The Best Places to Invest in Real Estate

31.12.2021
Milena

Investing is one of the cornerstones of building personal wealth. Real estate meanwhile is a proven way to capitalize on your investment in the long run. It, however, can also be a disastrous step unless you know where and when to purchase properties. That’s why we decided to list the best places to invest in real estate in the United States. We will also give you the essential criteria used in our ranking process. Meaning, you’ll not only discover the top real estate markets but also learn what makes them so favorable so that you can apply that knowledge going forward. So, scroll down and find out the top real estate markets to invest in.

Factors for Determining the Best Places to Invest in Real Estate

Various factors impact the real estate market and knowing them (along with how to analyze them) is essential before deciding where to invest. Below, we will list some of the criteria we considered before creating our list of top spots for real estate investment.

  • Economic and financial issues – job and income growth, qualified labor availability, interest rates, and cost of capital.
  • Social and political issues – political landscape, government budget issues, immigration.
  • Real estate and development issues – construction costs, construction labor, housing costs, and availability.

Each criterion is supported by additional factors. Meaning, the analysis goes deeper than a few key indicators. Still, destinations with a strong house index value, population growth, job growth, and high median rent are your smartest move.

Plus, we’d like to mention the importance of your plans with the estate.

If you plan to invest in one of the best places to buy vacation rental property, you should consider popularity. Also, it’s critical to know whether that destination is winter-only, summer-only, or all-year-round attractive. Popular spots, moreover, tend to be more expensive. This means you need a more substantial initial investment, but you will also get higher returns.

In contrast, you can focus on economic centers where people move to find a well-paid job. Another alternative is cities with good schools where families with children seek quality education.

The Best States to Invest in Real Estate

Below, we’ll first determine the top estate markets to invest in.

In this first table, you can discover how each state performs in most real estate and development issues. Due to the COVID-19 pandemic, the 1-year forecast on the house value index in all states is negative. We rank better, nevertheless, jurisdictions whose market is expected to drop insignificantly compared to those whose forecasted decreases are nearly 5%.

Other critical criteria are the median rental rates, rental vacancy, and homeownership rates. Let’s not forget about the estimated population change by the BLS. States whose population grows are also higher on the list of the best places to buy a rental property.

General Real Estate Status by State

In the second table, we focus on the financial and social aspects of the best real estate investment markets. You can see the year-on-year employment change in each state, which gives insight into that state’s job market. Again, most figures are in the negative because of the effects of the global pandemic.

We also provide insights on the unemployment rates, average weekly wages, and the number of job openings. Each of these establishes whether the state in question can offer its existing and new citizens career prosperity. States whose job market is in decline are unlikely to attract new people and therefore don’t rank well on our list of the best rental markets in the US.

Financial and Social Aspects of the Real Estate Market by State

Top Places to Invest in Real Estate

Now that we have all the necessary figures, it’s time to list the best places to invest in real estate. These states have the overall best result when all their rankings are combined. Meaning, while one destination may underperform in some respects, it’s still a better overall option.

Utah

Utah takes the top spot when it comes to the fastest-growing rental markets in the US. The state has one of the best y-o-y employment changes and a below-average rental vacancy rate. Both make Utah a smart choice as it offers job opportunities and has a high rental property demand.

  • Median sale price – $279,100
  • Rental vacancy rate – 5.4%

Utah is one of the best if not the best state to invest in real estate, regardless of what you plan to do with the property. In fact,  West Valley City in Utah is one of the best places for flipping houses. The reason? The state has the lowest remodeling costs and excellent average turnover time.

Government services, coal mining, and cattle ranching are the major industries in the state. In recent years, however, there’s been an increased demand for software developers, web developers, and veterinary technicians, as well.

Colorado

Breckenridge, Estes Park, Colorado Springs, and Keystone are among the best places to buy a rental property in Colorado. This state is, in general, a great market, thanks to its good median home value. The state’s unemployment rate and rental vacancy rates are low, making Colorado perfect for real estate investors.

