Where are the best places to buy rental properties in the US in 2025? We’ve got a list that might help.
As housing affordability declines across the country, rental demand continues to rise. Many Americans are finding that renting is significantly more cost-effective than buying, particularly in high-demand states like California, Hawaii, Texas, Florida, and New York. In fact, according to a recent BankRate study, in all 50 of the top US metros, it’s cheaper to rent by about 37 percent.
As you might have guessed, high interest rates and relative affordability have increased the number of renters. The share of renters is growing three times faster than homeowners – and there’s a significant supply shortage of homes across the country, giving savvy investors an opportunity to take advantage of this supply-demand gap.
In this guide, we’ll break down the best locations for rental property investments in 2025 and what makes them stand out.
Why Invest in Rental Properties in 2025?
The U.S. rental market is expected to remain strong in 2025, fueled by economic conditions, lifestyle changes, and shifting demographics.
In many cities, as we mentioned above, renting is significantly more affordable than buying, making it the preferred option for a growing number of people. Investors are drawn to multi-family properties for their ability to generate multiple income streams, while single-family homes remain in high demand in suburban and metropolitan areas alike.
Rental properties offer the potential for passive income and long-term wealth building, making them a solid addition to any investment portfolio.
Additionally, 2025 is shaping up to be a favorable year for investors due to stable mortgage rates and an increasing demand for rental housing.
As more people move for work, education, and lifestyle reasons, rental markets in key areas are poised for continued growth.
Key Factors to Consider When Buying Rental Properties in 2025
- Location: First popularized in a Chicago Tribue ad in 1926, the three primary rules of real estate still ring true today: “Location, location, location.” Proximity to job hubs, schools, and public transportation often determines rental demand.
- Market Trends: Areas with projected population and job growth tend to appreciate over time. As more people move into an area, more homes are needed. This steadily rising demand means home prices tend to maintain value or go up.
- Property Type: Single-family homes appeal to long-term tenants, while multi-family units offer investors the advantage of multiple income streams. Vacation rentals and short-term rental properties in tourist-heavy locations can be highly profitable, but investors must be aware of local regulations that may impact their viability.
- Rental Demand: Looking at local vacancy rates and average rental prices can provide insight into whether a property is likely to generate steady cash flow.
These four factors: location, market trends, property type, and rental demand, are what most investors need to consider before buying a rental property in 2025.
Best Places to Buy Rental Properties in the US in 2025
Investors looking to capitalize on the strong rental market should consider these locations. While they are not ranked in any particular order, they all offer unique advantages for rental property investments. As always, conducting thorough due diligence and market research is essential before making any investment decisions.
Texas
Texas remains one of the top states for rental property investment due to its booming economy, rapid population growth, and business-friendly environment.
Texas’ economy is so strong, in fact, that if it was a country, it would be the 8th largest in the world.
Cities like Dallas and Austin are particularly attractive. Dallas boasts a diverse economy with strong job growth in technology, finance, and healthcare. Austin, known for its thriving tech sector and vibrant cultural scene, continues to draw young professionals and remote workers, driving rental demand.
Additionally, the state’s relatively low cost of living and absence of state income tax make it a favorable location for both investors and renters.
Tennesse
With no income tax and a GDP that ranks it 12th in the state, Tennessee is a great option for rental property investing.
The city’s booming music and entertainment industry, coupled with strong job growth in healthcare and technology, has resulted in a steadily increasing demand for housing.
Nashville’s influx of new residents and its appeal as a tourist destination also contribute to a thriving short-term rental market. Investors can benefit from the city’s strong economic fundamentals and high occupancy rates, making it a solid choice for both long-term and short-term rental investments.
Florida
Florida continues to be a prime destination for rental property investors, especially in cities like Tampa and South Florida.
Tampa has experienced rapid population growth, thanks to its robust job market, excellent quality of life, and no state income tax.
South Florida, including Miami and Fort Lauderdale, attracts both domestic and international renters seeking beachfront living, vibrant nightlife, and business opportunities. The strong tourism industry further supports a lucrative short-term rental market, making Florida a versatile option for investors.
California
Despite its high property prices, California remains a strong rental market due to consistent demand.
During the pandemic, it seemed that there were no shortage of shocking headlines showing there was a mass exodus of people leaving California for Texas, NYC, the Midwest, and Florida – but data shows that California’s population has actually increased in recent years. In 2024, California’s population increased by 0.6% – which is quite a lot for the nation’s most populous state.
The state’s population density, thriving job market, and limited housing supply make renting a necessity for many residents. Investors can expect strong appreciation potential, especially in cities with high employment opportunities and economic activity. Specific high-performing markets within California are detailed below.
Hawaii
Hawaii’s rental market is unique due to its strong tourism industry and limited housing inventory.
The demand for both long-term and vacation rentals is consistently high, particularly in tourist-heavy areas. The state’s restrictive land use policies limit new development, keeping supply low and rental prices high. Investing in Hawaii requires careful consideration of local regulations, but for those who navigate them successfully, the potential returns are significant.
New York
New York’s real estate market extends beyond New York City.
Upstate cities like Syracuse, Buffalo, and Albany offer affordable investment opportunities with strong rental demand. These markets benefit from stable economies, driven by education, healthcare, and government sectors. Investors looking for steady cash flow without the high price tag of NYC real estate should explore opportunities in these upstate cities. We’ll go into more detail below.
