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7 Best States to Invest in Real Estate

2023

Last Updated: September 07, 2023

Written by

Kyle Adam, BComm

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Sarah Ure

Sarah Ure, BA, JD

Sarah Ure is a Legal Writer at LawDepot. Sarah has undergraduate degrees in English and Psychology from the University of Calgary, as well as a Law degree from the University of Victoria. During her clinical terms at law school, Sarah was fortunate to help low-income clients in many different areas of law, including criminal law, family law, wills & estates, landlord & tenancy law, and environmental law. Sarah completed her articles in Toronto in 2015, then moved back to Alberta to begin her legal career. She worked with the Elizabeth Fry Society providing legal information to low-income clients, and later as a criminal defence lawyer, before being hired by LawDepot in 2019. Sarah is called to the bar in Ontario and Alberta. Sarah is a huge proponent of access to justice, and she is proud to use her legal and writing skills to create comprehensive, high-quality legal templates, available to people at a reasonable cost.

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Real estate investing is the practice of purchasing real estate and selling or renting it to make a profit. Not all states have the same real estate investment opportunities. Factors like home price, population and job growth, taxes, and vacancy rates affect whether a state is ideal for investing.

State #1: South Carolina
State #2: Delaware
State #3: Idaho
State #4: Kentucky
State #5: Nevada
State #6: Tennessee
State #7: Florida
Final ranking of all states

What does “investing in real estate” mean?

Real estate investing is the practice of purchasing real estate, then selling or renting it to make a profit. Let’s break it down further:

In the case of a sale, an investor may flip a house, meaning they would buy at a lower price, renovate, and then put it back on the market at a higher price. Or, they may simply hold onto a property until the market conditions are favorable for a profitable sale.

Alternatively, an investor may rent out a property, whether it be residential or commercial, generating a stream of rental income that can be used to cover the property's expenses or as a source of reliable, passive income.

Investing in real estate can also mean investing in a real estate investment trust (REIT), a publicly-traded company that owns and manages real estate properties.

What makes a state good for investing in real estate?

For the purpose of this article, we picked five key metrics to come up with the top seven states:

Affordable home prices help investors enter the market and create opportunities to buy properties at lower prices and potentially sell them at higher prices in the future.
Population growth causes an increase in housing demand and can be great for those looking to rent or sell a property for profit.
Job growth means that more people move to a state looking for employment opportunities, which increases the population and housing demand.
Low property tax rates reduce the overall cost of owning real estate and increase the potential return on investment for real estate investors.
Low rental vacancy rates create a more stable rental market and increase demand for rental properties.

Recently, Forbes made a list of the top states people are moving to. Coincidentally — or perhaps not coincidentally — six out of the seven states on our list are also on Forbes’.

Our methodology

After determining which metrics to use to find the best states to invest in, we researched all the necessary statistics by looking at the following sources:

Next, to compile our list, we ranked all 50 U.S. states based on each metric and assigned points accordingly. For example, when we ranked the states on home affordability, the most affordable state got 50 points and the least affordable got one point.

After tallying up all the points, we had a final ranking of the best states to invest in real estate. Let’s take a look at the top seven states, in order by their total scores.

State #1: South Carolina

Typical home value 2022	$293k
Population growth July 2021-22	1.7%
Job growth February 2022-23	2.54%
Average property tax rate 2023	0.56%
Vacancy rate 2022	4.2%
Score	144 points
Sources: Seidman Research Institute , WalletHub , U.S. Bureau of Labor Statistics , U.S. Census Bureau , and Zillow Home Values Index

With a mild climate and 187 miles of beautiful coastline along the Atlantic Ocean, we are starting off our list with South Carolina. We think it presents promising opportunities for real estate investment in 2023.

Last year, the typical home value in South Carolina was $293,445, which is affordable compared to other states. Of course, some cities and towns are cheaper than others.

South Carolina also boasts a favorable property tax rate, with an average property tax rate of 0.56% in 2023. This low tax rate means that investors can enjoy better returns on their investments, making the state a more attractive option for real estate investment.

Additionally, the state's resident population grew by 1.7% from July 2021 to July 2022, indicating a demand for housing. Moreover, the state's rental vacancy rate was 4.2% in the third quarter of 2022, suggesting a healthy demand for rental properties.

The state also experienced a significant increase in job growth, with a 2.54% rise from February 2022 to February 2023, indicating a strong economy that can support property investments.