  • Median sale price – $343,000
  • Rental vacancy rate – 4.4%

The state is popular for its developed tech industry that employs hundreds of thousands of people, making it a popular choice for young professionals and families. Other established sectors here are agriculture, real estate, tourism, and energy.

Idaho

Boise, Twin Falls, Eagle, Idaho Falls – all these represent the best cities to invest in real estate in Idaho. The Gem State has the highest y-o-y population change and the best 1-year home value index forecast. These promise a high earning potential from your investment in a rental property in Idaho.

  • Median sale price – $212,300
  • Rental vacancy rate – 4.2%

All the other factors like the unemployment rate and median weekly wage are solid too. Some of the most popular industries in the state are food processing, mining, paper, tourism, and lumber/wood products.

Washington

Washington is among the best real market for real estate investing options in the US. Those who want to invest here should consider Bellevue, Redmond, Kirkland, and Tacoma as reliable options.

  • Median sale price – $339,083
  • Rental vacancy rate – 3.8%

The Evergreen State boasts a good market change forecast and a low rental vacancy rate. Plus, it’s one of the top five US destinations with the best education. Food and agriculture, aerospace, information, and communication technology, and trade are some of the top industries in Washington. Meaning, the state attracts both professionals looking for well-paid jobs and families focused on good education.

Arizona

Arizona rounds up our list of the five best real estate markets in the US. What makes this state such a great destination for real estate investors? The forecasts for its job market change, population change, and home value index change are very hopeful. All these signal that the number of people in Arizona will grow alongside the job opportunities, ultimately resulting in a higher average home index value.

  • Median sale price – $225,500
  • Rental vacancy rate – 4.6%

Electronics, aerospace, tourism, and business services are critical sectors. Mining and agriculture, however, remain developed in the rural areas of the Grand Canyon State. Tucson, Phoenix, Paradise Valley, Shonto, and Blue Gap are the best places to buy a rental property in Arizona.

Worst Places to Buy Rental Property

Michigan

Michigan is one of the worst US states for real estate investing. The Great Lake State has a terrible y-o-y employment change and a low median sale price. You can grab property for a reasonable price here, and the market change isn’t that terrible. Still, the other indicators don’t recommend investing here.

  • Median sale price – $154,900
  • Rental vacancy rate – 5.4%

You don’t have any other option and really want to buy property here? Then stick to Belleville, Manistique, St. Helen, and Detroit as these are the best cities for investment properties in Michigan.

Kentucky

Kentucky comes in as another unfavorable destination for purchasing properties. The state’s especially weak spots are the low median home value and population change of only 0.11%. With insignificant population growth, the Bluegrass State’s real estate market isn’t expected to grow either.

  • Median sale price – $148,662
  • Rental vacancy rate – 5.5%

Louisville, Lexington, Fort Thomas, and Owensboro are top destinations to invest in Kentucky. If you’re not open to the better options from our list, that is.

Mississippi

Mississippi ranks terribly on our list of the best places to buy real estate. Low median income, low median home value, and low median rental rate make the Magnolia State a bad choice for investors. The median sale price here is well below $200,000, making it affordable. Still, the possible returns and circumstances send a strong ‘avoid’ signal.

  • Median sale price – $127,206
  • Rental vacancy rate – 7.3%

Those determined to invest here regardless should consider properties in Jackson, New Albany, Gulfport, and Hattiesburg.

Louisiana

With a y-o-y population change of -0.28, things aren’t looking good for Louisiana. This negative population change made it impossible for the destination to rank better in this best real estate markets rundown. The fact that  Louisiana is among the most federally dependent states just further proves that the Pelican State isn’t in top shape. Louisiana received the highest federal aid as a share of revenue rates.

  • Median sale price – $163,100
  • Rental vacancy rate – 6.9%

If investing here is your only option, then look at properties in Baton Rouge, New Orleans, Hackberry, and Lafayette.

