After a couple of years of turmoil in the real estate market, investors are eager to know the best states to buy investment property in 2023.
In this article, we’ll address such a crucially important question. We’ll split our discussion into two main parts: the best US states for investing in long term rental properties and the best US states for investing in long term rental properties. As you will see, very different locations are optimal for the two rental strategies, as success depends on a different set of factors.
Table of Contents
- 10 Best States to Buy Investment Property for Long Term Rentals
- 10 Best States to Buy Investment Property for Short Term Rentals
- Investing in the Best Rental Properties in 2023
Finding the top states for investing in rental properties is the first step in locating the best market for investments and the best investment property. Thus, we at Mashvisor conducted nationwide real estate market analysis to rank the best US states to buy long term and short term rentals in the coming year.
We considered a number of different factors that affect ROI in real estate. However, we focused primarily on the cash on cash return as the most comprehensive measure of profitability in the industry.
So, in brief, the top states to buy a long term rental in 2023 are:
- Florida
- Maryland
- Delaware
- Arizona
- Connecticut
- California
- Rhode Island
- New Hampshire
- Colorado
- New York
Meanwhile, the best states to invest in short term rentals are:
- Indiana
- Nebraska
- Virginia
- Minnesota
- Alabama
- Wisconsin
- Kansas
- North Carolina
- New Mexico
- Connecticut
In addition, we’ll list the five best cities for each rental strategy in each of the ranked states. Moreover, we’ll show you how to use Mashvisor to find top-performing rental properties for sale in the said best states.
10 Best States to Buy Investment Property for Long Term Rentals
First, we take a look at the top states in the US housing market for long term rental properties, also known as traditional rentals. It implies renting out on a monthly or annual basis.
The main benefits of the said rental strategy include lower vacancy, more stability, and few rental laws in the majority of states across the US. On the flip side, long term rentals usually bring lower rental income and return on investment than their short term counterparts.
Nevertheless, if you perform careful real estate market analysis and investment property search, you can find very profitable opportunities within this strategy.
Long Term Rental Market Trends in 2023
Before we look at the best states to buy investment property to rent out on a long term basis, it’s worth considering whether such a strategy will be a good investment in 2023. Recently, we interviewed a panel of 19 real estate experts on their US housing market predictions for 2023.
The most important real estate trends related to long term rentals that they highlighted for next year include the following:
- The average rental rate is expected to continue going up, boosting ROI.
- Regional differences will persist, and the largest increases in rent are expected in large metro markets as employees return to the office and thus to major cities.
- To optimize ROI, investors should focus on markets with a high price to rent ratio to guarantee strong rental demand.
- Affordable housing will remain a challenge, so investors can capitalize on opportunities in this niche.
Overall, 2023 is forecast to be a good year to buy an investment property.
Data and Ranking
Next, let’s take a quick look at the real estate data and the methodology we used in our ranking of the best states for long term and short term rentals. We collected national real estate and long term and short term rental data from reliable sources like the MLS, Redfin, RentJungle, Airbnb, and public records.
Then, we applied our AI technology-based machine-learning algorithms to analyze the data and extract the most promising markets for each strategy. We selected markets with over 100 active rental listings for the respective rental strategy. Also, we chose the ones with a median property price below $1,000,000 to ensure affordability for investors.
As a leading metric of return on investment, we focused on the cash on cash return as it shows the potential of markets and properties in the most comprehensive manner.
So, without further ado, let’s take a look at the 10 best states for long term rental property investments in 2023, arranged from those with the highest to the lowest cash on cash return, based on Mashvisor’s December 5, 2022 location report:
1. Florida
- Median Property Price: $629,992
- Average Price per Square Foot: $387
- Days on Market: 89
- Number of Long Term Rental Listings: 77,682
- Monthly Long Term Rental Income: $3,362
- Long Term Rental Cash on Cash Return: 4.51%
- Long Term Rental Cap Rate: 4.58%
- Price to Rent Ratio: 16
- Walk Score: 49
Investors probably need no explanation why and convincing that Florida tops the list of the best states for the long term rental investment strategy.
Our nationwide rental market analysis shows that, on average, you can expect the highest rate of return in the Sunshine State. While a cash on cash return of 4.51% might not sound like a lot, keep in mind that it is just an average rate across the state. Otherwise, you can find cities, neighborhoods, and properties with much higher profits.
Some of the factors that make Florida such a great market to invest in rental properties include its large population, strong population growth, and robust economy. Moreover, Florida is home to major educational institutions, attracting students from all over the world. Importantly, the state’s warm climate draws retired people.
In addition, Florida is considered a landlord-friendly state because of favorable security deposit and eviction regulations.
