Despite a rapid increase in interest rates in the Summer of 2022, rental property acquisition is still a very popular form of investment that’s accessible for most “middle class” Americans. 41% of all rental properties in the US are owned by “mom and pop” style investors. In other words, individuals and not corporations. That should be welcome news to prospective real estate investors.

Once you decide whether rent estate investing is the right option for you, the next step is to decide which location is best for long-term appreciation growth and annual rent yield. We assembled this list of top rental markets, by state after evaluating multiple data sources in order to find the best markets.

Our sources included proprietary data from Attom Data, John Burns Consulting, RentHub and local MLS’s (multiple listing services). We also considered census data and property tax rates variations across markets.

Why are these states the best?

Several historical statistics, trends and anecdotal data were analyzed, however these metrics were the most critical to our scoring methodology:

• Job growth and ability to sustain and generate future jobs.
• Price appreciation with historical increases in property values and rental prices.
• Average home price is a good metric to evaluate and ideally the average home value should be no lower than 50% below the national average and no higher than 50% above the national average.
• Population growth, which is a reliable measure for future housing demand.
• Healthy occupancy rates, which provide a proxy for evaluating inventory levels in a given market.
• Favorable landlord laws, which allow leniency for property owners when evicting tenants for non-payment.
• Low property taxes, which indicate a more conservative tax environment and better annual cash flow versus high tax states.

15 Best Places to Buy Rental Property (Ranked)

If you’re exploring real estate investing, but don’t want to invest in your local real estate market, you can’t go wrong with these states. Keep in mind that you can always find a local property management company if you decide to invest outside of your home state.

15. Colorado

• Population growth rank: #6
• Job growth rank: #11
• Median home value: $561,100
• Average price per square foot: $256/sf
• Home value appreciation in 2022: 11%
• Average rent: $1,620/month
• Average rent increase year-over-year: 11%

14. Kentucky

• Population growth rank: #21
• Job growth rank: #17
• Median home value: $274,300
• Average price per square foot: $144/sf
• Home value appreciation in 2022: 9%
• Average rent: $1,082/month
• Average rent increase year-over-year: 8%

13. South Carolina

• Population growth rank: #10
• Job growth rank: #18
• Median home value price: $299,200
• Average price per square foot: $155/sf
• Home value appreciation in 2022: 13%
• Average rent: $1,170/month
• Average rent increase year-over-year: 9%

12. Idaho

• Population growth rank: #1
• Job growth rank: #15
• Median home value: $464,800
• Average price per square foot: $227/sf
• Home value appreciation in 2022: 18%
• Average rent: $1,420/month
• Average rent increase year-over-year: 14%

11. Ohio

• Population growth rank: #26
• Job growth rank: #14
• Median home value: $217,400
• Average price per square foot: $137/sf
• Home value appreciation in 2022: 7%
• Average rent: $1,210/month
• Average rent increase year-over-year: 6%

10. Arizona

• Population growth rank: #9
• Job growth rank: #12
• Median home value: $421,600
• Home value appreciation in 2022: 13%
• Average rent: $1,473/month
• Average rent increase year-over-year: 13%

9. New Mexico

• Population growth rank: #11
• Job growth rank: #19
• Median home value: $289,700
• Home value appreciation in 2022: 14%
• Average rent: $1,351/month
• Average rent increase year-over-year: 13%

8. Arkansas

• Population growth rank: #19
• Job growth rank: #16
• Median home value: $187,800
• Average price per square foot: $116/sf
• Home value appreciation in 2022: 9%
• Average rent: $960/month
• Average rent increase year-over-year: 10%

7. Utah

• Population growth rank: #1
• Job growth rank: #5
• Median home value: $452,900
• Average price per square foot: $231/sf
• Home value appreciation in 2022: 18%
• Average rent: $1,408/month
• Average rent increase year-over-year: 14%

6. Georgia

• Population growth rank: #8
• Job growth rank: #4
• Median home price: $389,400
• Average price per square foot: $170/sf
• Home value appreciation in 2022: 13%
• Average rent: $1,406/month
• Average rent increase year-over-year: 10%

→View Georgia properties

5. Nevada

• Population growth rank: #5
• Job growth rank: #2
• Median home value: $459,600
• Average price per square foot: $245/sf
• Home value appreciation in 2022: 12%
• Average rent: $1,758/month
• Average rent increase year-over-year: 11%

4. Tennessee

• Population growth rank: #14
• Job growth rank: #10
• Median home value: $407,200
• Average price per square foot: $198/sf
• Home value appreciation in 2022: 14%
• Average rent: $1,380/month
• Average rent increase year-over-year: 12%

3. North Carolina

• Population growth rank: #13
• Job growth rank: #6
• Median home value: $267,523
• Home value appreciation in 2022: 15%
• Average rent: $1,448/month
• Average rent increase year-over-year: 12%

2. Florida

• Population growth rank: #7
• Job growth rank: #3
• Median home value: $447,100
• Average price per square foot: $231/sf
• Home value appreciation in 2022: 16%
• Average rent: $1,890/month
• Average rent increase year-over-year: 14%

→View Florida properties

1. Texas

• Population growth rank: #3
• Job growth rank: #1
• Median home value: $386,700
• Average price per square foot: $181/sf
• Home value appreciation in 2022: 17%
• Average rent: $1,720/month
• Average rent increase year-over-year: 16%

→View Texas properties

Economic Growth and Investment Opportunities

When looking to invest in real estate, new real estate investors often seek out states where the blend of affordable housing, economic growth, and tax benefits align to ensure a profitable venture. States with lower home prices relative to the median income offer an attractive entry point for those aiming to buy investment property, particularly in markets ripe for vacation rentals or where average rental income outpaces the average property tax rate.

However, it’s crucial to steer clear of areas with the highest property tax rates, as these can significantly eat into profits. All these factors combined—ranging from economic growth indicators to the balance between home prices and median income—create a fertile ground for investment. Specifically, states that offer a combination of tax benefits for real estate investments and have a strong track record of economic growth stand out as prime locations.

By carefully considering these elements, investors can find regions where the cost of entry is justified by the potential for high rental yields and long-term property value appreciation.

Resources for Getting Started

Owning rental properties is one of the best ways to build wealth and enjoy passive income. As we covered, rental laws, property taxes, population growth and home values all impact where to invest.

If you want to dive deeper, take a look at our list of best cities to buy rental properties. Here’s a sneak peek:

1- Waco, TX

2- Niceville, FL

3- Greensboro, NC

SimpleShowing, is a tech-enabled real estate brokerage.  If you’re considering purchasing a rental property, check out our buyer refund program, which nets investors a 1% cash rebate towards closing costs. Check out some additional resources below if you want to get started investing in rental properties as a beginner:

Rental Property Interest Rates

Best Books on Real Estate Investing

How to Buy Rental Properties with Little or No Money Down

Conclusion

Navigating the dynamic world of real estate investment property requires astute insights into the best real estate markets that promise both consistent and predictable demand, as well as favorable returns on investment properties. Factors such as low property taxes, job market growth, median household income, and rising property prices play crucial roles in making certain states stand out as the best states to invest in.

Drawing from comprehensive data and trends within the housing market, this article showcases the leading contenders that should be on the radar of anyone looking to diversify their real estate portfolio. As the job growth rate and median property values evolve, savvy investors understand the importance of staying updated to harness optimal rental income and ensure that their next real estate investments thrive amidst these economic dynamics.