When looking to buy an investment property, the state you choose can greatly impact your returns. Factors like property taxes, home prices, rental demand and more vary widely across the US. After comparing all 50 states, Texas and Tennessee consistently come out as the best places for real estate investing due to their strong job growth, high rental yields, affordable home prices and favorable taxes. With the help of population growth, a business-friendly environment and a central location, these states offer savvy investors stable cash flow and excellent appreciation potential.
Texas has high rental demand and fast home price growth
Texas has become a magnet for companies and workers seeking lower costs of living and doing business. Major employers like Tesla, Oracle and Hewlett Packard have all relocated there recently, bringing an influx of high-paying jobs. This is fueling strong demand for rental housing, allowing investors to command high rents. At the same time, home values are rapidly rising in major Texas metros like Austin, Dallas and Houston. Investors can achieve annual returns of 9-12% in these cities by cashing in on price appreciation and collecting monthly rent payments.
Tennessee boasts attractive yields and low property taxes
Major cities in Tennessee like Nashville and Memphis are experiencing rapid economic and population growth as more companies move in. There is huge demand for rental housing as new residents pour in. Cap rates, which measure annual rental income as a percentage of property value, range from 5-8% in Tennessee. This allows investors to achieve much higher yields than the national average. Property taxes are also low, thanks to the lack of state income tax in Tennessee. Investors keep more of their rental income and maximize returns.
Texas and Tennessee home prices are relatively affordable
Despite surging demand, home prices in top Texas and Tennessee markets remain affordable compared to other states. The median home price in Austin is $465k, while in Nashville it’s $349k. This compares favorably to over $1 million in cities like San Francisco and New York City. Investors can more easily purchase investment properties that cash flow in Texas and Tennessee. Appreciation potential also remains strong in these markets as home values have more room to climb.
For real estate investors searching for the optimal combination of cash flow and appreciation, Texas and Tennessee stand out as the best states to purchase investment property. Their thriving job markets, high rental demand and relatively low home prices provide the perfect backdrop to profit.