Top 5 Cities for Long Term Rentals in the State of Florida in 2023
| Ranking | City | Monthly Long Term Rental Income | Long Term Rental Cash on Cash Return |
| 1 | Vero Beach | $2,592 | 4.30% |
| 2 | Naples | $3,986 | 3.62% |
| 3 | Jupiter | $4,264 | 3.49% |
| 4 | North Miami | $3,155 | 3.43% |
| 5 | Lantana | $2,672 | 3.35% |
Related: Florida Housing Market Predictions: What Will Happen in 2023?
2. Maryland
- Median Property Price: $473,726
- Average Price per Square Foot: $379
- Days on Market: 78
- Number of Long Term Rental Listings: 11,292
- Monthly Long Term Rental Income: $2,074
- Long Term Rental Cash on Cash Return: 3.30%
- Long Term Rental Cap Rate: 3.36%
- Price to Rent Ratio: 19
- Walk Score: 50
The second state on our list of the best real estate markets for buying an investment property next year is Maryland.
The main factor driving the strong performance of the Maryland rental market is its economy, which outperforms the national average. The main industries in the state include information technology, telecommunications, aerospace, and defense, which pay high wages.
It means that Maryland residents can afford good rental properties, take good care of rentals, and pay rent on time. They are important positive indicators for future landlords.
Another major advantage of Maryland, compared to other top states, is the affordable property prices. It means that even beginner investors can enter the market.
Furthermore, Maryland is yet another landlord-friendly state. State legislation does not allow rent control and does not require notice for rent increases. In general, local tenants are well protected, with their rights taken care of appropriately.
Top 5 Cities for Long Term Rentals in the State of Maryland in 2023
| Ranking | City | Monthly Long Term Rental Income | Long Term Rental Cash on Cash Return |
| 1 | Rockville | $2,536 | 3.16% |
| 2 | Gaithersburg | $2,402 | 3.09% |
| 3 | Laurel | $2,223 | 3.06% |
| 4 | Frederick | $2,144 | 3.05% |
| 5 | Columbia | $2,201 | 2.90% |
3. Delaware
- Median Property Price: $532,967
- Average Price per Square Foot: $348
- Days on Market: 207
- Number of Long Term Rental Listings: 917
- Monthly Long Term Rental Income: $2,077
- Long Term Rental Cash on Cash Return: 3.13%
- Long Term Rental Cap Rate: 3.18%
- Price to Rent Ratio: 21
- Walk Score: 39
Third on our list of the best states to buy a long term rental property in the coming year is Delaware. While Delaware’s population is relatively small, it is growing at a stable rate, which means constantly increasing rental demand.
The state’s economy is doing well. The main economic sectors comprise healthcare and social assistance, information, and retail trade. As wages in the said industries are not too high, many residents resort to renting rather than buying a home, supported by the high price to rent ratio.
One thing Delaware real estate investors should keep in mind is that it is not a landlord-friendly state. Overall, tenants tend to enjoy the upper hand in most issues pertaining to landlord-tenant relationships. Rent control is neither enforced nor prohibited, but a 60-day notice is required.
Top 5 Cities for Long Term Rentals in the State of Delaware in 2023
| Ranking | City | Monthly Long Term Rental Income | Long Term Rental Cash on Cash Return |
| 1 | Bear | $2,039 | 4.59% |
| 2 | Hockessin | $2,513 | 4.43% |
| 3 | Millsboro | $2,246 | 3.32% |
| 4 | Middletown | $2,479 | 3.17% |
| 5 | Smyrna | $2,049 | 3.04% |
4. Arizona
- Median Property Price: $580,074
- Average Price per Square Foot: $334
- Days on Market: 75
- Number of Long Term Rental Listings: 11,559
- Monthly Long Term Rental Income: $2,192
- Long Term Rental Cash on Cash Return: 2.86%
- Long Term Rental Cap Rate: 2.89%
- Price to Rent Ratio: 22
- Walk Score: 45
The presence of Arizona among the top markets to invest in rental properties is expected. Arizona cities generally boomed over 2022. Population growth is strong, and so is the economy. The latter is somewhat diversified, which is generally a positive indicator for real estate investments. The main sectors include healthcare, transportation, and government.
Importantly, Arizona benefits from above-average real estate appreciation. It means that investors can make a good profit not only in the short term but also in the long run.
Arizona is a landlord-friendly state, as renters are prevented from not paying rent for whatever reason. Upon not receiving rent on time, a landlord can give tenants a five-day notice to pay or move out, after which they can file an eviction. There is no official rent control law in the state.
