the approved sign in front of the house

Amid rising inflation, it’s becoming more important than ever for investors to protect their wealth and continue taking measurable steps on the path to financial freedom. Real estate investment is by and large one of the most powerful vehicles to curb inflation and generate a stable recurring income that exists in today’s financial world.

When you’re investing in a real estate asset, they say location is everything. But it goes deeper than the typical “weather” and “taxes” argument commonly brought to the table. To ensure you’re making hard cash and maximizing capital preservation, investors must consider the overall picture of the real estate markets they plan to invest in.

But how do you know what you need to look out for? Which areas should you start searching? In this article, we’ll talk about the key elements of finding an investment rental property to match your goals, and the best locations to find these rentals so you can create stable bedding for your real estate investment future.

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How to Determine the Best States for Real Estate Investing?

Above all, remember that when deciding on the best real estate investing market for rental properties, your ideal market may not be the same as your neighbors’ or friends. Each market offers investors advantages depending on what their personal investment goals are. Whether you seek strong cash flow or long-term appreciation, there are plenty of markets in the United States which can cater to your desires.

Investors usually turn to four key pillars when they select an investment market. In most cases, the right balance leads to a successful investing environment.

Population Growth

Areas undergoing population growth tend to experience high rental occupancy due to a consistent and reliable demand for housing. High occupancy rates create conditions for reliable, stable cash flow and shields investors against the potential for rental property vacancies.

In contrast, investing in a state with a declining population makes it harder for rental property owners to find tenants. Moreover, the average property value in the area will drop, meaning it’s more challenging to sell at the end of your investment term.

Job Growth

When an area has good job growth, the population living there tends to earn higher incomes. This raises the average rent of the local market. It also reduces the investor’s risk of frequent rental payment defaults, which is more likely to arise in tight economic markets.

Generally, business-friendly states or those that limit corporate tax obligations also come with affluent tenants who can reliably pay the rent you’re asking.

Affordability

When real estate investors buy an affordable property, the rental income is likely to exceed the monthly mortgage repayments. The higher your rent-to-purchase ratio, the higher your cash flow after your loan repayments.

You can decipher whether an investment property is likely to be cash-flow positive by working out the capitalization rate. This is done by dividing the net operating income by the purchase price. If the cap rate is above 10%, you’re in a good zone. Many of the best real estate markets have low median home prices and a high median household income, making rental real estate in these areas ultra-affordable for investors.

Landlord Friendly Laws

Different states have laws that can make a landlord’s job easier or more challenging. For example, investing in states where it’s harder for landlords to collect rents or evict bad tenants can become a landlord’s nightmare.

In line with the last point, rental control laws make it challenging for landlords to charge fair market rent. When expenses increase, for instance, landlords cannot match rental values to reflect the increased costs in maintenance operations. In these areas, landlords risk running their properties at a loss – especially when inflation enters the conversation.

It pays to be thoroughly versed in the state laws in the real estate markets in which you choose to purchase an investment property. In this list, we’re going to give you an idea of some of the best states to get started!

Best States For Real Estate Investing

New Jersey

New Jersey is one of the most diverse real estate markets in the United States. Between single-family homes, urban high-rises, or beach-front abodes, New Jersey offers great real estate to diversify any investor’s portfolio.

The state comprises world-class infrastructure, including over 1,000 miles of freight lines connecting New Jersey industries and corporations with the rest of North America. As a result, the state sees a steady flow of incumbents moving to uptake growing job opportunities.

New Jersey’s median household income is over $85,000 and trending upwards. Furthermore, over the past decade the real estate markets have also been on an upward incline.

Scouring multiple properties in a market as diverse as New Jersey in search of the perfect investment can be a taxing job for investors with busy lives. People’s Capital Group offers a more accessible solution. We professionally invest in undervalued, high income-generating commercial real estate in New Jersey, with access to New York City.

This allows passive investors to forget about the hassle of market analysis, profitability calculations, and property management services associated with their investments. If you prefer a simplified investment, where you can access recurring income and gain equity in appreciable assets, invest with ,People’s Capital Group today.

