Location is arguably the most important factor when buying an investment property to rent out. Location determines the purchase price, the closing fees, the rental rate, the operating expenses, and - ultimately - the rate of return on your investment. Meanwhile, you cannot change the location of your property after purchasing it.
Here are the top 7 states to buy rental property:
- Florida: Best state for rental and airbnb properties
- Texas: Best state for rentals and appreciation
- Tennessee: Best state for first-time investors
- North Carolina: Best state for large portfolio investors
- California: Best state for income stability
- Georgia: Best state for institutional investment properties
How We Chose the Best States to Buy Rental Property
Choosing the top market for your investment strategy can be overwhelming. Usually it takes years of experience in the industry and in the local market to be confident that a certain state is a good location for investing in real estate. Property investors have to consider things like home values, appreciation, rental demand, rental rates, return on investment, and fit with their preferred strategy.
When selecting the 7 best states to buy rental property, we took into consideration:
- Fit with a particular investment strategy: Our experience in working with investors and our data confirm that it is possible to find profitable opportunities for any real estate strategy in every state on this list. However, it’s going to be much easier to get good deals in certain states for certain strategies.
- Affordability, profitability, and growth data: Our team reviewed tons of primary (in-house) and secondary (publicly available) data on property prices, real estate appreciation, rental rates, and profit margins to choose the best US markets.
- Investor experience: We work directly with investors every day and help them select a remote location for investing based on their strategies. We’ve used our investors’ experiences across the US market to rank the 7 best states.
- In-house agents’ expertise: Our network of in-house agents work exclusively with investors in their markets and have completed hundreds of successful transactions. We’ve worked closely with our agents to refine this list and confirm that each state is the best fit for the recommended strategy.
Florida: Best overall state for rental and airbnb properties
Florida is recommended as the best state for both Airbnb and traditional real estate investors because of its strong population growth and the high number of frequent visitors to major tourist attractions and beaches.
Florida real estate statistics include:
- Median home price: $458,000
- Monthly average short term rental income: $5,425
- Airbnb average daily rates (ADR): $250
- Airbnb average occupancy rate: 70%
- Average monthly long-term rental income: $1,950
As the second most visited US state and the third largest by population, it’s clear why Florida has emerged on top of our list of the best states to buy rental property for both strategies.
The beautiful beaches, the water sports, the beach resorts, the theme parks, the art scene, and the nightlife attract over 122 million domestic and foreign tourists per year.
The mild climate, the strong economy, and the snowbird communities make many - both young families with children and retired couples - choose to make Florida their home.
With average property prices ($405,489) just above the nationwide median home value ($356,026), the Florida real estate market is much more affordable for investors than other top locations for buying rental properties, especially for those with good investment property financing options.
If you’re thinking of going for the short term rental strategy, the Sunshine State has all the factors that make for the #1 location for this type of investment across the US market. Airbnb demand is strong year-round; Airbnb daily rates are above the average; appreciation is good (at 27% over the last 12 months); profitability is excellent; and the Florida short term rental laws are favorable.
The best Florida Airbnb markets include Miami Beach, Kissimmee, Key West, Daytona Beach, Clearwater Beach, and St. Petersburg.
Meanwhile, investors interested in long term rentals can invest in Florida with the same confidence that Florida Airbnb hosts have.
Florida experiences twice the national population growth rate (15.6% vs. 7.3% between 2010 and 2021); local wages compare well to the national average; monthly rental rates are high; more than a third (35%) of local residents choose to rent rather than buy a home; and Florida has some of the most landlord-friendly rental legislation in the US.
All this means that Florida is not simply a great Airbnb market but also an excellent state for starting a traditional rental business.
The best Florida cities for investing in a long term rental property include Miami, Orlando, Fort Lauderdale, Jacksonville, and Tampa.
Texas: Best state for rentals and appreciation
Texas is best for long-term traditional investors interested in great rent and property value growth. Appreciation in Texas has been above the national average and there has been a large influx of high quality employers and people moving to major cities in Texas.
Texas real estate statistics Include:
- Median home price: $320,000
- Monthly average short term rental income: $3,404
- Airbnb average daily rates (ADR): $180
- Airbnb average occupancy rate: 61%
- Average monthly long-term rental income: $1,750
As the second largest US state by population and one where 39% of local residents rent, Texas ranks as a prime location for investing in long term rental properties.
Some of the drivers that make Texas one of the top states to buy rental property include the growing economy and the strong labor market. Texas boasts the second largest economy nationwide, after California, standing at 9% of US GDP.
After an increase during the pandemic, the unemployment rate is back to a low level of 4.1%. The labor force is large at 14.6 million and diverse, working in oil and gas, mining, manufacturing, healthcare, services, and others.
This is a positive indicator for investors considering Texas traditional rental properties as it means that even if one economic sector takes a downturn, other sectors might be able to absorb the labor force.
At $63,826, Texas has a median household income comparable to the national average. This means that the population is not only employed but also well paid, so tenants are able to pay rent.