Related: Invest in Real Estate in the 5 Most Landlord Friendly States
Top 5 Cities for Long Term Rentals in the State of Arizona in 2023
| Ranking | City | Monthly Long Term Rental Income | Long Term Rental Cash on Cash Return |
| 1 | Fountain Hills | $3,600 | 4.16% |
| 2 | Tempe | $2,287 | 3.09% |
| 3 | Peoria | $2,163 | 3.04% |
| 4 | Buckeye | $2,087 | 3.01% |
| 5 | Mesa | $2,072 | 3.01% |
5. Connecticut
- Median Property Price: $553,596
- Average Price per Square Foot: $620
- Days on Market: 99
- Number of Long Term Rental Listings: 3,922
- Monthly Long Term Rental Income: $2,477
- Long Term Rental Cash on Cash Return: 2.83%
- Long Term Rental Cap Rate: 2.88%
- Price to Rent Ratio: 19
- Walk Score: 46
Our ranking of the best states for the long term rental strategy next year continues with Connecticut. In 2022, the Connecticut economy emerged as the 12th strongest nationwide, which is impressive considering the relatively small size and population of the state.
The state’s strong economic standing is largely driven by a rebound in hospitality after the peak of the pandemic. It means that vacation rentals for sale can also be a profitable opportunity there. It is a positive indicator for investors who might consider a switch in rental strategies in the future.
The Connecticut landlord-tenant legislation generally favors renters, securing their rights. For example, eviction is a lengthy and complicated process. Meanwhile, rent control is banned across all cities in Connecticut. As a result, landlords can raise the rent as much as they want with prior notice.
Top 5 Cities for Long Term Rentals in the State of Connecticut in 2023
| Ranking | City | Monthly Long Term Rental Income | Long Term Rental Cash on Cash Return |
| 1 | Sharon | $3,137 | 3.74% |
| 2 | Fairfield | $3,966 | 3.56% |
| 3 | Newtown | $2,895 | 3.52% |
| 4 | Ridgefield | $4,469 | 3.50% |
| 5 | Stamford | $3,495 | 3.50% |
6. California
- Median Property Price: $896,912
- Average Price per Square Foot: $732
- Days on Market: 74
- Number of Long Term Rental Listings: 46,572
- Monthly Long Term Rental Income: $3,201
- Long Term Rental Cash on Cash Return: 2.54%
- Long Term Rental Cap Rate: 2.57%
- Price to Rent Ratio: 23
- Walk Score: 50
Seeing California ranked as one of the top states for real estate investing in 2023 comes as no surprise. With the largest population among all US states, there is plenty of demand for rental properties in the Golden State. The high property values and the high price to rent ratio ensure rental demand across the state.
As home prices are significantly above the national average, the California real estate market is not particularly well suited for first-time investors and those with limited budgets. However, if you are able to finance an investment property in California, you can earn a substantial profit. Real estate appreciation exceeds the national average, proving long term return on investment.
Before buying a rental property in California, investors should know that it is one of the least landlord-friendly states in the country. The rights of tenants are protected by many different laws, including statewide rent control laws. Eviction is a possibility if landlords go to court and win.
Related: Real Estate Investor’s Guide: What Is Rent Control?
Top 5 Cities for Long Term Rentals in the State of California in 2023
| Ranking | City | Monthly Long Term Rental Income | Long Term Rental Cash on Cash Return |
| 1 | Palm Springs | $3,699 | 3.14% |
| 2 | Redlands | $2,843 | 3.03% |
| 3 | Riverside | $2,788 | 2.86% |
| 4 | Simi Valley | $3,384 | 2.72% |
| 5 | Whittier | $3,341 | 2.69% |
7. Rhode Island
- Median Property Price: $649,762
- Average Price per Square Foot: $849
- Days on Market: 67
- Number of Long Term Rental Listings: 1,435
- Monthly Long Term Rental Income: $2,363
- Long Term Rental Cash on Cash Return: 2.34%
- Long Term Rental Cap Rate: 2.37%
- Price to Rent Ratio: 23
- Walk Score: 55
Yet another great state for buying an investment property in the coming year is Rhode Island. The expected cash on cash return there exceeds the national average.
Some positive factors driving the Rhode Island real estate market are the stable population and economic growth. The high price to rent ratio translates into strong demand from local residents, supported by the above-average home values. However, it means that investors also need to have solid budgets before investing in a rental property in Rhode Island.
The Rhode Island rental laws are rather neutral, favoring landlords on some occasions. For instance, there is no rent control, so landlords can raise the rent when they want and by as much as they want. Moreover, they can evict tenants who are more than 15 days late in paying rent through a quick court proceeding.
