8 worst states to invest in real estate in 2026

8 worst states to invest in real estate in 2026

Buy the same property at the same price with the same tenant in two different states, and you'll end up with two completely different investments. Property taxes, insurance costs, eviction timelines, and rent control laws vary enough from state to state that location alone can determine whether a deal makes money or bleeds it.

Most investors run the numbers on a potential investment property itself, but fewer consider its location. The legal and financial landscape where you buy shapes every part of the ownership experience, from your first tax bill to the day you need to remove a problem tenant.

TurboTenant has done that research for you. What follows is a breakdown of the worst states to invest in real estate. These eight markets deserve extra scrutiny before you commit. None are necessarily off-limits, but each one comes with homework that investors shouldn't skip.

What puts a state on this list

To build this list of the worst states to invest in real estate, five factors were weighed against each other. No single factor makes a state a bad place to invest, but when multiple negative factors stack up, the math no longer makes sense for investors.

Effective property tax rate: Property taxes across the U.S. range from 0.27% to 2.2%, and where your property falls on that spectrum determines whether your state is working for or against your tax advantages as a landlord.

Rent control or stabilization laws: Even if you don't intend to rent out your property, rent control and stabilization laws significantly limit how much you can recoup on your purchase if you change your mind later.

Average eviction timelines: Lengthy eviction timelines can cause major headaches and derail cash flow if squatters, holdover tenants, or other ownership disputes cut off income.

Population and job market trajectories: If you're focused on long-term property appreciation, plan to buy in an area where both the population and job market are trending upward. Your property is only worth as much as people are willing to pay to live there.

Home price-to-rent ratio: Researchers analyzed up-to-date Redfin research to determine home prices and compared them to average rents in each state. If you decide to rent out a property, buy somewhere with a solid price-to-rent ratio that allows for good returns.

These factors differ slightly from the dealbreakers a landlord weighs on a day-to-day basis. Here, TurboTenant looked at investment returns across the full property lifecycle, from purchase to exit.

8. Massachusetts

Much of Massachusetts' housing demand is concentrated in the metro Boston area, where median home prices rank among the highest in the country. Even so, appreciation and rent rates have slowed in recent months, meaning new investors rarely see competitive returns here.

Plus, eviction proceedings in Massachusetts can take three to six months to resolve. The state also has strict rules surrounding security deposits that require landlords to pay tenants annual interest or face penalties for noncompliance. Not to mention, Massachusetts' just-cause eviction laws protect even problematic tenants.

Admittedly, markets outside Boston, like Worcester and Springfield, are less expensive for would-be buyers. But the same landlord-tenant laws apply statewide, meaning that if you run into trouble with squatters or renters, your property could sit in limbo for months.

7. Louisiana

The bayous and the Gulf Coast of Louisiana might sound like beautiful places to buy a home. But after multiple catastrophic hurricane seasons, many private insurers now refuse to issue new policies for homes in the state. As a result, homeowners are stuck with the more expensive, state-funded insurer of last resort.

Statewide, annual insurance premiums for typical Louisiana homes average more than $7,000, with coastal parishes running considerably higher. But if you buy outside the 100-year floodplain, you still face elevated flood risk and additional maintenance costs due to heat and humidity.

Louisiana also hemorrhaged full-time residents between 2020 and 2023, limiting property appreciation and rental demand. Even in more affordable markets like Shreveport and Baton Rouge, the combination of population loss, insurance costs, and weak appreciation means the numbers rarely look optimistic.

Those low home prices attract investors who mistake cheap entry for value. Beneath those prices sits a contracting economy. The oil and gas sector has shed jobs steadily; no comparable industry has moved in to replace them, and rental demand across most of the state reflects that reality.

6. Connecticut

Connecticut has one of the nation's highest effective property tax burdens, and many municipalities charge additional fees and special assessments on top of the headline rate. The Constitution State also lost a large chunk of its population during the 2010s, leaving small cities like Bridgeport and Waterbury facing long-term population challenges.

Additionally, Connecticut has one of the oldest housing stocks in the country, with a median year built of 1966 and more than 40% of homes constructed before 1960. For landlords, that translates directly into higher maintenance costs, more frequent capital expenditures, and tighter insurance markets.

Towns like Stamford and Greenwich are the exception, as these places have become hubs for New York commuters. Properties here are the most costly, though, which will narrow investors' profit margins. Even when buying for long-term appreciation, home values rise slowly in Connecticut, while unforgiving property tax rates leave homeowners seeking relief.

