The Best Places to Invest in Real Estate

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. However, it 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 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, the 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.

 

State Median Home Value in $ HVI 1-Year Change Forecast in % Median Rental Rates in $ 2019 Rental Vacancy Rate in % 2019 Homeownership Rate in % Population Change 2018-2019 in %
Alabama 147,900 -1.1 989 16.1 70.7 0.3
Alaska 276,100 -4.8 1,529 14.6 62.6 -0.5
Arizona 241,100 -0.5 1,375 8 65.8 1.7
Arkansas 133,100 -1.7 875 12.7 65.3 0.3
California 546,800 -1.1 2,542 7.4 54.8 0.1
Colorado 373,300 -1.7 1,751 6.5 64.7 1.2
Connecticut 277,400 -2.3 1,474 8.3 64.3 -0.2
D.C. 640,783 -2.1 2,358 10.6 73.1 0.6
Delaware 255,300 -2.9 1,373 10.5 40.2 0.9
Florida 230,600 -1.5 1,620 11.9 66 1.1
Georgia 189,900 -1.5 1,360 10.2 64.4 1.0
Hawaii 631,700 -2.8 2,333 15.2 60 -0.3
Idaho 233,100 -0.2 1,271 7.7 70.6 2.1
Illinois 203,400 -2.4 1,563 9.2 65.1 -0.4
Indiana 147,300 -1.3 1,031 8.9 69.5 0.5
Iowa 152,000 -2.1 941 8.1 69.5 0.2
Kansas 159,400 -1.6 944 10.8 69.2 0.1
Kentucky 148,100 -1.5 1,000 9.4 69.5 0.1
Louisiana 167,300 -2.1 1,110 14.4 65.6 -0.2
Maine 197,500 -0.4 1,436 8.7 73.8 0.4
Maryland 324,800 -2.1 1,674 9.5 68.8 0.2
Massachusetts 400,700 -1.4 2,211 6.3 61.3 0.1
Michigan 162,500 -1.1 1,196 8.7 73
Minnesota 235,400 -1.4 1,409 5.6 71.4 0.6
Mississippi 123,300 -1.9 986 13.2 72.7 -0.2
Missouri 162,600 -1.7 945 11.4 69.1 0.3
Montana 249,200 -1.4 1,268 8.3 68.7 0.8
Nebraska 161,800 -1.4 1,062 7.4 68.2 0.5
Nevada 292,200 -1.3 1,380 9.6 58.2 1.7
New Hampshire 270,000 -0.8 1,591 8 75 0.5
New Jersey 344,000 -2.1 1,837 6.5 65
New Mexico 174,700 -1 1,169 11.6 67.4 0.2
New York 325,500 -2.2 2,221 9.4 52 -0.4
North Carolina 180,600 -1.3 1,211 11.9 65.1 1.0
North Dakota 198,700 -2.2 1,006 12.4 61.4 0.5
Ohio 151,100 -1.4 1,033 8.2 68.2 0.1
Oklahoma 140,000 -1.2 894 13.3 68.8 0.4
Oregon 341,800 -1.5 1,559 6.5 62.4 0.9
Pennsylvania 186,000 -1.7 1,273 9.2 69.2
Rhode Island 273,800 -1.6 1,443 9.2 63.8 0.1
South Carolina 170,800 -1.7 1,245 14.5 72.6 1.3
South Dakota 171,500 -1.6 968 8.4 69.5 0.7
Tennessee 177,500 -0.9 1,190 10.9 68.8 0.8
Texas 186,000 -1.9 1,359 10.6 62.4 1.3
Utah 303,300 -1.2 1,441 5.1 71.9 1.7
Vermont 233,100 -2 1,668 8.7 70.9 -0.1
Virginia 281,700 -1.9 1,606 10.1 67.6 0.4
Washington 373,100 -0.5 1,825 5.9 63.8 1.2
West Virginia 121,300 -2.3 866 12.5 75.6 -0.7
Wisconsin 188,500 -1.6 1,115 6.4 66.1 0.3

 

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.

