A recent study by SoCal Home Buyers analyzed all 50 states to find the best and worst for property investments. Using factors like median home prices, rental yields, property tax rates and cost of living, it created a property investment score to rank each state.
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When it comes to real estate investing, choosing the right state can make or break your investment.
“The key to successful property investment always lies in choosing the right location, location, location,” said property investment expert Doug Van Soest from SoCal Home Buyers.
If you’re considering investing in real estate, here are the markets offering the greatest and least potential.
5 Best States To Invest in Property
These five states are best bets when investing in real estate, according to the SoCal Home Buyers study.
Louisiana
- Median listing price: $279,997
- Rental yield: 2.06%
- Effective property tax rate: 0.62
- Cost of living index: 92.1
- Property investment score: 93.65
Louisiana is the top state for property investment, scoring 93.65 out of 100. Homes in the state have a median listing price of $279,997, a rental yield of 2.06% and a low property tax rate of 0.62%. The cost of living is also affordable, with an index of 92.1, as compared to the national cost of living index of 100. All of these factors make the state a smart choice for investors who want to keep expenses low while earning good returns, according to property investment expert Van Soest.
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West Virginia
- Median listing price: $242,450
- Rental yield: 2.50%
- Effective property tax rate: 0.49
- Cost of living index: 115.1
- Property investment score: 93.43
West Virginia comes in second for property investment with a score of 93.43. The state has a median listing price of $242,450, a high rental yield of 2.50% and one of the lowest property tax rates at 0.49%. While the cost of living index is higher at 115.1, the combination of affordable home prices, affordable property taxes and strong rental returns makes it a good option for budget-conscious investors, according to Van Soest.
Mississippi
- Median listing price: 299,900
- Rental yield: 2.13%
- Effective property tax rate: 0.62
- Cost of living index: 88.3
- Property investment score: 91.76
Mississippi also ranks high for property investment with a score of 91.76. The median home price is $299,900, and investors can expect a rental yield of 2.13%. With a low property tax rate of 0.62% and a cost-of-living index of 88.3, it’s a budget-friendly option for those seeking good returns.
North Dakota
- Median listing price: $377,000
- Rental yield: 1.67%
- Effective property tax rate: 0.99
- Cost of living index: 92.8
- Property investment score: 90.76
North Dakota scores 90.76 for property investment. The state’s median listing price is $377,000, with a rental yield of 1.67% and a property tax rate of 0.99%. Its cost-of-living index is 92.8, offering a reasonably affordable option for investors despite the lower rental yield.
Oklahoma
- Median listing price: $302,500
- Rental yield: 1.99%
- Effective property tax rate: 0.9
- Cost of living index: 86.4
- Property investment score: 89.81
Oklahoma has a property investment score of 89.81. Homes have a median listing price of $302,500, with a rental yield of 1.99% and a property tax rate of 0.9%. With a low cost-of-living index of 86.4, the state provides an affordable option for investors looking to balance costs with returns.
5 Worst States To Invest in Property
On the flipside, these are the 10 worst states to invest in property, featuring the lowest property investment scores out of all 50 states.
Massachusetts
- Median Listing Price: $817,475
- Rental Yield: 1.66
- Effective Property Tax Rate: 0.98
- Cost of Living Index: 144.3
- Investment Score: 35.30
Massachusetts ranks as the least favorable state for property investment, with a score of 35.30. The median listing price is high at $817,475, and the rental yield is 1.66%, paired with a property tax rate of 0.98%. The state’s high cost-of-living index of 144.3 makes it a tough market for investors looking for profitability, said Van Soest.
Hawaii
- Median Listing Price: $830,000
- Rental Yield: 1.22%
- Effective Property Tax Rate: 0.31
- Cost of Living Index: 186.2
- Investment Score: 35.69
Hawaii comes in as the second-worst state for property investment with a score of 35.69. The median home price is high at $830,000, with a rental yield of 1.22% and a low property tax rate of 0.31%. Additionally, the cost-of-living index is 86% higher than the national average. Van Soest pointed out that The Aloha State’s low rental yield and extremely high cost of living make it a much less appealing choice for real estate investors.
California
- Median Listing Price: $777,900
- Rental Yield: 1.60%
- Effective Property Tax Rate: 0.7
- Cost of Living Index: 145
- Investment Score: 41.51
California ranks third from the bottom with a property investment score of 41.51 is better than Hawaii’s and Massachusetts. The state’s median home price is $777,900, with a rental yield of 1.60% and a property tax rate of 0.7%. However, according to Van Soest, California’s cost-of-living index of 145 and the state’s property tax rate add to the challenges of investing in its real estate market.
New York
- Median Listing Price: $682,000
- Rental Yield: 2.14%
- Effective Property Tax Rate: 1.46
- Cost of Living Index: 123.1
- Investment Score: 45.89
New York’s property investment score is 45.89, making it less attractive to investors. The median home price is lower than Massachusetts, Hawaii and California at $682,000, and the rental yield of 2.14% is higher overall. However, the property tax rate of 1.46% is higher than the top three worst states, and the cost-of-living index is also high at 123.1, which adds to the drawbacks of investing in New York.
New Jersey
- Median Listing Price: $599,000
- Rental Yield: 2.06%
- Effective Property Tax Rate: 1.64
- Cost of Living Index: 113.7
- Investment Score: 50.51
New Jersey has a property investment score of 50.51. Homes in the state have a median listing price of $599,000, a rental yield of 2.06% and a property tax rate of 1.64%. Higher property taxes and a cost-of-living index of 113.7, makes New Jersey a costly option for real estate investors.
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This article originally appeared on GOBankingRates.com: 5 Worst and Best States for Real Estate Investments
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
