Offer

Once you're satisfied, make an offer on the property. If it's accepted, you'll enter into a contract and finalize the transaction. If your offer is not accepted, don't be discouraged - the perfect investment opportunity is still out there.

Step 9. Manage Your Investment

If you're renting out the property, you'll need to manage it (or hire someone to do so). This includes finding and vetting tenants, maintaining the property, hiring someone to ensure the tenants pay rent, handling leases, and more. 

If your goal is to resell, you'll need to consider when and how to market the property for maximum return.

Step 10. Continually Learn and Adjust

Real estate investing is a learning experience. Market conditions can change, unexpected issues with properties can arise, and your personal goals may evolve over time. Stay flexible and open to adjusting your strategies as needed.

Tips When Entering Real Estate Investing

Tips When Entering Real Estate Investing

Investing in real estate can be an exciting journey to wealth creation and diversification of your real estate portfolio. However, it requires a thorough understanding and careful planning. 

Based on the advice from seasoned professionals, here's a comprehensive list of tips when entering real estate investing:

  • Understand the Basics: Get familiar with the fundamentals of real estate investing. Understand how to evaluate properties, financing options, the tax implications, (whether you can deal with high property taxes or you prefer the lowest property taxes) and the different ways to make money, such as rental income, flipping properties, and appreciation.
  • Invest According to Your Financial Situation: Assess your financial situation before you begin investing in real estate. Pay down debt, improve your credit score, and save for a down payment if necessary.
  • Research Thoroughly: Take the time to research and understand the real estate market you're investing in. Look at historical data, current trends, and future predictions on strong rental demand before you buy investment property.
  • Diversify Your Investments: Don't put all your eggs in one basket. Invest in different types of real estate or different geographical areas to spread your risk. Check out the states we listed above including major cities with high median income. Research where property values and median home price are high when choosing the best states to invest in.
  • Don't Quit Your Day Job Immediately: Even after you have already identified the best states for real estate investors, this industry can still be complex and you'll likely need a steady source of income for financing (operating expenses) and stability as you learn the ropes.

Key Takeaways: 22 Best States for Real Estate Investing

The best states to invest in when real estate investing can change from year to year, impacted by various factors such as migration trends, market conditions, and economic development. 

As a potential investor, your homework is to stay informed and adaptable. Always remember that the key to a profitable investment is not only about buying a property but also about buying it in the right place at the right time.

Once you have identified the best states for your goals, check us out at Property Leads! We offer highly motivated seller leads per location and we sell them exclusively, so you have less to no competition. Our leads are primarily generated from SEO, so you are guaranteed their quality.

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