Top 5 Cities for Long Term Rentals in the State of Rhode Island in 2023
| Ranking | City | Monthly Long Term Rental Income | Long Term Rental Cash on Cash Return |
| 1 | Coventry | $2,065 | 2.77% |
| 2 | Westerly | $3,109 | 2.58% |
| 3 | Johnston | $2,123 | 2.47% |
| 4 | Wakefield | $2,661 | 2.42% |
| 5 | Middletown | $2,958 | 2.31% |
8. New Hampshire
- Median Property Price: $575,661
- Average Price per Square Foot: $437
- Days on Market: 85
- Number of Long Term Rental Listings: 1,470
- Monthly Long Term Rental Income: $2,307
- Long Term Rental Cash on Cash Return: 2.30%
- Long Term Rental Cap Rate: 2.34%
- Price to Rent Ratio: 21
- Walk Score: 40
Our nationwide rental market analysis ranked New Hampshire as the 8th best state to buy an investment property to rent out on a long term basis next year. Cash on cash return there will exceed the national average. While investment properties are not cheap, they are more affordable than in some of the other top states.
Healthcare and social assistance, retail trade, and education services dominate the local economy. New Hampshire benefits from one of the lowest unemployment rates nationally. Job security means that tenants are able to pay rent on time, causing little trouble to investors.
In terms of rental regulations, New Hampshire is a rather landlord-friendly state. There are no rent control laws, and there is no limit on fees. Nonetheless, the regulations pertaining to handling security deposits are strict.
Top 5 Cities for Long Term Rentals in the State of New Hampshire in 2023
| Ranking | City | Monthly Long Term Rental Income | Long Term Rental Cash on Cash Return |
| 1 | Madison | $2,018 | 3.56% |
| 2 | Concord | $2,552 | 3.21% |
| 3 | Conway | $2,283 | 3.17% |
| 4 | Manchester | $2,213 | 3.14% |
| 5 | Bristol | $2,147 | 3.12% |
9. Colorado
- Median Property Price: $806,154
- Average Price per Square Foot: $805
- Days on Market: 99
- Number of Long Term Rental Listings: 833
- Monthly Long Term Rental Income: $2,115
- Long Term Rental Cash on Cash Return: 2.30%
- Long Term Rental Cap Rate: 2.32%
- Price to Rent Ratio: 32
- Walk Score: 49
Colorado is one more state where long term rental properties promise a strong return on investment in the coming year. The main driver is the high home prices and the high price to rent ratio, pushing many local residents to resort to renting rather than buying a home.
However, the unaffordable real estate prices are a factor that investors should consider before deciding to buy an income property in Colorado. They need good financing options amid high mortgage rates. Meanwhile, property tax is very low in the state.
Related: 10 States With No Property Tax
Colorado is home to a relatively diverse economy, which is a positive indicator in real estate investing. There is a focus on farming and ranching, but other economic sectors are also well-developed.
Rental legislation makes Colorado a landlord-friendly state. There are no limits on when a landlord can enter a property to inspect it. Evictions are not restricted if rent is not paid on time. There is a statewide ban on rent control, so landlords can raise rental rates whenever they deem necessary upon providing a notice.
Top 5 Cities for Long Term Rentals in the State of Colorado in 2023
| Ranking | City | Monthly Long Term Rental Income | Long Term Rental Cash on Cash Return |
| 1 | Pagosa Springs | $2,674 | 3.10% |
| 2 | Peyton | $2,176 | 2.95% |
| 3 | Broomfield | $2,588 | 2.94% |
| 4 | Parker | $2,669 | 2.88% |
| 5 | Arvada | $2,489 | 2.80% |
10. New York
- Median Property Price: $693,219
- Average Price per Square Foot: $852
- Days on Market: 106
- Number of Long Term Rental Listings: 29,557
- Monthly Long Term Rental Income: $2,540
- Long Term Rental Cash on Cash Return: 2.11%
- Long Term Rental Cap Rate: 2.15%
- Price to Rent Ratio: 23
- Walk Score: 50
Last but not least, New York State is definitely one of the best places to invest in long term rental properties in the US. There is a large population that is always growing, attracted by educational and professional opportunities. The state’s economy is well diversified, with relatively high wages.
Thus, rental demand remains strong, while property prices are not as high as in other top states. Nearly half of the state population rents instead of owning a home. So, if you’re thinking of starting a rental business in 2023, you should consider the New York real estate market.
However, before buying an investment property in New York, you should keep in mind that the rental legislation is tenant-friendly. There are well-established rent control and rent stabilization laws to protect tenants amid the lack of affordable housing.
Top 5 Cities for Long Term Rentals in New York State in 2023
| Ranking | City | Monthly Long Term Rental Income | Long Term Rental Cash on Cash Return |
| 1 | Islip | $3,736 | 3.27% |
| 2 | Mineola | $3,519 | 2.48% |
| 3 | Yonkers | $2,629 | 2.34% |
| 4 | Harrison | $4,650 | 2.27% |
| 5 | Valley Stream | $3,186 | 2.08% |
To start searching for profitable long term rental properties for sale in any of these best states for 2023, click here.