Idaho

If you’re seeking appreciation, look no further than northwestern Idaho. Real estate investors have experienced exceptional appreciation in the value of their properties in recent years. This includes over 25.97% market appreciation in the last 12 months and a total of 142.15% in the past decade! These rates are not expected to slow down.

Idaho is seeing a trend of people moving out of large cities and into smaller ones, which is driving the suburban rental property markets. In areas like Boise, job growth sits at 2-3 times the national average, and unemployment is just 3.5%.

Additionally, Idaho offers investors fantastic rental income outlooks. The cost of living in Idaho is lower than the national standard, and people pay 14.1% above the national average for their housing.

Arizona

Arizona was the third-fastest state to recover from pandemic-related job loss in the US. Projections expect that there will be more than 700,000 new jobs in the market by 2030. A thickening economy makes the state attractive to real estate investors, as incumbent professionals and families will increase housing demand in the coming years.

Real estate appreciation has seen around a 20.5% increase in the past two years, though many local markets are higher-performing. At the beginning of the pandemic, Phoenix’s rising property prices reached a record $302,000. With Phoenix fast becoming a destination for those living in high-cost cities such as Seattle and Los Angeles, real estate investors from across the country are taking interest in this growing market.

Furthermore, Arizona is known for having laws that support landlords, and in 2021, legislators passed one of the most significant tax cuts in state history.

Maine

When you think of Maine, the first thing that comes to mind may be jagged coastlines and a peaceful lifestyle rather than metropolitan high-rise cities. This is what sets Maine apart as a drawcard for real estate investors!

The pandemic caused a surge of remote working opportunities, which has driven city-living professionals to move further afield and enjoy more spacious living opportunities that are not available in cities. Furthermore, New England residents are increasingly choosing Maine as a retirement destination of choice.

The overall percentage of workers in Maine may be lower than in other metropoles, although the median household income in the state remains just over $76,000. Median home prices have grown 21.78% in the past year and are now $305,000. These trends present investors with the chance to take advantage of appreciation and capitalize on an excellent rent-to-purchase ratio at the same time.

Texas

Texas may be one of the most obvious locations for several reasons. Known as a powerful hub to support new business growth, Texas has a stably growing economy that is not expected to slow down any time soon. With economic expansion comes strong population growth that will continue to climb for the foreseeable future.

Houston is the number one market for job creation in the United States, hosting the highest number of fortune 500 companies after New York. Massive international trade further boosts job growth in the state.

Over the past decade, median home values have doubled. Yet the city is still known for affordable real estate, comfortably sitting between 5-20% below fair market value. These figures are extremely appealing to Houston investors.

Dallas is another highly accessible Texan hub for real estate investment since the housing market has high stock and the rent-to-purchase price ratios are attractive. A diverse economy in Dallas means that housing demand exists on every level of the pay scale. Rental properties are typically 5-15% below market value and often renting is more affordable for residents than purchasing a property outright. Remote investors may find it trickier to find tenants than in some other areas, though the city’s population is expected to double in the next 15 years which will positively impact housing demand.

coins on the table

Florida

Between a flourishing tourism industry and high quality of life for residents, Florida is on nearly every out-of-state investor’s hotlist. Sunny Florida offers countless real estate investment opportunities state-wide and has a strong job growth rate in the leisure, tourism, and hospitality industries.

Florida has no state income tax, encouraging millions of individuals and businesses to move to this always-warm state. This includes a flow of venture capital firms moving business from Silicon Valley to Florida (more specifically, Miami). The Mayor of Florida recently launched a campaign to attract Web3 start-ups. With economic maneuvers like these comes an influx of high net-worth individuals. This is a strong drawcard for many real estate investors.

Florida State has over 80% residential occupancy with the average home costing around $300,000. However, in cities like Tampa and Lakeland, median home values are much lower.

Illinois

Chicago, Illinois, is in the top three largest metropolitan areas in the United States. It hosts a population of three million in the city, with 10 million residing in the surrounding areas. Home to 21 Fortune 500 companies, Chicago has a diverse and stable economy. Yet it still offers reasonably priced real estate.

Last year, more than 160,000 new jobs were created in Chicago. While this doesn’t beat the national average, employment opportunities will steadily grow each year in the foreseeable future.

