Are you looking for the top locations for your next investment property purchase? Well, you’ve come to the right place.
As a real estate investor, you should already know that location is one of the key determinants in terms of your profitability because it will affect your property price, taxes, maintenance costs, rental income, cap rate, CoC return, tenant pool, and whether you go traditional or Airbnb (related to Airbnb regulations and restrictions).
What makes a good location to invest in real estate?
Basically you want to buy an income property where you will face high demand from tenants. This means places with strong economies and well performing labor markets (in order to attract millennials and other working tenants), college towns (in order to attract student tenants), and quiet, safe locations (in order to attract retiree tenants).
In this sense, strong immigration (net inbound migration) is an excellent indicator that you are likely to experience an increase in demand for rental properties (as you have to accommodate all the new residents) and be able to charge a high rent compared to property prices. Luckily for real estate investors looking to diversity their portfolio – potentially with an out-of-state income property – recently United Van Lines, a leading full-service moving and storage company, has released the results of its 40th Annual National Movers Study. This study shows which US states went through the biggest inbound and outbound migration in 2016. Let’s see which states experienced the highest inbound moves in 2016 as these are the best states to buy real estate at the moment. As a real estate investor who might tend to be skeptical, you should keep in mind that United Van Lines is the largest mover of household goods, so its data is representative of nationwide migration trends.
Which are the best states to buy real estate in 2017?
Overall in 2016 the group which drove migration patterns was the retirees. People are moving from one state to another for retirement reasons at a pace which overtakes the migration of millennials towards urban centers. The elderly generally moved to the Mountain and Pacific West. Let’s have a look at the best states to buy real estate in 2017, on the basis of last year migration patterns.
1. South Dakota
According to the above-mentioned study, South Dakota is #1 among the best states to buy real estate this year as the most popular moving destination in 2016, with inbound migration reaching 68% and outbound migration at 32%. Importantly, inbound migration rose by 23% in the past 5 years, and this trend is likely to continue in the coming years. So, if you are looking for a location for your next investment property purchase, think seriously about South Dakota.
2. Vermont
The 2nd among the best states to buy real estate is Vermont, with results very close to South Dakota: 67% inbound and 33% outbound migration. According to data from Mashvisor’s investment property calculator, which does the real estate market analysis and gets the comps instead of you, Warren is the most profitable city for real estate investing in Vermont, based on CoC return and cap rate. The figures below are all for traditional – rather than Airbnb – rental strategy because new immigrants look for long-term rentals.
Warren
- Median Property Price: $250,000
- Rental Income: $2,150
- CoC Return: 7.0%
- Cap Rate: 11.9%
3. Oregon
Next in the ranking of the best states to buy real estate at the moment is Oregon, which benefits from a high number of people moving in. Waldport is the top city for a rental property in Oregon, which exhibits affordable property prices, as revealed from Mashvisor’s data.
Waldport
- Median Property Price: $193,000
- Rental Income: $1,530
- CoC Return: 4.8%
- Cap Rate: 8.5%
4. Idaho
Idaho is another top US state for buying an income property right now, with 65% inbound migration. Boise, on the other hand, is the best city to own a traditional rental property in Idaho. To choose the right neighborhood in Boise, you can use Mashvisor’s rental property calculator.
Boise
- Median Property Price: $419,000
- Rental Income: $1,450
- CoC Return: 1.8%
- Cap Rate: 4.8%
5. South Carolina
If you think an investment property in the 5th among the best states to buy real estate – South Carolina – is the right choice for you, consider Charleston. This city has the highest CoC return and cap rate in the state.
Charleston
- Median Property Price: $300,000
- Rental Income: $1,540
- CoC Return: 3.7%
- Cap Rate: 6.6%
6. Washington
Washington State is the next one in this list of states where you want to be buying an investment property in 2017. The top city according to Mashvisor’s calculator is Vancouver.
Vancouver
- Median Property Price: $244,000
- Rental Income: $1,180
- CoC Return: 3.1%
- Cap Rate: 5.6%
7. District of Columbia
Considering its political and social importance, no wonder that District Columbia is among the best states to buy real estate at the moment. While the median property price in Washington, DC is rather high compared to the other top states, the rental income for traditional is also higher than in other places.
Washington, DC
- Median Property Price: $634,000
- Rental Income: $2,530
- CoC Return: 2.6%
- Cap Rate: 5.0%
Related: Washington DC Real Estate Investing: Should You Jump In?
8. North Carolina
#8 among the best states to buy real estate is North Carolina, with Chapel Hill being the top city there.
Chapel Hill
- Median Property Price: $363,000
- Rental Income: $1,790
- CoC Return: 3.4%
- Cap Rate: 7.0%
9. Nevada
Inbound migration in Nevada reached 58% in 2016, which placed it among the best states to buy real estate in 2017. No surprise, Las Vegas is the most profitable city for traditional income property here.
Las Vegas
- Median Property Price: $225,000
- Rental Income: $1,210
- CoC Return: 3.5%
- Cap Rate: 7.4%
Related: Airbnb Las Vegas: The City With No Off Season
10. Arizona
Last but not least, no real estate investor should underestimate Arizona as one of the best states to buy real estate at the moment. In Scottsdale, the best city for owning an income property in Arizona, property prices are reasonable, while the rental income is high.
Scottsdale
- Median Property Price: $465,000
- Rental Income: $2,870
- CoC Return: 4.7%
- Cap Rate: 7.6%
Related: Is Buying a Scottsdale Investment Property a Smart Choice?
As a real estate investor, you should always remember the importance of research for your business. Inbound and outbound migration data is an excellent source of information in your decision where to buy your next rental property. Make sure to use the ranking above of the best states to buy real estate for your investment decisions in 2017.