A great piece of news for Texas real estate investors is that the median home value in the Lone Star State is 12% below the US average, at $314,837. This makes the Texas housing market one of the more affordable ones, while rental rates perform well, compared to other states.
Importantly, Texas is one of the most landlord friendly states across the entire nation, which means that landlords and investors’ rights are largely protected in potential disputes with tenants.
Over the past year, residential real estate prices appreciated by 23% in Texas, which exceeds the national average. Combined with the positive economic outlook, this rate makes Texas an excellent market to invest in rentals that can be held for a long-time for appreciation.
The best cities in the State of Texas for buying long term rental properties with strong appreciation potential include Spring, Pasadena, Friendswood, and Houston.
Tennessee: Best state for first-time investors
Tennessee is a great market for first time vacation and traditional rental buyers because pricing is accessible, there is plenty of inventory and it has landlord friendly laws.
Tennessee real estate statistics include:
- Median home price: $305,600
- Monthly average short term rental income: $3,472
- Airbnb average daily rates (ADR): $175
- Airbnb average occupancy rate: 64%
- Average monthly long-term rental income: $1,650
While Tennessee is not in the top 10 biggest US states, it is still an excellent location for investing in both vacation rentals and long term rental properties, especially for first-time investors.
The main reason Tennessee is among the best states to buy rental property as a newbie is the low median property price. At a value of $305,613, this makes Tennessee real estate properties 14% cheaper than typical US homes, on average.
Affordability is a major factor for beginner investors, particularly considering the hot housing market from 2018 through 2022, with skyrocketing home prices in numerous markets.
Another reason why Tennessee is such a great place for buying your first short term or long term rental is the legislative situation of the local rental market.
Tennessee short term rental laws are generally conducive and do not prevent the growth of the vacation rental industry. Meanwhile, Tennessee long term rental regulations favor landlords over tenants. So even a beginner can navigate the local legislative scene with no trouble.
The main attractions which bring domestic and foreign tourists to Tennessee all year long include the music scene and culture (home to both Elvis Presley and country music), the Great Smoky Mountains, the delicious cuisine, and the whiskey.
The top Tennessee Airbnb cities include Pigeon Forge, Gatlinburg, and Sevierville.
Meanwhile, an important reason that makes Tennessee a good place to start investing in traditional rental properties is that as much as 35% of the local population rents, which automatically translates into strong rental demand.
Moreover, over the last year Tennessee real estate prices went up by 25%. Consequently, your investment property is likely to appreciate until you decide to sell it, bringing in a long term profit.
The best markets for buying a long term rental property in Tennessee include Chattanooga, Nashville, and Memphis.
North Carolina: Best state for large portfolio investors
North Carolina is a great state to build and expand a portfolio because while property prices are at a premium, returns are also above average on short-term and long-term rentals.
North Carolina real estate statistics include:
- Median home price: $324,650
- Monthly average short term rental income: $3,627
- Airbnb average daily rates (ADR): $180
- Airbnb average occupancy rate: 65%
- Average monthly long-term rental income: $1,800
North Carolina is the 9th most populous US state and the 11th largest state economy and it has a lot to offer to both long term tenants and short term guests.
The attractive beaches, the amazing nature, the generally mild climate, the water sports, the Great Rocky Mountains National Park, and the outdoor activity opportunities there bring as many as 45 million visitors per year. Many of these tourists choose North Carolina vacation rental properties over hotels due to the comfort, coziness, unique experiences offered by hosts, and - usually - the better daily rates.
The year-round influx of mostly domestic tourists has turned North Carolina into one of the top US markets for investing in an Airbnb property.
The favorable North Carolina short term rental laws are another positive factor which has contributed to the growth of the Airbnb industry in The Tar Heel State.
While many North Carolina cities offer profitable opportunities for buying a vacation rental property, the absolute best markets for this investment strategy include Banner Elk, Nags Head, and Boone.
Although in recent years many real estate inventors associate the North Carolina market with Airbnb opportunities, the state has equally attractive options to offer to traditional landlords too.
With median property prices of 9% below the US rate - at $324,649 and average monthly rent of $1,549, North Carolina long term rentals can easily bring positive cash flow and good return on investment.
About 36% of the local population chooses to rent vs. own a home, which guarantees a strong demand for traditional rental properties. Moreover, the state-level annual population growth rate of 1.1% exceeds the national average (0.4%), so the number of potential tenants is expected to continue rising in the coming years.
The North Carolina crime rate hovers around the national median, which is good news for both Airbnb hosts and landlords. After all, no one wants to visit, live, or invest in a location where people and properties are not safe.
Furthermore, the North Carolina rental legislation protects landlords more than tenants, which makes it an ideal location for buying a long term rental property.
The top North Carolina markets for the traditional rental investing strategy include Charlotte, Raleigh, and Asheville.
California: Best state for income stability
California is a market where you’ll likely experience negative cash flow on some investments, however these properties are great anchors for a portfolio with high appreciation and plenty of room for growth.
