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Top Four States to Buy Rental Property


Rental trends have shifted since the pandemic began in 2020. Some hot markets like NYC and San Francisco have seen dramatic decreases in rent prices. At the same time, many areas outside high-density cities are seeing a bigger demand and increasing rents. With remote work becoming the norm, more workers are relocating away from high-cost tech hubs and looking for a place to rent. If you've been considering buying a rental property, here are four states to consider. These have high occupancy, higher rents, and lower median home prices. Although you might not be able to cover 100% of your mortgage with rent, you'll be much closer in these states.

Let's look at the best states and cities within those states to buy a rental property.

1. Florida

The sunshine state has become one of the most popular states for those looking for a change. Not only are home prices going up, but so are rental prices, even with the increase in the median home price to $314,900. In some areas like Clearwater, rents are skyrocketing, and a nice home to rent is hard to find. Across the bridge into Tampa is another hot market. Rents for a three-bedroom, two-bath home range from $913 to $2,257 and up, depending on the location.

Besides the Tampa area, other locations to consider when purchasing rental property are:

  • Orlando: Also good for vacation rentals
  • Kissimmee: Close to Disneyworld and growing
  • Tallahassee: Most residents rent their homes
  • Jacksonville: One of the fastest-growing cities in the U.S.

2. Texas

Similar to Florida, people are moving to the Lone Star state of Texas. As of the first quarter of 2021, the median home price is still affordable at $274,300. Rents for a three-bedroom, two-bath home range from $963 to $1,763 and up depending on the location. Dallas and Houston continue to be the top areas people are moving to.

Texas is considered a landlord-friendly state, especially if there are violations with the rental agreement.

Here are some top areas to check out when buying investment properties:

  • Austin: Offers strong employment
  • Lubbock: Offers stable returns
  • Sugar Land: Houston metro area
  • Round Rock: Austin metro area

3. Idaho

Those fleeing the big cities for more land and a bigger sky are headed for Idaho. The job market is strong and growing. The average cost of a home in Idaho is $369,495. Rents for a three-bedroom, two-bath home range from $963 to $1,474 and up, depending on the location. Boise is the most popular city that many people are flocking to.

When you're shopping in Idaho, check out:

  • Boise: In the top ten fastest-growing cities in the US
  • Idaho Falls: Good employment opportunities
  • Meridian: A suburb of Boise
  • Rexburg: Family-friendly and low cost of living

4. Georgia

Rents for a three-bedroom, two-bath home range from $806 to $1,491 and up depending on the location. It's a seller's market in Atlanta. With home prices increasing and scarce listings, the city is still a popular destination. The median home price in Georgia is $232,144, according to Zillow.

Georgia is also a landlord-friendly state, and if a tenant isn't paying rent, the landlord can get it handled quickly.

Besides checking out Atlanta rental property, two towns to take a look at when investing are:

  • Marietta: Close to Atlanta but more laid-back
  • Roswell: Lots of young professionals live there

Preparing to Buy Rental Property

When you're considering buying a one-to-four-unit rental, the best interest rates will most likely be with a conventional loan. You'll need to be prepared with a larger down payment of 20% to 30% depending on the property type. For example, if you're buying a condo, down payments will be on the higher end.

Investment property guidelines are different and stricter than owner-occupied. For example, you'll need to have more reserves, and the higher your credit score, the better. And don't expect to get the same rates as you would buying a home to live in.

You should be able to offset the mortgage payment (principal, interest, taxes, insurance) with rental income. How much you can offset it depends on if you've had property management experience.

Other Tips for Buying Rental Properties

Besides locations, let's take a look at other points to keep in mind.

  • Have your financing lined up with a reputable lender. Get pre-qualified and have your pre-qual letter in hand. Take a look at both fixed and adjustable-rate mortgages.
  • Consider single-family homes first. Not only do most tenants prefer a house, but appreciation is also generally higher than other types of properties.
  • Be sensible with any upgrades. It's wise to purchase durable materials but don't over rehab. Keep in mind that this is an investment, not your personal residence.
  • Always do credit checks on tenants. Doing just that can save you money and aggravation in the future.
  • Besides shopping for a property, shop for an excellent real estate agent that specializes in rental properties.
  • There are a lot of tax benefits of rental properties. Be sure to have a good accountant that can tell you all the available deductions and the best way to keep track of them.

There is a lot to consider when buying rental properties. Take your time and do your research. That way, when a good deal comes along, you'll be able to move fast.

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