When buying a rental property, a real estate investor must consider carefully which state to invest in. States have different rental laws, for instance. Some are landlord-friendly states while others are not. The state’s economy and tourism industry also play a role in making money in real estate. All this being said, what are the best states to buy real estate?
The three best states to buy real estate are Florida, California, and North Carolina.
Florida
The Sunshine State has consistently been one of the best states to invest in real estate since the ’08 market crash. Buying a rental property in Florida, for traditional or Airbnb investing, will remain a profitable investment. There are four main reasons why.
For starters, Florida’s population, already situated as the third highest, is expected to increase. A lot of this growth is due to Florida’s robust economy. Florida’s economy is currently the fourth largest. It is expected to grow at the third highest rate. The state is also very affordable for real estate costs and overall cost of living. Finally, the state’s top-notch tourism industry is continuing to shatter new records. This will likely continue in the upcoming year.
The combination of these factors places Florida as one of the best states to buy real estate. The best cities to invest in Florida are Orlando and Tampa.
Orlando
- Median Property Price: $318,615
- Price Per Square Foot: $172
Traditional
- Rental Income: $1,559
- Cap Rate / Cash on Cash Return: 2%
Airbnb
- Rental Income: $2,379
- Cap Rate / Cash on Cash Return: 3%
- Occupancy Rate: 59%
Tampa
- Median Property Price: $350,435
- Price Per Square Foot: $187
Traditional
- Rental Income: $1,626
- Cap Rate / Cash on Cash Return: 2%
Airbnb
- Rental Income: $2,441
- Cap Rate / Cash on Cash Return: 4%
- Occupancy Rate: 52%
Both the Orlando and Tampa real estate markets are excellent places for making money in real estate. Despite their median property prices being higher than the $230,000 Florida median, they are inexpensive on the national level. They also have high averages for rental income and return on investment, ensuring positive cash flow real estate. Both cities are also expected to be a buyer’s market. Tourism is a huge factor for their Airbnb markets, particularly in the Orlando real estate market.
It’s no wonder both Orlando and Tampa are among the top ten markets to watch for.
California
The second of the best states to buy real estate is California. Despite its unaffordability, California remains one of the best states to invest in real estate. The key reason is its profitability. California markets are some of the most income-generating for both traditional and Airbnb investments. The state is generally a seller’s market, which allows sellers to make a high return on investment from a transaction. The Golden State’s renowned tech industry is also a trend expected to continue.
California’s most well-known markets, such as San Francisco and Los Angeles, are no longer the best markets to watch for. Instead, San Jose, and more affordable markets such as Bakersfield, are taking the spotlight.
San Jose
- Median Property Price: $973,046
- Price Per Square Foot: $649
Traditional
- Rental Income: $3,156
- Cap Rate / Cash on Cash Return: 1%
Airbnb
- Rental Income: $4,035
- Cap Rate / Cash on Cash Return: 2%
- Occupancy Rate: 58%
Bakersfield
- Median Property Price: $317,573
- Price Per Square Foot: $178
Traditional
- Rental Income: $1,477
- Cap Rate / Cash on Cash Return: 2%
Typical of the California housing market, which is among the best states to buy real estate, the San Jose and Bakersfield real estate market have high rental income averages. This provides ample opportunities for positive cash flow real estate. Both cities are among the top markets to keep an eye on, with San Jose mentioned in the annual PwC report and Bakersfield as the fourth highest in a Trulia report. The San Jose real estate market’s property prices remain high, as is expected of the Californian market. Bakersfield, however, is very affordable for the state.
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Related: The Most Affordable Neighborhoods to Buy Property in the Most Expensive Cities
North Carolina
North Carolina is the final entry on our list of the best states to buy real estate. While it may be an unexpected candidate for best state to invest in rental property for some, North Carolina rightly belongs on the list. Many of North Carolina’s markets have a very bright forecast heading into the new year. Of the top ten cities to watch by the PwC report, three markets are in the North Carolina real estate market.
North Carolina, like Florida, has a high population growth rate. It is 1.14 percent, which is well over the 0.07 national average. North Carolina is also one of the best states to buy real estate due to its affordability and strong economy. The best cities to invest in North Carolina are Raleigh and Charlotte.
Raleigh
- Median Property Price: $425,912
- Price Per Square Foot: $1,076
Traditional
- Rental Income: $1,505
- Cap Rate / Cash on Cash Return: 1%
Airbnb
- Rental Income: $2,283
- Cap Rate / Cash on Cash Return: 3%
- Occupancy Rate: 59%
Charlotte
- Median Property Price: $377,540
- Price Per Square Foot: $181
Traditional
- Rental Income: $1,465
- Cap Rate / Cash on Cash Return: 1%
Airbnb
- Rental Income: $2,292
- Cap Rate / Cash on Cash Return: 2%
- Occupancy Rate: 50%
As with many cities in the best states to buy real estate, Raleigh and Charlotte are both affordable and lucrative. Both cities have strong economies, especially in the tech field, which influences high population growth. The two cities are also projected to have high appreciation at 4 percent for Charlotte real estate and 3.9 percent for Raleigh real estate, according to a report from Realtor.com.
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