If you’re looking for the best state for real estate investing, you’ve come to the right place! We’re counting down the top five states to invest in, culminating with the single best state for real estate investors in 2022.
First, a quick caveat: there are lots of different ways to invest in real estate. Some states are better for short-term rentals, some are favorable for new developments, and some are better for fix-and-flip deals. This article will focus on long-term buy-and-hold rentals. So while house flipping investors can pick up some gems from this list, please keep this focus in mind.
Having said that, our best state for real estate investing is based on nine factors:
- Median home value.
- Median home value increase, year-over-year.
- The percent of housing currently occupied.
- Average rental rates.
- Average rent increases.
- The percent of housing occupied by renters.
- Population growth.
- Job growth.
- Property tax averages.
You’ll find a convenient comparison table toward the end of this article, where you can see how each of our five states performs in each of these nine categories.
- Home values are based on Q4 2021 data from Zillow.
- Population and job market information is based on 2019 census data from Census Reporter and Data USA.
- Rental rates are based on Apartment Guide data from Q4 2021.
Best States for Real Estate Investing
Based on the criteria outlined above, here are the best states for real estate investing, starting with our pick for number five and counting down to the number one best state for real estate investing.
If you’re looking for an affordable real estate market, Mississippi is the state for you. With the median home value hovering around $150,000, homes in MS are less than half of the national average value of $314,000.
These low values are a double-edged sword. They make it easy to get on the property ladder and they result in low property taxes, but they also mean low rental rates. With an average rent of just $937, Mississippi has the lowest rates on our list by far.
Pros of investing in Mississippi:
- Exceptionally low median home price
- Low property taxes
- Respectable job growth
Potential cons of investing in Mississippi:
- Comparatively low property value increases
- Low rents
- Comparatively low rent increases
- Negative population growth
Georgia is a solid example of a well-balanced state for real estate investing. Georgia performs well in several of our nine categories for ranking states, but it isn’t the single best state for real estate investing in any category.
With the median home value at $269,441, homes are reasonably affordable without being impressively so. Value growth, rent growth, population growth, and job growth are all on the high side without being the leading state for any of those metrics.
So we can’t say that Georgia is the best state for real estate investing, but it’s certainly a sound option from an all-around perspective.
Pros of investing in Georgia:
- Mid-range home values
- Solid value growth
- High rent increases
- Low property taxes
Potential cons of investing in Georgia:
- While Georgia has solid numbers across several categories in our ranking criteria, it doesn’t stand out as being the best in any category.
The Idaho housing market is on fire! You might be surprised to learn that Idaho is a leading state for population growth, seeing a 1.87% year-over-year increase. And with business-friendly policies, Idaho saw a job growth increase of 4.32%, which is higher than any other state on our list.
This high demand is driving up property values and rental rates. The median home value saw an insane year-over-year increase of 38.2% (the highest on our list) putting values at a comparatively high $446,550 (which may be outside the affordability range of many investors). Rent rates also increased by a healthy 21.72%.
On the other hand, only 28% of housing in Idaho is occupied by renters. Most Idahoans prefer to own their homes, meaning property owners run a risk of slightly higher turnover as residents leave the rental market to purchase homes of their own.
Pros of investing in Idaho:
- Exceptional property value appreciation
- Solid population growth
- Impressive job growth
- High rent increases
Potential cons of investing in Idaho:
- A low percentage of renters
- High median purchase prices
Florida saw higher rental increases than any other state on our list: a whopping 37.56% increase! Property value growth was also impressive at 23.9%.
On the downside, you will see high property taxes in Florida, especially relative to property values. But this increased expense is largely (if not completely) offset by the lack of state income tax in Florida. Perhaps a more serious concern for investors is the comparatively low occupancy rates. Only 82% of housing units are occupied, meaning that Florida isn’t seeing the type of housing shortage that will fuel long-term growth based on scarcity.
Pros of investing in Florida:
- Exceptionally high rent increases
- High property appreciation
- High rental rates
Potential cons of investing in Florida:
- High property taxes (but no state income tax)
- Comparatively low occupied housing rate
If you’ve read several “best states for real estate investors” articles, you might be surprised to see California take the top spot as the best state for real estate investing. Many of the other lists mistakenly dismiss California as being too expensive for the average investor.
Well, it’s true that California home values are exceptionally high at $722,406. But when you know how to overcome this hurdle, you get to take advantage of the many, substantial benefits of the California housing market. (And we’re going to show you exactly how to get around these high home prices in the next section!)
So what makes California the best state for real estate investing?
First, California housing is in extremely high demand and short supply. With 90% of units occupied, California is experiencing a severe housing shortage that will continue to drive values and rental rates up. Average rent rates are well over $3,000 per month, up nearly 20% year-over-year.
And California is a society of renters. With 45% of housing occupied by renters, California is the best state in the United States for building a real estate portfolio. Your units will always be in-demand.
Additionally, new legislation in California makes it possible to add value to existing properties by creating Accessory Dwelling Units (ADUs). By allowing property owners to build additional units on single-family parcels, the state government has made California even more attractive to real estate investors!
But what about the negative population growth? It’s true that the population has decreased slightly (by .11%). The consensus is that a tiny portion of the population got priced out of the housing market and choose to relocate to more affordable states. As the economy continues to recover from the COVID pandemic and the market stabilizes a bit, people will continue to be drawn to California for the weather, entertainment, and natural beauty.
Pros of investing in California:
- Exceptionally high average rent rates
- Exceptionally low inventory
- An exceptionally high percentage of renters
- High rent increases
- High home value appreciation
- High value-add potential
Potential cons of investing in California:
- High median purchase prices
- High property taxes (high by dollar-value standards, but reasonable as a percentage of the property’s value with aggressive caps in place to protect property owners)
- Slightly negative population growth
Comparison of the Best States for Real Estate Investing
Investing in the California Real Estate Market with Gatsby Investment
We promised to show you how to overcome the hurdle of California’s high property prices so you can invest in CA real estate and reap the benefits of this unique housing market. Here’s the secret: real estate syndication.
Real estate syndication is similar to crowdfunding: you can buy into a real estate project, splitting the cost with other investors. This makes it possible to access high-value deals with low investment amounts! But syndication comes with a few benefits you don’t get with standard real estate crowdfunding. Namely, syndication offers a stable legal ownership structure as well as equity in the underlying real estate (as opposed to most crowdsourcing platforms in which investors own the debt, but not the underlying real estate).
With Gatsby Investment, you can buy into an investment property in the hyper-desirable Los Angeles real estate market for an initial investment between $10,000 and $25,000. That’s less than you would pay on a 20% down payment for an average property in Mississippi! And if you don’t have the cash available, no problem! We make it possible to invest in real estate with your 401(k).
Plus, with experts to handle every step of the process, from scouting potential deals to making renovations to managing occupied rental properties, you can maximize potential profits without any prior real estate experience. Our team even adds ADUs to appropriate properties to provide exceptional value-add for our investors!
Any accredited investor can invest with Gatsby. And since we handle every detail for you, you don’t need to be located in California. You don’t even need to be located in the United States. We make it possible for investors from all over the world to access the best state for real estate investing.
Get started today by signing up with Gatsby Investment.