The “best” states vary depending on your investment goals, but several stand out in 2025:

• For Appreciation: Idaho, Arizona, Utah, and Florida lead in price growth due to strong population influx and limited housing supply
• For Cash Flow: Midwest states like Ohio, Michigan, and Indiana offer strong rental returns relative to property values
• For Balanced Returns: Texas, Georgia, and North Carolina provide moderate cash flow with solid appreciation potential
• For Tax Advantages: Florida, Texas, Nevada, Wyoming, and South Dakota have no state income tax
• For Landlord Protections: Alabama, Arizona, Georgia, Florida, and Texas have more favorable laws for property owners

Consider your specific strategy, risk tolerance, and whether you’ll manage properties remotely when selecting markets. Our state-specific guides provide detailed analysis to help you identify the best match for your personal investment criteria.

Property tax rates vary dramatically across states and can significantly impact investment returns:

• Highest Property Tax States: New Jersey (2.49%), Illinois (2.27%), New Hampshire (2.18%), Connecticut (2.14%), Vermont (1.90%), Texas (1.80%)
• Lowest Property Tax States: Hawaii (0.28%), Alabama (0.41%), Colorado (0.51%), Louisiana (0.55%), Wyoming (0.57%), Utah (0.62%)

However, effective tax burden depends on multiple factors:

• Assessment Ratios: Some states assess property at less than market value
• Homestead Exemptions: Primary residences often receive tax reductions
• Tax Caps: Some states limit annual increases or total tax burden
• Appeal Processes: Ease of challenging assessments varies by location

States with high property taxes often have lower taxes in other areas (e.g., Texas has high property taxes but no state income tax), so consider the total tax picture when evaluating investment markets.

Landlord-tenant laws vary significantly by state, with some states strongly favoring property owners and others offering more tenant protections:

• Most Landlord-Friendly States:
  • Texas: Faster eviction process (2-3 weeks typical), no rent control, minimal notice requirements
  • Georgia: Limited rent control, streamlined eviction procedures, fewer tenant protections
  • Alabama: No statewide rent control, minimal dwelling standards, shorter notice periods
  • Florida: Efficient eviction processes, limited rent control (except in Miami-Dade)
  • Arizona: Reasonable eviction timelines, no statewide rent control, balanced regulations
• Most Tenant-Friendly States:
  • California: Rent control in many cities, strict habitability requirements, lengthy eviction process
  • New York: Strong rent control/stabilization, tenant-favoring courts, longer eviction timelines
  • New Jersey: Strong tenant protections, “just cause” eviction requirements
  • Washington: Longer notice periods, increasing tenant protections
  • Oregon: Statewide rent control, tenant protections growing

Key factors to compare include eviction procedures, security deposit limits, rent control regulations, required notice periods, and habitability standards. Our state-specific guides detail these regulations for each market.

Foreign investors can purchase US real estate with some additional considerations:

• Purchase Process:
  • No US citizenship or residency required to purchase property
  • Must obtain an Individual Taxpayer Identification Number (ITIN)
  • May need to establish a US-based entity (LLC recommended)
  • Title and escrow processes similar to US citizen purchases
• Financing Options:
  • Cash purchases simplest for foreign investors
  • Foreign national mortgage programs available (30-40% down payment typical)
  • Higher interest rates than domestic borrowers (usually +0.5-1.5%)
  • International banks with US presence may offer better terms
• Tax Considerations:
  • Subject to FIRPTA (Foreign Investment in Real Property Tax Act)
  • 10-15% withholding on sale proceeds typically required
  • Annual income tax filing requirements for rental income
  • Potential estate tax exposure (up to 40%) without proper structuring

Working with professionals experienced in foreign investment is crucial, including a US-based real estate attorney, CPA with international tax expertise, and real estate agents familiar with foreign buyer transactions.

A 1031 exchange (named for Section 1031 of the IRS code) allows real estate investors to defer capital gains taxes when selling investment property and reinvesting the proceeds in a “like-kind” property.

• Key Benefits:
  • Defer federal capital gains taxes (up to 20% plus 3.8% NIIT)
  • Defer depreciation recapture tax (typically 25%)
  • Preserve more capital for reinvestment
  • Potential for unlimited exchanges throughout lifetime
  • Portfolio optimization without tax penalties
• Critical Timeline Requirements:
  • 45 days to identify potential replacement properties (up to three properties)
  • 180 days to complete the purchase of replacement property
  • Both timelines run concurrently from closing of relinquished property
• Key Rules:
  • Property must be held for investment or business use (not personal)
  • Replacement property value must equal or exceed sold property value
  • All proceeds must be reinvested to defer 100% of taxes
  • Must use a Qualified Intermediary to hold funds
  • Direct receipt of sale proceeds disqualifies the exchange

1031 exchanges are powerful wealth-building tools when executed correctly. Consult with a tax professional and qualified intermediary before attempting an exchange, as strict compliance with IRS requirements is essential.

Short-term rental (STR) regulations vary dramatically not just by state, but often by city and county, creating a complex regulatory landscape for investors:

• Most STR-Friendly States:
  • Florida: State law limits local government restrictions, though some cities have registration requirements
  • Tennessee: State law protects existing STRs from new prohibitive regulations
  • Arizona: State law prevents cities from banning STRs outright, though recent changes allow more local control
  • Texas: No statewide restrictions, though individual cities vary dramatically
• Most Restrictive States/Cities:
  • New York: NYC prohibits rentals under 30 days in most buildings
  • California: Varies by city, with San Francisco, Los Angeles, and Santa Monica having strict limitations
  • Hawaii: Strict zoning restrictions in many areas with high fines
  • Massachusetts: State registry and tax requirements plus local restrictions
• Common Regulations Include:
  • Primary residence requirements (owner must live on property)
  • Annual caps on rental nights (e.g., 90-180 days per year)
  • Special permits or licenses with associated fees
  • Occupancy limits and parking requirements
  • Special tax collection and remittance
  • Safety equipment and inspection requirements

Due to the hyper-local nature of STR regulations and their frequent changes, investors should thoroughly research current local ordinances before purchasing properties intended for short-term rental use. Our state guides include sections on STR regulations with links to updated resources.