California real estate statistics include:
- Median home price: $898,900
- Monthly average short term rental income: $9,067
- Airbnb average daily rates (ADR): $390
- Airbnb average occupancy rate: 75%
- Average monthly long-term rental income: $2,400
Investors don’t probably need an explanation why California is one of the best states to buy rental property across the US housing market. Being #1 in all major categories - population size, state economy, and number of visitors - California has the perfect combination of factors to provide investors with the stability and reassurance they need to grow and diversify their rental property investment portfolios.
While the California real estate market has one of the highest median home values at $775,876, it still has plenty of profitable opportunities for both long term and short term rental investments.
The above-average property prices are compensated by the high average monthly rental rate of $2,949, which exceeds both the US nationwide average and the potential rental income in the majority of other states.
Similarly, California has one of the strongest traditional rental demands as a significant proportion of local residents - 46% - rent. When nearly half of the 39 million residents choose to rent rather than buy a home, this is a strong indication that landlords will continue benefiting from excellent demand for years to come.
As California boasts the largest US state economy, comprising a wide range of sectors, which continues to grow year after year, it will continue to attract more and more individuals and families with children to move to The Golden State in search of employment. Naturally, many of them will rent, at least initially.
In addition, the California median household income of $78,672 - well above the national average - means that tenants are able to afford the high rental rates and pay rent on time. This is a major indicator for current and future rental stability in the eyes of traditional landlords.
The top locations for buying long term rental properties in the California housing market include Sacramento, Escondido, and Long Beach.
Meanwhile, as the home of Airbnb, California has unsurprisingly become one of the absolutely most profitable locations for the short term rental strategy.
The warm weather, the beaches, the swimming and water sports, the resorts, the unique nature, the national parks, Disneyland, Universal Studios Hollywood, and the hundreds of other tourist attractions make California the most visited state in the US, with nearly 214 million domestic and foreign guests per year.
As we recover from the Covid-19 pandemic, the number of travelers to The Golden State is only expected to increase, which gives California Airbnb hosts confidence that Airbnb occupancy rate will remain high.
In the vacation rental industry, the state has become infamous with the strict California short term rental laws. However, many top markets retain relatively favorable regulations and allow non-owner occupied Airbnb rental properties.
Importantly, recent years have witnessed a slowdown in the adoption of restrictive vacation rental regulations in California, with some cities ever reversing previously adopted rules. So, stability can be expected in the California Airbnb rental market too, similar to the traditional rental market.
The top locations for investing in a California short term rental include Palm Springs, Coachella, and Temecula.
Georgia: Best state for institutional investment properties
Georgia is characterized by the uniformity of its single-family homes which makes it great for long-term and institutional investors. It also offers short-term rental investors scalable markets where multiple cabins can be managed by a single team, enabling larger STR portfolios.
Georgia real estate statistics include:
- Median home price: $321,400
- Monthly average short term rental income: $3,700
- Airbnb average daily rates (ADR): $168
- Airbnb average occupancy rate: 71%
- Average monthly long-term rental income: $1,849
Our team of in-house agents and other real estate experts has nominated Georgia as not only one of the best US states to buy rental property but also the best US market to buy like an institutional investor. This is the result of the unique investment opportunities which the State of Georgia offers.
The main factor which makes investing in real estate at large scale in Georgia feasible and profitable is the low home values. At the moment, the median property price in the Georgia real estate market is $321,400, which is 10% below the national average.
Importantly, Georgia has experienced an appreciation rate of 26% over the last year, which is above the US average and above the rate seen by most other domestic markets.
While residential property prices are affordable, especially for investors with access to loans with good terms, the average monthly rent is relatively high, at $1,849. This combination provides excellent opportunities for profitability for those to buy a number of long term rental properties in Georgia.
The fact that 38% of the local population rents, combined with Georgia being the 8th most populous state in the US, translates into strong demand for traditional investment properties.
Investing in Georgia long term rentals is particularly easy and hassle-free because of the landlord friendly legislation. If you are thinking of investing in multiple properties, you need to make sure that your investment portfolio is protected against various possible risks, like legal risk.
If you want to invest like an institutional investor, then it’s a smart move to diversify your strategy through buying both long term and short term rental properties.
What makes Georgia such a great location for imitating institutional investors is that both rental strategies are not only feasible and easy to implement but also very profitable.
The coastal beaches, the warm climate, Blue Ridge Mountains, Stone Mountain Park, and the Georgia Aquarium are just some of the tourist attractions that bring visitors year-round, making Georgia the 9th most visited state across the US.
The vacation rental investment strategy is easy to apply in the Georgia market as there are no state-wide Georgia short term rental laws, and many cities have enacted favorable regulations.
The top Georgia Airbnb locations include Morganton, Cherry Log, Ellijay and Blue Ridge.
If you’re thinking of starting or expanding your real estate investing portfolio, your best bet is to focus on the best states to buy rental property. Whether you’re interested in long term or short term rentals - or even fix and flips, these are the 7 US markets where you’ll benefit from the highest profit both in the short and long run.