10 Best States to Buy Investment Property for Short Term Rentals
Next, we’ll have a look at the top states for buying a short term rental property in 2023. These rentals are also referred to as vacation rentals or Airbnb rentals.
While long term rentals offer important benefits, as outlined above, the most significant advantage of short term rentals is that they generally come with a higher return on investment. This is driven by the fact that they are rented out on a daily basis, so rental rates are higher.
Another benefit is that investors can use them as a second home, spending holidays and vacations there instead of in hotels. This also implies some vacation rental tax advantages.
Nevertheless, vacation rentals come with some drawbacks too. They are a riskier investment strategy as vacancies can be high. Moreover, there is more active work as well as more costs involved in starting an Airbnb business. This originates from the need to furnish your investment property and cover all utilities, amenities, restocking, and cleaning between guests.
Long Term Rental Market Trends in 2023
Before ranking the best states to buy investment property to rent out on a short term basis in the coming year, it’s worth investigating whether such a decision is at all worth it in the US market. The general US housing market forecast shows that the vacation rental industry will continue to expand in 2023, returning to pre-pandemic trends and patterns.
A major driver will be the resumption of travel activities, as domestic and foreign tourists want to compensate for the opportunities they missed during the peak of the pandemic.
If you consider investing in a vacation rental, you should know that the pandemic brought an increased demand for properties in nature and rentals providing outdoors activities. The trend is expected to carry on in the coming years. Moreover, there is an increased interest in Airbnb experiences, not simply Airbnb properties.
Now, here are the top states to focus on in your short term rental property search in 2023, ranked from the highest to the lowest cash on cash return, based on Mashvisor’s December 5, 2022 location report:
1. Indiana
- Median Property Price: $314,796
- Average Price per Square Foot: $161
- Days on Market: 79
- Number of Short Term Rental Listings: 6,128
- Monthly Short Term Rental Income: $2,543
- Short Term Rental Cash on Cash Return: 5.03%
- Short Term Rental Cap Rate: 5.14%
- Short Term Rental Daily Rate: $160
- Short Term Rental Occupancy Rate: 51%
- Walk Score: 43
Our nationwide vacation rental data analysis ranked Indiana as the top of the top states to invest in a short term rental property in 2023. Indiana is famous for various natural attractions including canyons, state parks, and natural reserves. It’s also well known for producing some of the biggest basketball stars in the US.
Many of the more than 80 million visitors per year prefer the comfort and local experiences provided by vacation rentals over hotels. It results in a strong occupancy rate as properties are rented out more than half the time.
Another positive factor for investors is the low property prices, which are below the national median value. It means that even beginners can get started in real estate investing in the Indiana market.
Statewide short term rental laws prohibit the ban of vacation rentals across the State of Indiana. Local authorities can impose certain regulations, such as permits though, so you should check out the laws pertaining to your specific market before buying a property.
To learn more, check out the different short term rental regulations in any US market.
Top 5 Cities for Short Term Rentals in the State of Indiana in 2023
| Ranking | City | Monthly Short Term Rental Income | Short Term Rental Cash on Cash Return |
| 1 | Madison | $2,665 | 6.92% |
| 2 | Evansville | $2,726 | 6.26% |
| 3 | Fort Wayne | $2,253 | 5.57% |
| 4 | Terre Haute | $2,390 | 5.49% |
| 5 | Noblesville | $3,270 | 5.40% |
2. Nebraska
- Median Property Price: $379,315
- Average Price per Square Foot: $187
- Days on Market: 80
- Number of Short Term Rental Listings: 2,086
- Monthly Short Term Rental Income: $3,002
- Short Term Rental Cash on Cash Return: 4.93%
- Short Term Rental Cap Rate: 5.02%
- Short Term Rental Daily Rate: $157
- Short Term Rental Occupancy Rate: 54%
- Walk Score: 41
The second location on our list of the best states for vacation rentals next year is Nebraska. Nebraska boasts a spacious landscape with various natural features and scenes. These include prairies, sand dunes and sand hills, and rock formations.
The state attracts more than 20 million visitors a year, and many of them go for short term rentals rather than hotels. This results in a high Airbnb occupancy rate, which is one of the two most important factors for the profitability of vacation rentals, the other one being the average daily rate.
A major benefit of the Nebraska real estate market is the affordable property prices, comparable to the national average. Finding an investment property at a reasonable price is crucial for the success of a rental business, especially in an environment of high mortgage interest rates.
Laws vary among cities in Nebraska, but non-owner-occupied short-term rentals are generally allowed. Permits are required in many markets, so investors need to check the situation in their location before starting to buy an investment property.
