The best states to buy rental property can be hard to find. You might think that all you have to do is look at the average home price and property tax rates, but there are many factors that go into determining which state or city will give you the best return on your investment. We’ve tracked the data to see exactly which states will give you the highest ROI and best cash flow, without burdening you with hard landlord laws or excessive taxes.
By this stage, you’ve done your preliminary research about different ways to earn passive income. You’ve compared REITs vs rental properties, investigated the different types of rental properties, and are now ready narrow in on the best state (for you) to buy a rental property.
Ready to start your real estate investing research? Keep reading!
Why are these the best states to buy rental property?
With the real estate market on a roller coaster ride, it’s hard to know where to invest your money. But, real estate investing isn’t a guessing game. After you’ve nailed down which type of rental property you want to invest in, a few key factors can easily show which rental property markets make the most sense, and which you should stay away from.
These are (some of) the most important factors to analyze a rental property market, and it’s how we’ll be ranking this list:
- Population Growth: Is the area growing or shrinking? Growth = Good
- Job Growth: Are jobs being added to this market? Growth = Good
- Unemployment Rate: Are citizens regularly employed (can they pay rent)? Lower = Better
- Price-to-Rent Ratio: How much yearly rent do you get per dollar of house you buy? Lower = Faster Property Payoff
- Property Tax Percentage: How much do you need to pay in property taxes? Lower = Better
- Landlord/Tenant-Friendly Laws: Are evictions easy? Is there imposed rent control? Will the state make managing a rental property easy? Yes = Good
These are some of the basic factors you can look at when determining whether or not a market is worth investing in.
So where are the best markets in the country?
11 Best States to Buy Rental Property
These states offer some of the best returns, laws, and prices for landlords. If you’re looking to buy a rental property out of state, this list will be VERY useful to you. We’ll go over why you should buy there, some housing market stats, and the top cities in the area.
1. Alabama
Why Buy Property in Alabama?
Alabama has long stood as a great real estate investing area. With multiple large cities, solid population growth, and affordable housing, there is a good reason why investors flock to this southern state to invest.
Alabama Housing Market Stats
- Population growth: +0.35%
- Job growth: +1.9%
- Unemployment rate: 2.6%
- Price-to-rent ratio: 20.8
- Property taxes: 0.41%
- Landlord friendly: Yes
Top Cities to Buy a Rental Property in Alabama:
The best cities to invest in Alabama are Huntsville, Birmingham, Mobile, and Montgomery.
2. Florida
Why Buy Property in Florida?
With its exploding population growth, lack of state taxes (if you live there), and landlord-friendly laws, Florida is one of the best rental property states in the nation.
Florida Housing Market Stats
- Population growth: +0.84%
- Job growth: +2.57%
- Unemployment rate: 2.7%
- Price to rent ratio: 16
- Property taxes: 0.89%
- Landlord friendly: Yes
Top Cities to Buy a Rental Property in Florida:
Some cities worth investing in the sunshine state are Tampa, Sarasota, Orlando, and Jacksonville.
3. Georgia
Why Buy Property in Georgia?
The peach state offers more than just fresh fruits, barbeque, and good rap music. You can also find some serious rental property returns as well!
Georgia Housing Market Stats
- Population growth: +0.93%
- Job growth: +1.17%
- Unemployment rate: 2.8%
- Price to rent ratio: 19
- Property taxes: 0.92%
- Landlord friendly: Yes
Top Cities to Buy a Rental Property in Georgia:
Some great cities to invest in would be Cumming, Peachtree City, Buford, and Woodstock.
4. Idaho
Why Buy Property in Idaho?
Could investing in the land of potatoes be profitable? You bet! With a big jump in population and jobs over the past two years, Idaho is looking more like a scalable real estate state and less like a starchy potato producer.
Idaho Housing Market Stats
- Population growth: +1.87%
- Job growth: +4.32%
- Unemployment rate: 2.7%
- Price-to-rent ratio: 22
- Property taxes: 0.69%
- Landlord friendly: Yes
Top Cities to Buy a Rental Property in Idaho:
Cities like Rexburg, Pocatello, Meridian, and (of course) Boise are hotspots for high rents and, by association, rental property investors.
