5 Worst States to Invest in Real Estate in 2024

Contrasting with the 10 best states to invest in real estate, we also evaluated the worst five states to invest in real estate. These generally have low rents and high vacancy rates. These five worst states for landlords suffer from low housing inventory, slow job growth, decreased population growth, and a low happiness score, indicating weak demand for rental properties. Household incomes are low compared to other states, and high vacancy rates indicate too many vacant units to affect supply and demand.

1. New Mexico

  • New Mexico’s residents have a low median household income of $53,992, ranking 46th out of 51 states.

  • The state has one of the lowest Y-o-Y home value changes at 2.80% (42nd) and rent value changes at -3.30% (44th).

  • The 10 best states to invest in real estatestate only obtained a 43.64 happiness score, ranking 43rd.

The Land of Enchantment ranks first among the worst states for real estate investing. Like the other states on this list, the overall resident affordability ranking is low at 48th for the cost of living index (22nd) and median household income (46th). Also, the tax burden of 10.20%, ranking 26th out of 51, is very high, and with average rent prices at $857 per month, investors will be waiting a while to get a significant return on their investment.

Although the percentage of renters is 30.8% (26th), the job growth rate is slow, ranking 20th, and the happiness score is very low (43rd), which could indicate a changing housing market in New Mexico. Also, a very low Y-o-Y home and rent values make it challenging for investors to attract tenants in this state. While it might not be time to purchase a rental property, investors should keep an eye on this state.

2. Kentucky

  • Kentucky has one of the lowest median home values at $251,300, ranking 48th out of 51 states.

  • The state has only $783 average monthly rent, the fourth lowest in the country.

  • It ranked 48th among all states for happiness score, garnering a score of 38.36.

  • Kentucky’s residents only have a $55,573 median household income, the sixth lowest in the country.

A major contributing factor to Kentucky’s lower ranking is the overall location opportunity for residents, which ranks 46th. This ranking is a combination of low job growth at 2.20% (34th) and population growth at 0.32% (29th), as well as a low happiness score of 38.36 (48th). The lack of opportunity in these areas deters renters from moving to Vermont. It also has a low number of available homes at 8,154 (28th) and a median home value of $251,300 (48th), making it a complex state for investors to find affordable properties to purchase.

Although the state has a low vacancy rate at 4.9%, ranking 16th, a reason for its low state rating for overall rent potential is that the average monthly rent is very low at $783 (48th) and a moderately low percentage of renters at 30.1% (34th). Also, combined with a negative Y-o-Y rent value change of -2.36% (40th), there is a slight opportunity for growth down the line.

3. West Virginia

  • The state has the lowest average monthly rent at $732 and the lowest percentage of renters at only 22.2% in the country.

  • Among the 51 states, West Virginia has the lowest percentage of job growth at only 0.40% and the lowest happiness score at 33.83.

  • West Virginia’s residents have only a $51,248 median household income, the second lowest in the country.

  • The state also has a low number of available inventory at 3,085, ranking 42nd out of all states.

  • It has a high vacancy rate at 9.3%, ranking 45th among all states.

The Mountain State ranks third among the worst states for owning rental property. This is primarily due to the overall ranking for rent potential, which looks at the percentage of renters at 22.2%, average monthly rent at $732 (both ranked 51st), and vacancy rate at 9.3%, ranked 45th. These statistics show a very low number of renters in the state; therefore, vacancy rates are high and rent prices are low, leaving a lot of supply and little demand. This is not ideal for investors who want to market their properties for top dollar and get quality tenants.

In addition, this area’s job growth, population growth, and happiness scores are low, ranking 51st overall, indicating fewer opportunities for residents. Also, its home values are at $304,400, ranking 32nd in the country, and it has a cost of living index of 90.3 (ranked ninth). While this bodes well for buyers, investors should be cautious when purchasing in this state.

4. Maine

  • The state has one of the lowest percentages of renters at only 23.8%, ranking 48th.

  • Maine has one of the highest tax burdens at 12.40%, ranking 42nd out of 51 states.

  • It has only 2,935 available inventory, the ninth-lowest in the country.

  • The state ranked 40th for the percentage of job growth, with only a 2% increase.

Maine is the fourth-worst state for investing in real estate due in part to its low resident affordability, ranking 51st collectively. The cost of living index is relatively high (13th-highest), considering the median household income is $64,767 (33rd). Plus, the state lacks opportunities for residents, e.g., the happiness score and job and population growth were low at 25, 40, and 21, respectively. These numbers limit the number of renters willing to live in the Pine Tree State.

The average monthly rental income is the 18th lowest in the country ($873), and it has a very low percentage of renters (23.8%), ranking 48th, which doesn’t provide much profitability for investors. Y-o-Y home (9.60%) and rent (3.80%) values were fairly high, ranking seventh and 24th-highest, respectively, so investors might have some potential in Maine.

5. Louisiana

  • Louisiana’s residents have only a $52,087 median household income, the third lowest in the country.

  • The state ranked 44th out of 51 states for median home value at $257,400.

  • It has one of the highest vacancy rates at 10.1%, ranking 47th.

  • The state has experienced a -2.20% Y-o-Y home value change, which is the third lowest.

  • It has the second-lowest population growth (-0.31%) and happiness score (34.81) among all states.

Rounding out our list of the five worst states is Louisiana. The Bayou State has a slow job and population growth (42nd and 50th, respectively), a low happiness rating (50th), and ranks third for the lowest median household income. Property values have decreased by 2.20%, which doesn’t make Louisiana attractive to new residents and, therefore, it is not one of the best states for real estate investing.

The percentage of renters in the area is 30.2% (33rd), and vacancy rates are at 10.1 (47th), which are extremely low compared to other states. Its Y-o-Y rent value increased by 2.14% with an average monthly rent of $876 (32nd), still showing some rental income potential for the future. In addition, the median home price of $257,400 (eighth-lowest) makes it affordable for investors to buy. However, these overall factors combined make it the worst state to invest in real estate for the time being.

Bottom Line

Before purchasing an investment property, investors must research each housing market to understand the profitability potential and challenges they will face in the area. Choosing a state with location opportunities for residents, rising appreciation rates, high rents and percentages of renters, and low vacancy rates will yield the best results. However, change is constant in the real estate industry, so keep your investment options open in every market.

Source: Jealie Dacanay, Fit Small Business

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