State #2: Delaware

Typical home value 2022	$355k
Population growth July 2021-22	1.4%
Job growth February 2022-23	2.43%
Average property tax rate 2023	0.58%
Vacancy rate 2022	3.7%
Score	129 points
Sources: Seidman Research Institute , WalletHub , U.S. Bureau of Labor Statistics , U.S. Census Bureau , and Zillow Home Values Index

Next on our list, is another East Coast state — Delaware. It may not be as flashy as some of its nearby states, such as New Jersey and New York, but Delaware has a lot to offer for real estate investors.

One of the biggest reasons why Delaware is a good state to invest in real estate is its steady population growth. From July 2021 to July 2022, Delaware’s resident population grew by 1.4%.

Additionally, Delaware's job market has been growing steadily. From February 2022 to February 2023, there was a 2.43% increase in job growth, which is a promising indicator for the state economy.

Delaware also has a relatively low property tax rate compared to other states. In 2022, the average rate was 0.58%, which is lower than the national average of 1.1%. This can help investors keep their expenses down, ultimately increasing their return on investment.

Another reason why Delaware is a great state to invest in real estate is its low rental vacancy rate. In the third quarter of 2022, Delaware’s rental vacancy rate was 3.7% indicating a high demand for rental properties.

Finally, the typical home value in Delaware was $355,181 in 2022. Although much more than places like Kentucky, this is a reasonable price point for real estate investors, especially when you consider the economic growth and low property tax rate.

State #3: Idaho

Typical home value 2022	$476k
Population growth July 2021-22	1.8%
Job growth February 2022-23	3.01%
Average property tax rate 2023	0.63%
Vacancy rate 2022	4.3%
Score	128 points
Sources: Seidman Research Institute , WalletHub , U.S. Bureau of Labor Statistics , U.S. Census Bureau , and Zillow Home Values Index

Idaho, also known as the Gem State, is an excellent state for real estate investment. Idaho’s population grew by 1.8% from 2021 to 2022, the second-largest growth in the entire country, which is a significant factor in it making this list.

Idaho’s population is growing for a variety of reasons, one being that Idaho offers a relatively low cost of living compared to other states, making it an attractive and affordable option for those seeking a place to live and work. Another reason that Idaho may be growing is remote work as more individuals choose to reside in rural areas like Idaho instead of urban centers.

There was a 3.01% increase in job growth from 2022 to 2023. Boise, the capital city, and Coeur d'Alene, a popular tourist destination, are two major metropolitan areas that are driving this growth.

The typical home value in Idaho is $476,198, which is higher than the national value of $354,639, but it is still an affordable state for investors.

Idaho's average property tax rate of 0.63% is also lower than many other states, which provides financial advantages to investors.

Furthermore, Idaho has a low rental vacancy rate of 4.3% in the third quarter of 2022, indicating that the demand for rental properties is high.

State #4: Kentucky

Typical home value 2022	$198k
Population growth July 2021-22	0.1%
Job growth February 2022-23	2.51%
Average property tax rate 2023	0.85%
Vacancy rate 2022	5.1%
Score	128 points
Sources: Seidman Research Institute , WalletHub , U.S. Bureau of Labor Statistics , U.S. Census Bureau , and Zillow Home Values Index

Kentucky had a decent increase of 2.51% in job growth from 2022 to 2023. However, Kentucky made our list due to its extreme home affordability and low property tax rates.

Kentucky has the lowest typical home value on our list at $197,644, making it an extremely affordable state for investors looking to buy property. Moreover, the state's average property tax rate of 0.85% is lower than many other states, offering tax benefits to investors.

In addition, Kentucky's rental vacancy rate was 5.1% in the third quarter of 2022, indicating that demand for rental properties is high.

State #5: Nevada

Typical home value 2022	$485k
Population growth July 2021-22	1.0%
Job growth February 2022-23	5.19%
Average property tax rate 2023	0.55%
Vacancy rate 2022	5.9%
Score	125 points
Sources: Seidman Research Institute , WalletHub , U.S. Bureau of Labor Statistics , U.S. Census Bureau , and Zillow Home Values Index

Nevada made the list due to its impressive growth in jobs and extremely low property tax rate.

With a staggering 5.19% increase in job growth from 2022 to 2023, Nevada leads the country in job creation. Major metropolitan cities like Las Vegas and Reno are driving this growth, with their thriving tourism and entertainment industries.

In 2022, the typical home value in Nevada was $484,530, which is much higher than the national value of $354,639, but is still affordable compared to other states with similar job growth rates.

Nevada's average property tax rate of 0.55% is the fourth-lowest in the country, offering tax benefits to investors. Moreover, Nevada's rental vacancy rate was 5.9% in the third quarter of 2022, indicating that demand for rental properties is high. In addition, 43% of Nevada households are renter-occupied, so finding a renter to lease an investment property shouldn’t be tough.