Best Places to Buy Rental Properties in California
Los Angeles
Los Angeles remains one of the most desirable rental markets in the country. With its massive population, strong job market, and world-famous entertainment industry, demand for rentals remains consistently high. The city’s tourism industry also supports a thriving short-term rental market, particularly through platforms like Airbnb and VRBO. Investors should be aware of local rental regulations but can find strong long-term opportunities in well-located properties.
San Francisco Bay Area
Despite media portrayals of economic challenges, the San Francisco Bay Area remains a key rental market driven by the tech industry. High salaries and limited housing availability keep rental demand strong, making it a viable location for long-term rental investments. Investors may find opportunities in suburban areas surrounding San Francisco, where affordability is slightly better, but demand remains high.
San Diego
San Diego’s rental market benefits from its growing economy, strong military presence, and desirable climate. The city’s beaches and vibrant downtown make it a popular location for both long-term residents and short-term vacation rentals. The combination of strong employment opportunities and tourism-driven demand makes San Diego a well-balanced investment market.
Sacramento
As housing prices continue to rise in California’s coastal cities, Sacramento has become an increasingly popular alternative. With lower property prices and a growing influx of residents from the Bay Area, the city offers strong rental demand. The state capital’s expanding job market and affordable cost of living make it a practical investment location.
Best Places to Buy Rental Properties in Hawaii
Honolulu (Oahu)
Honolulu’s combination of limited inventory and high demand makes it a prime location for rental property investments. The city attracts both long-term residents and tourists, ensuring year-round rental demand. Investors in Honolulu can expect strong rental yields and long-term appreciation.
Maui
Maui’s luxury vacation rental market provides opportunities for high returns. The island’s appeal to tourists, retirees, and high-net-worth individuals makes it an excellent location for short-term rentals. Limited housing inventory further drives up rental rates, making it a profitable investment option.
Big Island (Hawaii Island)
The Big Island offers a more affordable alternative to Oahu and Maui while still providing strong rental demand. The island has seen increasing interest from remote workers and retirees, creating a steady need for long-term rentals. Investors can find opportunities at a lower cost while still benefiting from Hawaii’s high rental demand.
Kauai
Kauai is known for its breathtaking landscapes and exclusivity. The demand for vacation rentals remains high due to limited competition, as the market is smaller than other Hawaiian islands. For investors targeting high-end short-term rentals, Kauai presents a strong opportunity.
Best Places to Buy Rental Properties in New York
Syracuse
Syracuse offers affordable property prices and increasing rental demand. Its growing tech and education sectors attract young renters, while revitalization efforts in the downtown area make it an attractive investment location.
Buffalo
Buffalo is a low-cost entry market with rising demand due to economic development and a growing population. Investors can benefit from steady rental income and long-term appreciation potential.
Albany
Albany’s economy is driven by government and education jobs, providing a stable rental market. Family-friendly neighborhoods and consistent demand make it a reliable choice for investors looking for steady, long-term tenants.
Top Lending Options For Investing in Rental Properties in 2025
When purchasing a rental property, securing the right financing is critical. Below, we highlight two primary lending options for rental property investors in 2025.
DSCR Loans
Debt-Service Coverage Ratio (DSCR) loans are a popular choice for real estate investors because they allow qualification based on the rental income generated by the property rather than personal income. Click here for our full guide on DSCR loans.
Non-Qualified Mortgage Loans
Non-Qualified Mortgage (Non-QM) loans from private mortgage lenders offer another alternative for real estate investors. Unlike conventional loans, which require strict income verification, Non-QM loans allow investors to qualify using alternative income documentation such as bank statements or rental income projections. Our full guide on non-QM loans is available here.
Conclusion: Best Places to Buy Rental Properties in the US in 2025
Investing in rental properties in 2025 offers significant opportunities for long-term financial growth. Whether considering California’s established rental hubs, Hawaii’s lucrative vacation markets, or upstate New York’s affordable investment opportunities, strategic research and planning are essential. By understanding market trends, selecting the right location, and securing favorable financing, investors can position themselves for success in the evolving real estate landscape.
The key takeaway is that no single location or property type fits all investors. Thorough research, financial planning, and leveraging professional resources can help maximize profitability. With the right approach, rental property investments in 2025 can serve as a valuable addition to any investor’s portfolio.
FAQ Section: Best Places to Buy Rental Properties in the US in 2025
What are the best states for rental property investment in 2025?
The top states for rental property investment include California, Hawaii, Texas, Florida, Tennessee, and New York. These states offer strong rental demand, economic growth, and investor-friendly opportunities.
Is it better to invest in long-term or short-term rental properties?
Both investment strategies have advantages. Long-term rentals provide stable, consistent income with lower tenant turnover, while short-term rentals can generate higher revenue but require more active management. The best choice depends on the investor’s financial goals and the regulations in the chosen market.
How do I calculate ROI for a rental property?
To calculate return on investment (ROI), subtract annual expenses (mortgage payments, property taxes, maintenance, property management fees) from the annual rental income. Then, divide the net profit by the property’s purchase price and multiply by 100 to determine the ROI percentage.
What are the risks of investing in rental properties?
Some potential risks include market fluctuations, unexpected maintenance costs, tenant vacancies, and changes in rental regulations. Investors should conduct thorough due diligence and have a financial cushion for unforeseen expenses.
Are there tax benefits to owning rental properties?
Yes, rental property owners can take advantage of several tax benefits, including deductions for mortgage interest, property depreciation, repairs, and operating expenses. These benefits can help offset taxable income and improve overall returns on investment.
By keeping these factors in mind and staying informed about market trends, investors can make well-informed decisions that lead to successful rental property investments in 2025 and beyond.