Top 5 Cities for Short Term Rentals in the State of Nebraska in 2023
| Ranking | City | Monthly Short Term Rental Income | Short Term Rental Cash on Cash Return |
| 1 | Bellevue | $4,339 | 6.43% |
| 2 | Elkhorn | $4,174 | 5.31% |
| 3 | Grand Island | $2,487 | 5.23% |
| 4 | Chadron | $3,169 | 4.86% |
| 5 | Lincoln | $2,282 | 3.63% |
3. Virginia
- Median Property Price: $491,973
- Average Price per Square Foot: $464
- Days on Market: 81
- Number of Short Term Rental Listings: 15,181
- Monthly Short Term Rental Income: $3,456
- Short Term Rental Cash on Cash Return: 4.76%
- Short Term Rental Cap Rate: 4.83%
- Short Term Rental Daily Rate: $198
- Short Term Rental Occupancy Rate: 56%
- Walk Score: 48
Virginia continues to be a top destination for investing in vacation rentals in 2023, retaining its status. This is supported by the high occupancy rate, the good daily rates, and the overall strong return on investment.
The beautiful beaches on the Atlantic coast comprise the main attractions in Virginia, but other natural and tourist attractions also bring tourists year-round. There are over 80 million annual visitors to the state.
In general, short term rentals are allowed and legal in the State of Virginia. However, specific regulations apply by city, so it’s important for investors to check out the local legislation before deciding on a specific market. It’s crucial to ensure that non-owner occupied short term rental properties are a possibility in your selected location.
Top 5 Cities for Short Term Rentals in the State of Virginia in 2023
| Ranking | City | Monthly Short Term Rental Income | Short Term Rental Cash on Cash Return |
| 1 | Luray | $3,639 | 6.22% |
| 2 | Charlottesville | $5,419 | 5.67% |
| 3 | Richmond | $3,289 | 5.56% |
| 4 | Vinton | $2,579 | 5.55% |
| 5 | Portsmouth | $2,376 | 5.41% |
4. Minnesota
- Median Property Price: $399,718
- Average Price per Square Foot: $194
- Days on Market: 77
- Number of Short Term Rental Listings: 7,234
- Monthly Short Term Rental Income: $3,312
- Short Term Rental Cash on Cash Return: 4.69%
- Short Term Rental Cap Rate: 4.77%
- Short Term Rental Daily Rate: $182
- Short Term Rental Occupancy Rate: 57%
- Walk Score: 46
Number 4 on our list of the best states to buy investment properties to rent out on a short term basis next year in Minnesota. While the state is home to thousands of beautiful lakes, the major cities also host multiple tourist attractions, making Minnesota a top tourist destination in the US market.
Minnesota welcomes more than 70 million visitors per year, bringing an occupancy rate of 57%. The affordable home values close to the natural median value also support investments in the Minnesota short term rental industry, especially among beginner investors with limited budgets.
Another positive factor for Minnesota Airbnb hosts is the conducive legal environment. There are no statewide short term rentals laws. Most cities have introduced their own requirements, mostly related to licenses, but non-owner occupied short term rentals remain generally legal.
Top 5 Cities for Short Term Rentals in the State of Minnesota in 2023
| Ranking | City | Monthly Short Term Rental Income | Short Term Rental Cash on Cash Return |
| 1 | West St. Paul | $3,357 | 6.88% |
| 2 | Robbinsdale | $3,199 | 6.68% |
| 3 | Saint Paul | $2,891 | 5.33% |
| 4 | Minneapolis | $2,935 | 4.42% |
| 5 | Rochester | $2,679 | 4.26% |
5. Alabama
- Median Property Price: $408,898
- Average Price per Square Foot: $228
- Days on Market: 89
- Number of Short Term Rental Listings: 15,569
- Monthly Short Term Rental Income: $2,827
- Short Term Rental Cash on Cash Return: 4.56%
- Short Term Rental Cap Rate: 4.65%
- Short Term Rental Daily Rate: $186
- Short Term Rental Occupancy Rate: 51%
- Walk Score: 41
Another of the best short term rental markets in 2023 is Alabama. The state is home to multiple historical landmarks as a result of its rich history and culture. Natural attractions are also not lacking, including white sand beaches. Other things that attract tourists around the year are the golf courses and the amazing food.
As a result of all these factors, Alabama meets close to 30 million visitors each and every year, and the numbers are expected to continue growing as travel across the US resumes. The combined effect of good occupancy and daily rates generates a high average return on investment.
There are no statewide short term rental laws in Alabama, but individual cities have imposed their own regulations. So, investors need to check out the local legislation and what rules apply before choosing a specific Alabama real estate market to buy an investment property.
