As a professional investor for most of my life, I have developed systems to derive my investment choices.
For real estate, I prioritise positive cash flow and, to a lesser extent, capital appreciation, although both are correlated.
Real estate investment is not to be confused with a second home, pied-de-terre, or vacation home. These are not income-generating assets and have very different reasons for owning.
Since positive cash flow is my priority, I look at which states have high rental yields, potential rent growth, and what specific criteria drive this growth.
Supply and Demand => If more folks are renting in a community faster than the supply of available rentals can support, rental prices tend to increase over time.
What drives Demand?
Typically, this is population growth. For example, if California is expensive to live in, you can move to Arizona. If New York is expensive, you can move to Florida, and so on.
What attributes would attract people to move to another state?
- Cost of living
- State income tax rates
- Education
- Job prospects
- Wage growth, and many more
In this article, I will examine the Cost of Living and Disposable Income criteria.
In later articles, I will share how I screen for these other criteria, so stay tuned!
What is the Cost of Living?
It is the amount you spend on essential expenses under a normal and reasonable lifestyle.
We also need to take into consideration Salary and Wages since a low Cost of Living state is often associated with lower salary prospects.
We will now look at the average amount you have “leftover” after spending on essentials = Disposable Income.
Does a high disposable income state represent the best place to own an investment portfolio?
Not necessarily, since taxes, property prices, education, and other factors are not taken into consideration.
Without giving away the secret sauce, the top states to own for cash flow are around the middle of 2 lists.
Next week, I will look at: Average property prices, Population growth, GDP growth, and Rental yield to determine which state(s) is the best to own a U.S. real estate investment in.
| State | Cost of living (annual $) |
| Mississippi | $32,336 |
| Arkansas | $32,979 |
| Alabama | $33,654 |
| Oklahoma | $33,966 |
| New Mexico | $34,501 |
| Tennessee | $34,742 |
| South Carolina | $34,826 |
| West Virginia | $34,861 |
| Kansas | $35,185 |
| Missouri | $35,338 |
| Kentucky | $35,508 |
| Louisiana | $35,576 |
| North Dakota | $35,707 |
| Iowa | $35,871 |
| Ohio | $35,932 |
| Indiana | $36,207 |
| North Carolina | $36,702 |
| South Dakota | $36,864 |
| Michigan | $37,111 |
| Montana | $37,328 |
| Wisconsin | $37,374 |
| Nebraska | $37,519 |
| Wyoming | $37,550 |
| Texas | $37,582 |
| Idaho | $37,658 |
| Georgia | $38,747 |
| Arizona | $39,856 |
| Maine | $39,899 |
| Pennsylvania | $40,066 |
| Florida | $40,512 |
| Utah | $40,586 |
| Illinois | $41,395 |
| Minnesota | $41,498 |
| Nevada | $41,630 |
| Virginia | $43,067 |
| Vermont | $43,927 |
| Delaware | $44,389 |
| Rhode Island | $44,481 |
| New Hampshire | $45,575 |
| Colorado | $45,931 |
| Oregon | $46,193 |
| Connecticut | $46,912 |
| Washington | $47,231 |
| Maryland | $48,235 |
| Alaska | $48,670 |
| New Jersey | $49,511 |
| New York | $49,623 |
| California | $53,171 |
| Massachusetts | $53,860 |
| Hawaii | $55,491 |
| State | Disposable income |
| New York | $25,247 |
| Washington | $25,119 |
| Massachusetts | $22,740 |
| Illinois | $22,535 |
| Virginia | $22,523 |
| Connecticut | $22,398 |
| Minnesota | $22,142 |
| Colorado | $21,939 |
| Maryland | $21,515 |
| New Jersey | $21,379 |
| Michigan | $20,889 |
| Ohio | $20,598 |
| North Dakota | $20,093 |
| California | $20,049 |
| Rhode Island | $20,049 |
| New Mexico | $19,899 |
| Texas | $19,718 |
| North Carolina | $19,518 |
| Georgia | $19,253 |
| Missouri | $19,182 |
| Arizona | $18,764 |
| Wisconsin | $18,746 |
| Pennsylvania | $18,404 |
| Tennessee | $18,078 |
| Delaware | $17,871 |
| Kansas | $17,665 |
| Iowa | $17,649 |
| Nebraska | $17,551 |
| Alaska | $17,460 |
| Indiana | $17,293 |
| New Hampshire | $16,975 |
| Oklahoma | $16,974 |
| Alabama | $16,966 |
| Wyoming | $16,890 |
| Utah | $16,774 |
| Oregon | $16,487 |
| Maine | $16,061 |
| Kentucky | $15,982 |
| South Carolina | $15,824 |
| Arkansas | $15,591 |
| Florida | $15,468 |
| Louisiana | $15,364 |
| Vermont | $15,263 |
| Montana | $14,872 |
| West Virginia | $14,309 |
| Nevada | $13,860 |
| Idaho | $13,692 |
| South Dakota | $13,026 |
| Mississippi | $12,844 |
| Hawaii | $5,929 |
With years of experience in finance, I've developed a keen eye for identifying lucrative investment opportunities. At Global Mortgage Group and America Mortgages, we understand the importance of strategic decision-making in real estate ventures. By carefully examining critical factors such as cost of living and disposable income, we guide U.S. expat and non-resident investors towards maximizing their returns while minimizing risks. As we explore various aspects of real estate investment, our commitment remains steadfast in empowering our clients with the knowledge and tools necessary for financial success. Get in touch with us today to navigate the ever-evolving landscape of U.S. real estate together.
