If one of your long-term goals is to build wealth through real estate investing, this may just be your year. Continuing from last year, one of the current challenges of the housing market is low inventory, which is driven largely by homeowners’ reluctance to sell out of a desire to keep their lower-interest loans.

This, combined with limited new construction in various markets and time delays in building new homes, this low inventory has fostered a favorable environment for investors to successfully buy and flip existing homes. Moreover, purchasing properties for rental income (36 percent of American households rent) can help you build a robust real estate holdings portfolio. Here’s a glimpse into what you can expect from the investing landscape in 2024 and the best local markets to look into.

Investors’ view

Despite rising prices and mortgage rates, a recent survey by New Western indicates a significant rise in investor interest in renovating and flipping neglected, often vacant properties across various markets, and experts anticipate that this trend to peak around 2027. And for homeowners, who lack the skills or resources to renovate homes themselves, this can present a lucrative opportunity if you want to fix-and-flip homes that need substantial repairs. This trend should ideally, in turn, lead to more affordable housing options for lower-income buyers struggling to find a foothold in the market.

Profit outlook

Given the vast opportunities available for investing in 2024, it’s no surprise that it may be a potentially great way to generate passive income. Over half the investors surveyed anticipate a 25 percent growth in their ventures year over year, and nearly two-thirds report successfully selling their refurbished properties at or above the asking price (while still being below market average). This allows them to pocket a profit, reinvest in their real estate portfolios, and solidify their investment strategies.

Optimal locations for real estate investments typically include areas with thriving populations, a robust economy and job market, and reasonably priced homes. Here are some of the best states to consider investing in to help improve your chances of success.

Arizona

For investors looking to diversify their portfolios, Arizona presents a compelling opportunity. Thanks to a thriving job market (ranking among the top ten in the United States) and a 5 percent increase in home values from 2022 to 2023, it has become a favorable market for sellers and investors alike. Adding to its allure, 34.7 percent of Arizonians rent, with rental prices experiencing a significant 32 percent year-over-year increase. Collectively, these factors indicate a robust and stable real estate market.

Colorado

Colorado’s appeal to real estate investors lies in its favorable economic climate. Considered by Management Library to be one of the top ten states to invest in, the low income tax and property tax rate help make holding your investments more affordable. Denver, in particular, is a hotbed for investment, with investor activity up 14 percent in 2023 and a 32 percent drop in traditional home sales. Furthermore, over one-third of residents rent and the state has a 1 percent annual population growth, meaning it’s sure to provide a consistent stream of tenants and buyers. Plus, due to the millions of visitors Colorado attracts year-round, purchasing investment properties can also reap returns through income from vacation and short-term rentals.

North Carolina

Fueled by a nearly 10 percent increase in population over the past ten years, North Carolina’s real estate market is one of the hottest in the nation. Raleigh, for example, experienced a 27 percent increase in investor activity in 2023. With more than one-third of the state’s population being renters, it offers a prime opportunity for investors who want to buy, hold, and rent for passive income, making it a potentially profitable way to capitalize on local rental markets.

Texas

Texas can be a great place to invest with its thriving economy, which boasts a 3 percent annual job growth rate, 5.6 percent wage increase in 2023, and influx of 300,000 new residents yearly. Although property taxes are high and home values are lower than the national average, it has a surging rental market, with four in ten people renting their homes. Dallas, for example, is considered an investors haven for rental properties since 59 percent of households rent, while Houston has become a profitable center for flipping rehabbed homes, seeing an increase in investor activity of 32 percent in 2023.

If you’re contemplating entering the realm of property investing this year, it’s crucial to seek guidance from a real estate professional. Whether your goal is to generate rental income or achieve quick profits through house flipping, they can assist you in identifying the most suitable properties and navigating the process to acquire them.