 

State Y-O-Y Employment Percent Change 2019 Unemployment Rate Q4 2019 Average Weekly Wage in $ December 2019 job Openings in Thousands
Alabama -7.8 3 985 92
Alaska -12.4 6.1 1,139 16
Arizona -5.7 4.7 1,059 132
Arkansas -7.1 3.5 898 59
California -13 4 1,457 739
Colorado -8.5 2.8 1,227 117
Connecticut -14.9 3.7 1,383 65
D.C. -8.4 5.5 1,992 29
Delaware -15.6 3.8 1,136 22
Florida -9.5 3.1 1,044 422
Georgia -8.8 3.4 1,090 228
Hawaii -20.1 2.7 1,053 30
Idaho -5.9 2.9 918 35
Illinois -12.1 4 1,221 267
Indiana -10.7 3.3 969 140
Iowa -11 2.7 984 74
Kansas -7.7 3.2 959 65
Kentucky -14.8 4.3 955 86
Louisiana -11.9 4.8 993 85
Maine -13.8 3 955 28
Maryland -11.9 3.6 1,271 139
Massachusetts -16.4 2.9 1,511 149
Michigan -19.2 4.1 1,115 225
Minnesota -12.8 3.2 1,177 121
Mississippi -7.5 5.4 818 49
Missouri -9.8 3.3 1,010 120
Montana -8.6 3.5 918 23
Nebraska -7.1 3 969 50
Nevada -17.3 3.9 1,030 62
New Hampshire -14.6 2.5 1,192 31
New Jersey -16.5 3.6 1,332 182
New Mexico -9.9 4.9 942 40
New York -18.3 4 1,499 392
North Carolina -11.1 3.9 1,036 276
North Dakota -9.5 2.4 1,085 23
Ohio -13.6 4.1 1,037 252
Oklahoma -7.3 3.3 945 76
Oregon -11.7 3.7 1,100 94
Pennsylvania -14.3 4.4 1,143 277
Rhode Island -15.9 3.6 1,099 22
South Carolina -8.8 3.9 931 97
South Dakota -7.5 3.3 916 20
Tennessee -8.5 3.4 1,047 134
Texas -7.2 3.5 1,187 496
Utah -4.8 3.7 1,185 /
Vermont -17.1 2.6 1,022 69
Virginia -9.1 2.4 987 17
Washington -11.8 2.8 1,204 209
West Virginia -12.7 4.3 1,370 136
Wisconsin -13 4.9 904 39

 

Top Five Places to Invest in Real Estate

Now that we have all the necessary figures, it’s time to list the five 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 than the states coming in next.

 

1. Utah

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

  • Median sale price – $342,833
  • Rental vacancy rate – 5.1%

Utah is 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.

 

2. 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 – $416,000
  • Rental vacancy rate – 6.5%

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.

 

3. 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 – $289,667
  • Rental vacancy rate – 7.7%

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.

 

4. Washington

Washington is the 3rd best real market for real estate investing in the US. Those who want to invest here should consider Bellevue, Redmond, Kirkland, and Tacoma as reliable options.

  • Median sale price – $442,083
  • Rental vacancy rate – 5.9%

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.

 

5. 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 – $273,583
  • Rental vacancy rate – 8%

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.

 

5 Worst Places to Buy Rental Property

 

1. Michigan

Michigan is the worst US state for real estate investing. The Great Lake State has a terrible y-o-y employment change, a high rental vacancy rate, 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 – $184,417
  • Rental vacancy rate – 8.7%

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.

 

2. Kentucky

Kentucky comes in as the 2nd worst destination for purchasing properties. The state’s especially weak spots are the low median home value and the low population change of only 0.15%. With insignificant population growth, the Bluegrass State’s real estate market isn’t expected to grow either.

  • Median sale price – $187,750
  • Rental vacancy rate – 9.4%

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.

 

3. 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 just under $200,000, making it affordable. Still, the possible returns and circumstances send a strong ‘avoid’ signal.