Despite below-average job growth, the median home value is $287,000, which is also below average by about 10%. Average rent prices are above the national standard, sitting at approximately $1,730. Not bad for a city where around 50% of residents rent their property.

Across Illinois, the median home value has not risen since 2006 due to the state’s tough foreclosure laws. However, city residents are increasingly moving into suburban Chicago, so some local markets are steadily rising, and becoming desirable for hot-handed investors.

a modern city view

Alabama

Alabama, recognized for its warm climates and endless rivers, is another hot spot for real estate investors. With a population of five million, affordable housing and low living costs may be the perfect economic environment for your investment.

A steady employment base over a wide range of industries like healthcare, manufacturing, education, and public service is driving state-wide demand for single-family rental properties and residential real estate.

The median home value in Alabama is around $150,000 which is significantly below the others on this list. Furthermore, the state comes with high rental occupancy, sitting at 85%. Birmingham, home to many colleges and universities, has a lower median home value and a thriving market for student renters.

Who Can Help Me Find Investment Properties?

Once you’ve found a state to invest in to help you reach your investment goals, it’s time to look for the perfect property. So who can help you find it? There are so many places to look for investment properties, including the classic Zillow, but also many other listing services.

But these tend to come with higher competition, as they’re so readily accessible to real estate investors everywhere! Here are a few creative ways to find decent rental property investments in highly desirable markets, without having to face scores of competitors.

Professional Investors

Professional real estate investors are a clear choice to discover income-generating properties for several reasons. To get the most obvious point out of the way: it’s their job to find and invest in profitable real estate.

Professional investors have developed key industry connections with agents, brokers, developers, bankers, wholesalers, and off-market sellers over their careers. Rather than building these networks out-of-state from the ground up, it can be easier for investors to enlist the guidance of a professional to find their next investment.

Real estate professionals also have a sharp eye for a good deal, having already found and managed real estate investment projects successfully. They can save busy investors significant amounts of time and energy searching through the rental property market.

If you want to move ahead with your out-of-state investment, without the hassle of searching for and actively managing a property, get in touch with the investment experts at People’s Capital Group to get started.

a white house with a pool

Real Estate Agents

Local real estate agents are another great way to find an investment property out of state. They are knowledgeable about trends and projections in the real estate market they serve and can offer insights into certain locations that may present opportunities that match your strategy.

Of course, real estate agents often have powerful networks and insider information about the market where you’d like to invest. Plus, having somebody with their feet on the ground in your chosen market means you won’t miss out on a good deal.

Your Networks

Real estate investors commonly tap into their inner circle and professional networks when they search for prime real estate deals. By telling those you’re close to that you’re looking for an investment property in a specific location, you can potentially connect with sellers directly and avoid researching the housing market altogether!

Some investors choose to grow their networks on their own. This could be by joining local online meet-ups or social media groups specifically tailored to the needs of investors. Online investor groups offer a great way to learn about the concerns, methodologies, and successes of other investors just like you.

Summary

Hopping into the out-of-state real estate markets is an increasingly popular choice for real estate investors. When you search further afield, you can open yourself to significantly higher returns (or better conditions) than your state offers.

To get the most out of investments, rental real estate investors should learn about trends in the real estate market they have chosen to invest in. The job and population growth, median household income and average rent, and the local laws that regulate landlord and tenant activity are all critical factors to consider. Fortunately, there are still plenty of thriving markets across the US that offer ripe openings for investors with the time to research markets and find good deals.

However, many busy individuals don’t have the time to invest in real estate market research or find the right property from afar. Participating in professional real estate syndications is an easy solution for investors who still want access to lucrative opportunities in remote markets without the hassle of extensive research and management obligations. If you want to earn passive income streams without undergoing time-consuming market analyses, invest with People’s Capital Group today. We’ll help you get into historically profitable passive real estate investment opportunities the easy way!

Aaron Fragnito

Aaron Fragnito

Aaron has been helping people invest in Real Estate for over 10 years. He is a Co-Founder of Peoples Capital Group (PCG) a real estate investment and holding company. He is a full time real estate investor, as well as, the host of the New Jersey Real Estate Network and host of the Passive Cash Flow Podcast. Aaron has previously completed over 100 real estate transactions as a realtor and another 150 transactions in his current role as a real estate investor.

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