Top 5 Cities for Short Term Rentals in the State of Alabama in 2023
| Ranking | City | Monthly Short Term Rental Income | Short Term Rental Cash on Cash Return |
| 1 | Montgomery | $2,184 | 5.15% |
| 2 | Fairhope | $4,719 | 5.03% |
| 3 | Birmingham | $2,276 | 4.88% |
| 4 | Madison | $2,510 | 3.92% |
| 5 | Mountain Brook | $3,929 | 2.51% |
6. Wisconsin
- Median Property Price: $397,327
- Average Price per Square Foot: $205
- Days on Market: 80
- Number of Short Term Rental Listings: 10,259
- Monthly Short Term Rental Income: $2,982
- Short Term Rental Cash on Cash Return: 4.50%
- Short Term Rental Cap Rate: 4.58%
- Short Term Rental Daily Rate: $201
- Short Term Rental Occupancy Rate: 52%
- Walk Score: 47
Wisconsin is also among the best states for short term rental property investments in 2023. There are various natural attractions and tourist attractions that drive the growth of the local vacation rental industry.
The annual number of visitors exceeds 100 million, bringing a good occupancy rate and strong ROI. Another factor boosting return on short term rentals in Wisconsin is the below-average property prices, making the state an affordable option even for those who are just getting started in real estate investing.
Importantly, the State of Wisconsin has prevented cities from banning vacation rentals, which leads to a favorable legal environment for Airbnb hosts. Nevertheless, investors need to consider the local laws and regulations before deciding on the best market for this rental strategy.
Top 5 Cities for Short Term Rentals in the State of Wisconsin in 2023
| Ranking | City | Monthly Short Term Rental Income | Short Term Rental Cash on Cash Return |
| 1 | West Allis | $2,447 | 6.31% |
| 2 | Madison | $4,689 | 5.85% |
| 3 | Sturgeon Bay | $3,237 | 4.76% |
| 4 | Milwaukee | $2,081 | 4.20% |
| 5 | Wauwatosa | $2,874 | 4.14% |
7. Kansas
- Median Property Price: $384,414
- Average Price per Square Foot: $181
- Days on Market: 111
- Number of Short Term Rental Listings: 2,493
- Monthly Short Term Rental Income: $2,682
- Short Term Rental Cash on Cash Return: 4.27%
- Short Term Rental Cap Rate: 4.37%
- Short Term Rental Daily Rate: $128
- Short Term Rental Occupancy Rate: 52%
- Walk Score: 39
The next one on our list of the top states for vacation rentals in the coming year is Kansas. The state benefits from diverse, beautiful nature, featuring tall grass prairies, sunflower fields, caves, and rock formations. Cities in Kansas offer tourist attractions as well.
The State of Kansas welcomes more than 35 million visitors per year. Combined with low home prices, this leads to above-average cash on cash return as well as cap rate on short term rental properties.
At the state level, short term rentals are legal. However, cities have enacted various local laws and regulations, so investors need to check with the local authorities before starting an Airbnb business in any particular market.
Top 5 Cities for Short Term Rentals in the State of Kansas in 2023
| Ranking | City | Monthly Short Term Rental Income | Short Term Rental Cash on Cash Return |
| 1 | Lawrence | $2,419 | 4.50% |
| 2 | Manhattan | $2,428 | 4.16% |
| 3 | Shawnee | $2,143 | 3.26% |
| 4 | Prairie Village | $3,228 | 3.23% |
| 5 | Overland Park | $3,194 | 2.97% |
8. North Carolina
- Median Property Price: $473,818
- Average Price per Square Foot: $368
- Days on Market: 98
- Number of Short Term Rental Listings: 33,522
- Monthly Short Term Rental Income: $3,043
- Short Term Rental Cash on Cash Return: 4.23%
- Short Term Rental Cap Rate: 4.30%
- Short Term Rental Daily Rate: $168
- Short Term Rental Occupancy Rate: 50%
- Walk Score: 45
Next year, North Carolina will continue to be one of the best places to buy an investment property to turn into an Airbnb property. The state benefits from numerous tourist and natural attractions not only in major cities but across the state. These make North Carolina one of the most popular and most visited states across the US.
The state welcomes around 50 million visitors per year, and many of them go for short term rentals rather than hotels. While a bit higher than in other best states for this rental strategy, property prices in the North Carolina real estate market are still affordable for various investors.
North Carolina short term rentals are generally allowed and legal, but there are various regulations and restrictions imposed by local authorities. Thus, investors need to check out the website of their particular market before investing in a vacation rental market in North Carolina.
