Real estate can provide a wonderful return on your investment. It is a stable, secure, and productive means of investing your money. But as with any sort of investment, optimizing the time and place to invest can be the key to really make the biggest splash. That’s why it’s important to consider where, specifically, it would be best to invest in real estate. Different states have different laws, for example, and different demands for the properties you’re dealing with. Luckily, there are plenty of statistics available to help you decide where to invest in property for your best interests.
Traditional Metrics: Realtor.com
In terms of go-to organizations for obtaining detailed real estate information, Realtor.com is a good place to start. The focus here is on rising prices. Its top 5 states for investment properties are:
- Nevada – 8.6%
- Texas – 6%
- Florida – 5%
- California – 4.6%
- Utah – 3.2%
Predictions about the California housing market are cautioned because of the shortage of homes on the market.
Related: US Housing Market Forecast 2020: Key Takeaways from Realtor’s Predictions
Modernized Analysis: Airbnb
Airbnb operational data can be used to significantly improve upon the traditional metrics used to compare real estate across the United States. Its statistics for Rental Income and Cash on Cash Return can be substantially higher than when traditionally accounted for. Airbnb cites the Median Property Price as a crucial metric for investment analysis. Airbnb’s chosen states (listed below) are between $210,000 to $238,000:
- West Virginia
- North Dakota
Traditional Rental Income vs. Airbnb Rental Income nearly doubles for all 6 states listed as affordable investment opportunities. And, for each of these states, Traditional Cash on Cash Return vs. Airbnb Cash on Cash Return more than doubles.
Also, note that the Airbnb Occupancy Rate of each of these states is well above 40%. Occupancy is nearly at 50% for Ohio, North Dakota, and Indiana. Kansas exceeds this mark at nearly 54%. Other insightful metrics for affordable real estate investment property includes the Price Per Square Foot and the Price-to-Rent Ratio.
As is the case for any aspect of the economy, demand is the driving force. Housing demand statistics indicate long-term investments. Comparing population density alongside demand can reveal a lot. Consider the Ohio housing market. Its housing demand is high. This would be expected in a state that ranks in the top 10 for both overall population and density.
The Job Market
Other key metrics for property investments are those tied to job market data. The employment rate of a state helps dismiss superficial trends. It shows a commitment from businesses to engage in regional economies. Similarly, states that are home to Fortune 1000 companies demonstrate their business-friendly policies. Obviously, the New York real estate market tops the list here. Coming in at number two is the Houston real estate market It is no wonder why the Texas economy is so strong. These cities are growing so rapidly due to job related moves, that they will likely remain high contenders for top cities to invest in for many years to come.
When investing in property, it is desirable to consider every possible significant statistic, so let’s not forget about property taxes. It is important to know what exactly you’re paying for the property you’re investing in so everything needs to be considered. The following states lead the race in lowest property taxes:
- Louisiana – 0.20%
- Hawaii – 0.25%
- Alabama – 0.34%
- Delaware – 0.42%
- West Virginia – 0.48%
While having a low property tax does not necessarily mean it’s a prime location for investing, it’s worth consideration. Here are also a look at the states that have the highest property taxes:
- New Jersey – 1.90%
- New Hampshire – 1.85%
- Texas – 1.81%
- Nebraska – 1.75%
- Wisconsin – 1.74%
Some states with higher property taxes will give a break on another tax. For instance, New Hampshire has a high property tax rate, but no state income tax. Remember to do your research when it comes to taxes in the state you are considering purchasing in.
While we covered a list of best states to buy property in, it still takes a lot of research and investigation before buying your specific investment property. While a specific state may contain land that is generally in demand and affordable, inspect what area of town that property is in. Crime and proximity to a city can greatly affect the worth of any property. Consider if that area floods often. Is the property you are looking at near a swamp? Do you plan to build houses on it, and if so, how is the septic system on the land and is it fixable? How much will that add to your costs? Many properties are not livable for simple reasons such as this and greatly decrease the value of the land. Just because a property may be cheaper with fewer taxes on it, does not necessarily make it a good property for investing. Another example is that while Louisiana has a far lower property tax than North Carolina, it has generally less appealing land (many swamps, towns damaged from hurricanes, etc.) – so it may not be the ideal place to invest. There is property in every state that is ideal and some that is not. Talk to local real estate agents for up to date information.
This article has been contributed by Austin Winder.