Besides all the impressive statistics, Nevada is home to impressive desert landscapes and many outdoor recreational areas, including Lake Tahoe and Red Rock Canyon. In addition, Nevada’s overall cost of living is only 4.9% higher than the national average.

State #6: Tennessee

Typical home value 2022	$298k
Population growth July 2021-22	1.2%
Job growth February 2022-23	3.15%
Average property tax rate 2023	0.66%
Vacancy rate 2022	7.8%
Score	125 points
Sources: Seidman Research Institute , WalletHub , U.S. Bureau of Labor Statistics , U.S. Census Bureau , and Zillow Home Values Index

Second to last on our list is Tennessee. It made our list because it scored quite well for its job growth and low property tax rate. Besides those factors, we think it provides profitable opportunities for real estate investors.

Tennessee has seen a 3.15% increase in job growth from 2022 to 2023, which has led to an increase in population. As people move to Tennessee to take advantage of employment opportunities, the demand for housing increases.

From 2021 to 2022, Tennessee’s population grew by 1.2%. More specifically, the state's major metropolitan areas, including Nashville and Knoxville, have experienced significant population growth in recent years, which has driven demand for housing and increased property values.

Tennessee’s average property tax rate is 0.66%, which is lower than many other states. Additionally, the state has an affordable cost of living that is 10% lower than the national average, making it an attractive location for individuals and families looking to relocate.

The typical home value in Tennessee is $297,943, which is lower than the national average, making it an affordable state for investors.

The rental vacancy rate in Tennessee was 7.8% in the third quarter of 2022, which is relatively low compared to other states.

State #7: Florida

Typical home value 2022	$416k
Population growth July 2021-22	1.9%
Job growth February 2022-23	4.23%
Average property tax rate 2023	0.86%
Vacancy rate 2022	7.6%
Score	118 points
Sources: Seidman Research Institute , WalletHub , U.S. Bureau of Labor Statistics , U.S. Census Bureau , and Zillow Home Values Index

Rounding out our list is Florida — the Sunshine State. It scores well on things like population and job growth, but there are plenty of other reasons why it’s a great place to invest in real estate. In addition, Florida is considered a landlord-friendly state.

Florida has 1,350 miles of coastline which is the second-largest length of coastline out of all 50 states. Within that impressive stretch of coast is 825 miles of stunning beaches. It’s no surprise that many consider it a place worth investing in real estate.

However, some people may argue that having that much coastline makes Floridians susceptible to extreme weather events. If you’re looking to make a real estate investment in Florida, perhaps consider this risk and how it will affect things like home insurance.

A key factor in Florida being included on this list is its job growth rate increasing by 4.23% from 2022 to 2023. The increased number of jobs creates a demand for housing, which makes it easier to sell real estate or rent out properties.

Due to the warm, sunny climate, those buying property in Florida should expect to pay a little more for a home, especially in metropolitan areas like Miami, Fort Lauderdale, Orlando, and Tampa. The typical home value in Florida is $415,762 which is about $60,000 above the national average.

With an increase of 1.9%, Florida had the highest percentage of population growth in the United States from 2021 to 2022. This growth is impressive when other states, like New York, experienced a 0.9% decrease in population.

Additionally, Florida's property tax rate of 0.86% is lower than the median national average, providing an additional financial advantage to investors.

With all these factors in mind, investing in real estate in Florida is a smart choice for investors looking for a thriving market with promising growth potential.

Final ranking of all states

Rank	State	Score
1	South Carolina	144
2	Delaware	129
3	Idaho	128
4	Kentucky	128
5	Nevada	125
6	Tennessee	125
7	Florida	118
8	Georgia	116
9	New Mexico	116
10	Kansas	115
11	Oklahoma	115
12	Utah	115
13	North Carolina	114
14	Virginia	113
15	Alabama	112
16	Arkansas	110
17	Mississippi	110
18	Montana	110
19	Wyoming	110
20	West Virginia	107
21	Indiana	106
22	South Dakota	106
23	Texas	106
24	Pennsylvania	105
25	Alaska	104
26	Louisiana	101
27	Oregon	101
28	Washington	99
29	Michigan	98
30	Arizona	96
31	North Dakota	96
32	California	94
33	Hawaii	93
34	Ohio	92
35	Colorado	91
36	Nebraska	91
37	New Hampshire	90
38	Maine	89
39	Wisconsin	89
40	Maryland	87
41	Minnesota	85
42	Missouri	85
43	New York	85
44	Connecticut	78
45	Iowa	77
46	Vermont	74
47	Illinois	71
48	Massachusetts	71
49	New Jersey	69
50	Rhode Island	55