West Virginia

The worst median home value alongside the worst median income earned West Virginia the last place on our “avoid” list. Unlike the best real estate markets to invest in which enjoy prosperity, West Virginia ranks terribly in most categories. The state’s median home cost is only $115,018. Compare this figure against the median home value of $678,707 in D.C. Plus, the rental vacancy rate in West Virginia is fairly high at 7.1%.

  • Median sale price – $107,927
  • Rental vacancy rate – 7.1%

Charles Town, Gerrardstown, Anmoore, and Shepherdstown are the most sought-after cities in the state. So, if there’s no other option than investing in West Virginia, consider properties in these areas.

The Best Cities for Real Estate Investment

Scroll down to discover the top places to invest in real estate in the US. Please, beware that some forecasts and figures are surprisingly negative. This applies to the latest data that was heavily affected by the COVID-19 pandemic.

Still, you will notice that some destinations do much better than the rest, even in such delicate situations. That’s why you can’t go wrong with the developing real estate markets on our list.

Austin, Texas

Austin is a top pick among the best cities to buy a rental property. The city notes a high investor demand and an excellent 1-year home value change of 5.4%. Texas is also among the states whose projected real estate market drop isn’t as steep compared to other destinations. Austin is also a college town, which is always great for real estate expansion. Plus, the population in the Lone Star state is growing, which is yet another positive indicator for future investors.

  • Home value index – $498,786
  • 1-year change – 18.4%
  • 1-year forecast – -0.7%
  • Median rent price – $1,750
  • Rental vacancy rate – 7.55%
  • State job opening rate – 4.4%
  • State population change – 1.3%
  • State average weekly wage – $1,150

Durham, North Carolina

If your investment is under $300,000, Durham in North Carolina is among the best cities to buy real estate with that budget. The area has noted serious investment activity recently, both in homebuilding and office buildings. There’s good population growth in North Carolina, too, even though the job market could do better. Still, Durham would be a top spot for real estate investors.

  • Home value index – $290,270
  • 1-year change – 10.6%
  • 1-year forecast – -1.7%
  • Median rent price – $1,495
  • Rental vacancy rate – 5.03%
  • State job opening rate – 4.6%
  • State population change – 0.95%
  • State average weekly wage – $1,039

Nashville, Tennessee

What makes Nashville one of the best cities to invest in rental properties? The real estate market in Tennessee noted a significant growth alongside a solid rental vacancy rate in 2019. Tennessee also has a good median average weekly wage and a growing population. Nashville, therefore, is one of the fastest-growing rental markets in the US. Plus, Nashville is the state’s capital and a developed economic center. Tennessee doesn’t have a personal income tax either, attracting new residents from states with soaring taxes.

  • Home value index – $326,515
  • 1-year change – 9.8%
  • 1-year forecast – -1.0%
  • Median rent price – $1,700
  • Rental vacancy rate – 5.85%
  • State job opening rate – 4.2%
  • State population change – 0.8%
  • State average weekly wage – $1,022

Charlotte, North Carolina

With excellent business prospects and a significant 1-year home value jump, Charlotte is the 4th best place for real estate investors. North Carolina sees its population growing, and the state’s rental vacancy rate is reasonable. Charlotte, as the state’s top destination, is dedicated to attracting new businesses and expanding its industrial profile. The city also invests in infrastructure and has a clear strategy to grow. This makes it perfect for investors, even though the home prices have already jumped, meaning the returns won’t be too high.

  • Home value index – $290,402
  • 1-year change – 13.7%
  • 1-year forecast – -1.2%
  • Median rent price – $1,500
  • Rental vacancy rate – 6.14%
  • State job opening rate – 4.6%
  • State population change – 0.95%
  • State average weekly wage – $1,039

Boston, Massachusetts

Besides being a top destination in the US, Boston is also one of the best places to invest in real estate in the world. First, Boston’s home state Massachusetts is one of the best job markets in America. Massachusetts, moreover, has a low rental vacancy rate, while Boston’s metropolitan area offers over 50 colleges and universities. Boston is also an economic center, excellent for investing in offices or industrial buildings.