5. Hawai'i

Hawai'i's median housing costs are the highest in the country. And despite strong overall rental prices in Honolulu, Hawai'i consistently ranks among the lowest states for rental yield, with net yields on Oahu typically ranging from 2.5% to 3.8% after expenses.

Maui has also placed significant restrictions on vacation rentals to create more residential housing, eliminating the opportunity for higher monthly returns. Most investors have to bet on appreciation rather than rental income, but that's risky given elevated insurance premiums and costly HOA fees on Hawai'i's condos.

Purely as an investment, Hawai'i's entry costs are prohibitively high and yields too low to make the math work for most portfolios. Buying a home here makes more sense for those who want to live the island lifestyle, not build a rental portfolio.

4. Illinois

Cook County, home to Chicago, is Illinois' biggest and most active real estate market. Landlords can benefit from high rental demand, but effective property tax rates have skyrocketed in recent years. Multiple reassessment cycles often blindside real estate owners with unexpectedly high bills.

Consider this: Illinois has one of the nation's most underfunded pension systems, and property taxes have historically filled the gap. The state has seen nine consecutive years of domestic out-migration, limiting long-term appreciation and keeping vacancy rates relatively high in cheaper markets like Peoria and Rockford.

In other bad news for investors, Chicago's Residential Landlord and Tenant Ordinance (RLTO) is one of the most tenant-friendly municipal codes in the U.S., requiring a lengthy eviction process, move-in checklists, and other time-intensive steps for landlords.

3. New Jersey

While many of the states on this list carry a heavy property tax burden, New Jersey tops them all with the nation's highest effective rate. On a $400,000 property in the Garden State, that amounts to nearly $10,000 per year before accounting for any other expenses.

New Jersey's Anti-Eviction Act also favors tenants, requiring landlords to show a valid cause for eviction or nonrenewal even after a lease ends.

Investors can still afford to buy in urban markets like Newark, but management demands and legal exposure follow landlords there. In addition to property taxes, New Jersey taxes rental income at rates that rank among the highest in the country, meaning landlords pay steep fees on the property and again on its earnings.

Understanding the IRS's rules for rental properties is critical here, since depreciation and deductions are the primary tools available to offset an already heavy tax burden.

2. New York

While much of New York State has relatively affordable homes, New York City is a different story. The Big Apple has some of the country's highest median home prices, and approximately 1 million rental units are subject to strict rent stabilization laws that prevent landlords from charging market rates, even on new leases.

New York's landlord-tenant courts tend to move slowly, with evictions taking anywhere from two months to a year, depending on the case. Security deposit regulations, hot water requirements, and subletting laws add to compliance costs, making New York one of the most tenant-friendly states in the country.

Outside of NYC, cheaper markets like Buffalo and Syracuse allow for easier entry, but property values there won't appreciate as quickly. Investors looking to get started here may struggle to recoup their expenses through either rent or long-term appreciation, even where rental demand and population growth are strong.

1. California

As one of the most expensive states for buying rental property, California has a high barrier to entry. Insurance costs compound the problem, as few major insurers cover homes in the Golden State. With limited options, landlords are forced to pay higher premiums and often fall back on a costly state-assigned plan.

California also has strict rent control laws. AB 1482, known as the Tenant Protection Act, caps annual rent increases at 5% plus the local Consumer Price Index, with a maximum of 10%. Many cities, including San Francisco and Los Angeles, layer even stricter local ordinances on top of them.

Inland markets like Fresno and Bakersfield offer more affordable alternatives to the state's pricey coastal cities, which often charge transfer taxes on home sales. The same state-level constraints apply statewide, though, and appreciation tends to be slower inland than on the coast.

Finally, at a staggering 13.3%, California has the highest state income tax rate in the country, meaning more of what real estate investors collect goes right into the state's pockets.

Finding a state that puts the odds in your favor

None of the states on this list is necessarily a bad place to live. The resistance being analyzed is investor-specific: taxes, regulations, and market dynamics that make it hard to generate competitive returns in most scenarios. That said, plenty of landlords own profitable properties in every state covered. The difference is that they invested in the right property at the right time.

Knowing where not to put your money is as valuable as knowing the best states to buy rental property or the most landlord-friendly states. Every market deserves a closer look, and the state you choose can matter as much as the property itself.

Wherever you look, run the same mental checklist: effective property tax rate, local rent control laws, eviction timelines, and insurance availability.

This story was produced by TurboTenant and reviewed and distributed by Stacker.