5. Indiana
Why Buy Property in Indiana?
As one of the most affordable Midwest states, Indiana has become a strong rental property market thanks to its growing population, job scene, and competitive tax climate.
Indiana Housing Market Stats
- Population growth: +0.60%
- Job growth: +1.53%
- Unemployment rate: 2.8%
- Price-to-rent ratio: 18
- Property taxes: 0.85%
- Landlord friendly: Yes
Top Cities to Buy a Rental Property in Indiana:
Gary, Fort Wayne, Lafayette, and Elkhart are some of the most popular rental property investing areas in Indiana.
6. Maryland
Why Buy Property in Maryland?
Maryland boasts a solid rental market, mostly due to their somewhat pricey homes and equally high property taxes. This isn’t great for you as an investor, but it does create strong rental property demand.
Maryland Housing Market Stats
- Population growth: +0.31%
- Job growth: -0.012%
- Unemployment rate: 4.3%
- Price to rent ratio: 24
- Property taxes: 1.09%
- Landlord friendly: Yes
Top Cities to Buy a Rental Property in Maryland:
Townson, Rockville, Hyattsville, and (if you have the stomach for it) Baltimore are some of the popular rental property areas in Maryland.
7. Michigan
Why Buy Property in Michigan?
Like lakes? Like forests? Like passive income? Then you’ll probably like Michigan. The state has a plentiful amount of investing options, from dirt-cheap Detroit to short-term rental-heavy Torch Lake.
Michigan Housing Market Stats:
- Population growth: -0.09%
- Job growth: +1.22%
- Unemployment rate: 4.1%
- Price to rent ratio: 16
- Property taxes: 1.54%
- Landlord friendly: Yes
Top Cities to Buy a Rental Property in Michigan:
Lansing, Grand Rapids, and if you want to buy houses for $5,000, (no, that’s not a joke) Detroit are some of the most popular cities for rental properties.
8. Missouri
Why Buy Property in Missouri?
Missouri is best known for its rental property-heavy cities of St. Louis and Kansas City. Thankfully, this state still offers relatively affordable rentals and high rents.
Missouri Housing Market Stats:
- Population growth: +0.18%
- Job growth: +0.66%
- Unemployment rate: 2.5%
- Price to rent ratio: 21
- Property taxes: 0.97%
- Landlord friendly: Yes
Top Cities to Buy a Rental Property in Missouri:
Kansas City, Joplin, Jefferson City, and St. Louis are all top picks for rental properties.
9. North Carolina
Why Buy Property in North Carolina?
North Carolina has seen a revival in popularity over the past few years. With tech jobs flooding the market, more workers are leaving the west coast and heading over to the Carolinas.
North Carolina Housing Market Stats:
- Population growth: +1.18%
- Job growth: +1.36%
- Unemployment rate: 3.5%
- Price to rent ratio: 21
- Property taxes: 0.84%
- Landlord friendly: Yes
Top Cities to Buy a Rental Property in North Carolina:
The Raleigh-Durham area, Winston Salem, Greensboro, and even small towns like Salisbury make great rental markets in North Carolina.
10. Ohio
Why Buy Property in Ohio?
Ohio, much like Indiana, has become another Midwest hotspot for rental property investors. With cities like Cincinnati seeing rent spikes, population growth, and even equity appreciation, Ohio remains an affordable, stable place to invest.
Ohio Housing Market Stats:
- Population growth: 0%
- Job growth: +0.67%
- Unemployment rate: 4%
- Price to rent ratio: 19
- Property taxes: 1.56%
- Landlord friendly: Yes
Top Cities to Buy a Rental Property in Ohio:
Cincinnati, Cleveland, Madison, and Columbus all offer strong reasons to invest in the Midwest.
11. Texas
Why Buy Property in Texas?