  • Home value index – $667,793
  • 1-year change – 3.9%
  • 1-year forecast – -1.7%
  • Median rent price – $2,950
  • Rental vacancy rate – 5.1%
  • State job opening rate – 4.1%
  • State population change – -0.02%
  • State average weekly wage – $1,488

Dallas, Texas

The 6th best place to invest in real estate is Dallas, Texas. The population of this city is expected to grow over the next five years. This is one of the main reasons why Dallas earned a spot here. Also, the average home value index is just above $250,000, so it’s a good choice for investors with low-to-medium starting capital.

  • Home value index – $250,227
  • 1-year change – 9.2%
  • 1-year forecast – -2.4%
  • Median rent price – $1,700
  • Rental vacancy rate – 7.16%
  • State job opening rate – 4.4%
  • State population change – 1.3%
  • State average weekly wage – $1,150

Orlando, Florida

Rental rates in Florida keep growing, albeit at a slower pace in 2020. The Sunshine State has always been an attractive destination, especially for single-family properties. Orlando is an especially great choice, thanks to its favorable location. Settled in the ‘sunbelt’ region, Orlando has nice beaches, a good climate, and lots of attractions. So, it’s definitely one of the best places to invest in real estate in Florida.

  • Home value index – $281,598
  • 1-year change – 8.7%
  • 1-year forecast – -1.6%
  • Median rent price – $1,600
  • Rental vacancy rate – 9.24%
  • State job opening rate – 4.4%
  • State population change – 1.12%
  • State average weekly wage – $1,029

Atlanta, Georgia

The average home value in Georgia is a bit above the $300,000 mark, while the median rent price is almost $1,800. In this state, the number of residents is expected to increase, whereas the rental vacancy rate is favorable. Combine this with Atlanta’s unique urban culture, strong transaction volume, and positive market forecasts and you’ll get one of the best places to buy an investment property this year.

  • Home value index – $320,025
  • 1-year change – 7.7%
  • 1-year forecast – -1.5%
  • Median rent price – $1,795
  • Rental vacancy rate – 6.14%
  • State job opening rate – 5.5%
  • State population change – 0.77%
  • State average weekly wage – $1,084

Los Angeles, California

The Golden State remains a top real estate market in 2020. Here, Los Angeles tops the list of the best places to buy a rental property in California. With a median home value index of over $750,000, California is among the most expensive places to invest, however. Meaning, it’s a tough market to profit from if your starting investment is low.

  • Home value index – $835,721
  • 1-year change – 9.5%
  • 1-year forecast – -0.4%
  • Median rent price – $3,500
  • Rental vacancy rate – 5.1%
  • State job opening rate – 3.9%
  • State population change – -0.18%
  • State average weekly wage – $1,466

Seattle, Washington

Our last pick for this list is also one of the best real estate markets in the world. Seattle has always been a favorite among real estate investors. Property prices in the Emerald City are soaring, just like the rental rates. Still, the rental vacancy rate in Washington is only 3.61%, while the population keeps growing. So, if you have a considerable starting investment, you can’t go wrong with purchasing a property in Seattle.

  • Home value index – $824,666
  • 1-year change – 7.5%
  • 1-year forecast – -1.7%
  • Median rent price – $2,600
  • Rental vacancy rate – 3.61%
  • State job opening rate – 3.9%
  • State population change – 1.05%
  • State average weekly wage – $1,482

Final Thoughts

There you have it — the best places to invest in real estate in the US. All these states and cities promise good returns and have high potential. With populations that grow and home values that improve, any of those can translate into a smart real estate investment. Just make sure to find something suitable for your budget and not too far away. After all, managing a rental property takes time. If an estate requires a plane ticket or hours of driving to reach, it’s best to go with another option.

References: PwC, Zillow, BLS, BLS, Census, Zillow, World Population Review, Pew

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