  • Median sale price – $197,083
  • Rental vacancy rate – 13.2%

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

 

4. Louisiana

With a YOY population change of -0.23, things aren’t looking good for Louisiana. This negative population change made it impossible for the destination to rank better in this rundown of the best real estate markets. 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 – $234,000
  • Rental vacancy rate – 14.4%

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

 

5. 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 $121,300. Compare this figure against the median home value of $640,783 in D.C. Plus, the rental vacancy rate in West Virginia is the 10th highest at 12.7%.

  • Median sale price – $200,583
  • Rental vacancy rate – 12.5%

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.

 

1. 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 – $401,999
  • 1-year change – 5.4%
  • 1-year forecast – -0.7%
  • Median rent price – $1,750
  • Rental vacancy rate – 7.55%
  • State job growth – -7.2%
  • State population change – 1.3%
  • State average weekly wage – $1,187

 

2. Raleigh and Durham, North Carolina

If your investment is under $300,000, Raleigh and Durham in North Carolina are 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, Raleigh/Durham would be a top spot for real estate investors.

  • Home value index – $290,270
  • 1-year change – 2.9%
  • 1-year forecast – -1.7%
  • Median rent price – $1,495
  • Rental vacancy rate – 5.03%
  • State job growth – -11.1%
  • State population change –1.0%
  • State average weekly wage – $1,036

 

3. 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 – $289,142
  • 1-year change – 5.1%
  • 1-year forecast – -1.0%
  • Median rent price – $1,700
  • Rental vacancy rate – 5.85%
  • State job growth – -8.5%
  • State population change – 0.8%
  • State average weekly wage – $1,047

 

4. 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 – $252,438
  • 1-year change – 5.3%
  • 1-year forecast – -1.2%
  • Median rent price – $1,500
  • Rental vacancy rate – 6.14%
  • State job growth – -11.1%
  • State population change – 1.0%
  • State average weekly wage – $1,036

 

5. 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 has the best job market 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 – $644,743
  • 1-year change – 2.4%
  • 1-year forecast – -1.7%
  • Median rent price – $2,950
  • Rental vacancy rate – 3.42%
  • State job growth – -16.4%
  • State population change – 0.1%
  • State average weekly wage – $1,511

 

6. 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 under $230,000, so it’s a good choice for investors with a low starting capital.

  • Home value index – $226,145
  • 1-year change – 1.9%
  • 1-year forecast – -2.4%
  • Median rent price – $1,700
  • Rental vacancy rate – 7.16%
  • State job growth – -7.2%
  • State population change – 1.3%
  • State average weekly wage – $1,187

 

7. Orlando, Florida

Rental rates in Florida keep growing, noting a significant 6% jump in 2019. Florida has always been an attractive destination, especially for single-family properties. Orlando is an especially great choice, thanks to its favorable location. Settled on 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 – $260,915
  • 1-year change – 3.4%
  • 1-year forecast – -1.6%
  • Median rent price – $1,600
  • Rental vacancy rate – 9.24%
  • State job growth – -9.5%
  • State population change – 1.1%
  • State average weekly wage – $1,044

 

8. Atlanta, Georgia

The average home value in Georgia nearly hits 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 – $299,308
  • 1-year change – 3.4%
  • 1-year forecast – -1.5%
  • Median rent price – $1,795
  • Rental vacancy rate – 6.14%
  • State job growth – -8.8%
  • State population change – 1.0%
  • State average weekly wage – $1,090

 

9. 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 – $752,508
  • 1-year change – 5.8%
  • 1-year forecast – -0.4%
  • Median rent price – $3,500
  • Rental vacancy rate – 5.1%
  • State job growth – -13%
  • State population change – 0.1%
  • State average weekly wage – $1,457

 

10. 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 – $767,906
  • 1-year change – 2.2%
  • 1-year forecast – -1.7%
  • Median rent price – $2,600
  • Rental vacancy rate – 3.61%
  • State job growth – -11.8%
  • State population change – 1.2%
  • State average weekly wage – $1,370

 

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

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