Like big hats? Yes! Like wearing boots? Yes! Like barbecue? Yes! Like unusually high property taxes? Not really! Thankfully, Texas makes up for its high property taxes with huge investment property opportunities in almost all of its big cities.
Texas Housing Market Stats:
- Population growth: 1.02%
- Job growth: +2.97%
- Unemployment rate: 4.1%
- Price to rent ratio: 16
- Property taxes: 1.80%
- Landlord friendly: Yes
Top Cities to Buy a Rental Property in Texas:
No surprise here, big cities like Dallas, Houston, and San Antonio all offer great investing opportunities. Sorry, Austin! You’re cool but WAY too expensive!
5 Worst States to Buy Rental Property
Want to not make any cash flow? Want to only bank on appreciation even though your state’s population is starting to tank? What about opening up your rental property to squatters who don’t pay? All of this (and more) is possible if you rent in any of these below states!
1. Illinois
With a shrinking population and sky-high property taxes, Illinois is pretty unattractive as a rental property market. Why not just go over to nearby Ohio or Indiana?
Illinois Housing Market Stats:
- Population growth: -0.427%
- Job growth: -0.432%
- Unemployment rate: 4.5%
- Price to rent ratio: 20
- Property taxes: 2.27%
- Landlord friendly: Yes
2. New York
If you love strict rent control, high crime, and an unresponsive government, New York is the perfect place to invest!
New York Housing Market Stats:
- Population growth: -0.294%
- Job growth: -0.835%
- Unemployment rate: 4.7%
- Price to rent ratio: 25
- Property taxes: 1.72%
- Landlord friendly: No
3. Hawaii
The beaches are beautiful, and the food is amazing, but the property prices…let’s just say unless you’re only after short-term rentals, it’ll be a little harder to make a profit in Hawaii.
Hawaii Housing Market Stats:
- Population growth: -0.142%
- Job growth: NA
- Unemployment rate: 4.1%
- Price-to-rent ratio: 34
- Property taxes: 0.28% (best in the US, actually!)
- Landlord friendly: No
4. California
Beaches and bridges. California is a great place to visit, and sometimes to live. But, it’s not the best of the bunch to invest in. With a population quickly leaving the state and high home prices, will there still be a strong California rental market in decades to come?
California Housing Market Stats:
- Population growth: -0.3%
- Job growth: +0.32%
- Unemployment rate: 4.1%
- Price to rent ratio: 27
- Property taxes: 0.76%
- Landlord friendly: No
5. New Jersey
New Jersey has long been a state that landlords stay away from. This is primarily due to their very strong renter laws and exceptionally high property taxes. But, it may also have to do with the fact that people there pronounce the word Coffee like Cah-fee.
New Jersey Housing Market Stats:
- Population growth: +0.078%
- Job growth: -0.043%
- Unemployment rate: 4%
- Price to rent ratio: 27
- Property taxes: 2.49% (Highest in the US!)
- Landlord friendly: No
Better States Mean High Returns
There’s no doubt that real estate is a lucrative industry and one of the best investments you can make. But where should you invest? If you’re considering buying rental property in any of the states listed above, we recommend doing your research first and looking at factors such as job growth, home prices, rental rates, and demographics before making any decisions.
Best States to Buy Rental Property FAQs
Hey! Did you scroll all the way down on this blog post just to see our TL;DR quick answers? It’s okay if you did. Here are some more answers to help you with your rental property search.
The best states for landlords are those that offer property tax and rent control laws that are friendly to real estate investors. Generally, these states also have good job markets and lower crime rates. Some of the most landlord-friendly states include Florida, Texas, Ohio, and Alabama. If you’re looking for a more detailed list of the best places in America for rental properties, scroll up!
The states with the biggest housing shortage are Florida and Texas. This is due to rising populations, increased demand for properties, and a lack of homes being built. If you’re looking at investing in rental properties in these states, make sure to do your research on the local market first!
Florida, Arizona, and North Carolina all experienced high appreciation over the past couple of years. Some averaged in the double digits, but with shifting markets, this type of appreciation may not be expected in the near future.