Top 5 Cities for Short Term Rentals in the State of North Carolina in 2023
| Ranking | City | Monthly Short Term Rental Income | Short Term Rental Cash on Cash Return |
| 1 | Greensboro | $2,515 | 4.83% |
| 2 | Bryson City | $2,974 | 4.57% |
| 3 | Black Mountain | $3,098 | 3.75% |
| 4 | Raleigh | $3,203 | 3.64% |
| 5 | Durham | $2,720 | 2.85% |
9. New Mexico
- Median Property Price: $482,915
- Average Price per Square Foot: $234
- Days on Market: 112
- Number of Short Term Rental Listings: 6,237
- Monthly Short Term Rental Income: $2,946
- Short Term Rental Cash on Cash Return: 4.17%
- Short Term Rental Cap Rate: 4.24%
- Short Term Rental Daily Rate: $153
- Short Term Rental Occupancy Rate: 57%
- Walk Score: 42
Yet another state that is definitely worth considering for buying a short term rental in the coming year is New Mexico. The state boasts diverse nature with numerous attractions, including state parks, caves, and the Rocky Mountains.
Close to 40 million visitors come to New Mexico each year. Many prefer to stay at vacation rentals rather than hotels, resulting in a healthy occupancy rate of 57%. While daily rental rates are lower than in other top markets for this type of investment, the overall rate of return is excellent.
The New Mexico vacation rental laws vary widely from city to city, and some local governments impose strict regulations. It means that Airbnb hosts need to check the feasibility of vacation rentals before buying an investment property to rent out on a short term basis.
Top 5 Cities for Short Term Rentals in the State of New Mexico in 2023
| Ranking | City | Monthly Short Term Rental Income | Short Term Rental Cash on Cash Return |
| 1 | El Prado | $4,599 | 5.21% |
| 2 | Albuquerque | $2,776 | 4.23% |
| 3 | Santa Fe | $4,331 | 3.77% |
| 4 | Las Cruces | $2,378 | 3.52% |
| 5 | Taos | $3,838 | 3.38% |
10. Connecticut
- Median Property Price: $553,596
- Average Price per Square Foot: $620
- Days on Market: 99
- Number of Short Term Rental Listings: 3,693
- Monthly Short Term Rental Income: $3,895
- Short Term Rental Cash on Cash Return: 4.02%
- Short Term Rental Cap Rate: 4.08%
- Short Term Rental Daily Rate: $205
- Short Term Rental Occupancy Rate: 57%
- Walk Score: 46
The last on our list of the best states to invest in a short term rental in the coming year is Connecticut.
What sets the Connecticut market apart from others is that it is one of the top 10 locations for both rental strategies. It makes the state an ideal place for investors who might not be fully sure about their preferred investment approach, as they can switch between rental strategies and retain good ROI.
The mix of natural and tourist attractions is what brings interest to Connecticut. The average daily rate exceeds the levels in many of the other top locations for vacation rentals, while the occupancy rate is also high.
One thing investors need to consider, though, is that property prices are a bit higher than in other states. So, they need a solid financing plan.
The State of Connecticut does not impose any statewide short term rental regulations. Nevertheless, investors need to check out local authority websites.
Top 5 Cities for Short Term Rentals in the State of Connecticut in 2023
| Ranking | City | Monthly Short Term Rental Income | Short Term Rental Cash on Cash Return |
| 1 | Stonington | $5,607 | 5.50% |
| 2 | Groton | $4,577 | 5.28% |
| 3 | Wethersfield | $2,719 | 4.33% |
| 4 | Milford | $4,688 | 4.13% |
| 5 | Orange | $3,580 | 3.28% |
To start searching for profitable short term rental properties for sale in any of these best states for 2023, click here.
Mashvisor allows real estate investors to search for and find the best states to buy investment property in 2023.
Investing in the Best Rental Properties in 2023
Choosing the best states to buy investment property is the first step in making profitable real estate investment decisions. The next steps are selecting the best city and neighborhood before searching for top-performing long term or short term rental properties for sale. Now that you know which states to focus on in 2023, it’s time to consider the other steps in the process.
Lucky for you, Mashvisor can help you along the way. The real estate heatmap available on our real estate investing app can show you the best neighborhoods for either rental strategy in any US city based on prices, rental income, and ROI. Next, the investment property search engine can help you locate profitable opportunities within your selected market and budget.
Last but not least, the Mashvisor rental property calculator provides comprehensive side-by-side investment property analysis for both rental strategies. This way, you can know what rental income, operating expenses, occupancy rate, and return on investment to expect before you buy a property.
All that is left is to try the power of the Mashvisor platform in boosting your long term and short term rental property investment decisions.
If you’re still not convinced or would like to learn more, schedule a free demo with our real estate investment consultants to see what Mashvisor can do for you.
