Texas vs Florida for Real Estate Investing

Updated on February 28, 2024

Have you decided to invest in real estate but you’re torn between Texas and Florida? While both offer excellent potential for real estate investors, there are some important differences to know that can put one ahead of the other.

One important consideration to bear in mind is that your personal circumstances and preferences will be some of the most important factors in determining your choice. Consulting a local real estate tax professional is also essential for getting the most out of your property investment.

Florida and Texas Compared at a Glance

The Florida and Texas real estate markets share many of the most appealing traits investors look for in an investment property. Though both are great options for investors wishing to expand their portfolios, there are some differences that might help to tip the balance:

FLORIDATEXAS
Average house price**October 2023, Redfin.com$404,100$342,400
Current population growth rate+1.87%+1.57%
Average rent for a 2 BR house$1,359$1,093
State income tax0%0%
Percentage of renter-occupied homes33%38%
Income per capita$40,278$38,123

When considering a rental property to add to your portfolio, knowing the demographics of your chosen state can be a good place to start. Taking the above data into account, it’s clear that both states offer solid economic foundations for investment, with a growing population, a solid percentage of the population renting their homes, and a fairly average income per capita as compared to the U.S. as a whole.

Though real estate may, an overage, cost more in Florida than in Texas, the average rental price and average income per capita are also higher. Investors also need to take into account the greater potential for vacation rentals in Florida that can bring in extra income per night compared to properties located in Texas.

Reasons to Invest in Florida Real Estate

Florida offers excellent prospects for real estate investors looking for different types of investment properties. Whether you’re searching for a short-term or long-term rental property, a second home, or a fixer-upper, Florida is a solid investment option.

Florida’s Established Tourism Industry

Florida’s high season extends almost the whole year, with tourists flocking to the Sunshine State to soak up the sun on the state’s beaches or make memories with their families in the world-famous attraction parks. The year-round warm and sunny climate means that occupancy rates in Florida’s hotels and rental homes are consistently high, but especially in the peak season (November-April).

Florida is consistently one of the most visited states in the USA. Though cities in Texas like Fort Worth reported record numbers of visitors in 2022, investors who wish to focus on vacation rentals may get a better return on their investment in Florida.

Florida’s Favorable Tax Laws

Florida has favorable tax laws that make the state very appealing for investors. Make sure to consult with a reputable Florida CPA firm to learn the tax implications of purchasing property in the state. A qualified professional can help you understand how your purchase could be affected if you’re a Florida resident or out-of-state investor.

Florida tax laws that could benefit you include:

No State Income Tax

Investors who earn income through renting out their property in Florida aren’t taxed at the state level.

No Capital Gains or Estate Tax

If you intend to hold onto your property long-term, the fact that you won’t pay state capital gains tax is an appealing advantage to investing in Florida. You will be subject to federal capital gains tax though. Similarly, Florida residents don’t pay estate tax on inherited property.

Excellent Opportunity for Growth

According to Statista, the median cost of a single-family home in Florida was $403,000 in 2022. This has risen from $145,000 in 2012, showing that values more than doubled in only 10 years.

With a growing population, various industries booming, and Florida’s ongoing status as a popular and glamorous tourist location, there are many reasons to believe this growth will continue.

Reasons to Invest in Texas Real Estate

Texas is also a huge draw for real estate investors. The following are some of the key reasons to invest in the Lone Star State.

A Strong Housing Market

If you’re looking for a home that appreciates over the long term, Texas could be a great option. Texas has a stable housing market with year-on-year increases in real estate prices. As an investor looking for a nest egg, a long-term investment, or a rental home, your property in Texas is likely to keep growing in value.

Average House Prices in Texas

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Source: https://www.redfin.com/state/Florida/housing-market

A Strong Rental Market

38% of the population is currently renting, the population is growing, and there are relatively high rental prices in cities like Dallas and Austin. These factors indicate that investors interested in renting out their properties can get excellent returns.

A Growing Population

A growing population is music to an investor’s ears. New potential renters continue to head to Texas to enjoy the booming jobs market and the fiscal benefits the state offers.

With Texas’ population growing steadily, there will be no shortage of potential tenants looking for accommodation.

Texas’ Population Over the Years

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Source: https://worldpopulationreview.com/states/texas-population

Favorable Tax Laws for Investors

There are a range of tax benefits open to real estate investors in Texas. These include:

  • No state income tax: Since there is no state income tax in Texas, rental property owners aren’t subject to state-level income tax on the rent they charge their tenants.
  • No capital gains tax: There is no state capital gains tax in Texas, meaning you will only need to remit capital gains taxes to the federal government. 
  • Tax deductions for rental properties: Consult your CPA about how deductions including depreciation, mortgage interest, and maintenance expenses can work for you. Please note that federal tax deductions apply to rental properties located anywhere in the U.S.

The Final Verdict: Florida or Texas?

Texas offers excellent prospects for real estate investors for immediate returns and future growth. As a geographically large and diverse state, Texas provides options for a wide range of investment options from large cities to the coast.

Similarly, Florida offers everything from luxury condos along South Beach to more humble family abodes in smaller towns across the state. With the potential to rent your property both to permanent residents and tourists, Florida has an edge over Texas when it comes to its short and long-term investment potential.

An Expert CPA Makes Investing Easier

Whether you decide to invest in Florida or Texas, be sure to get the help of an experienced CPA. Having professionals on your side will make the process smoother, ensure legal compliance, and take away some of the stress associated with purchasing property.

A local CPA firm can inform both in-state and out-of-state investors of all the fiscal benefits open to them to ensure they’re getting the biggest bang for their buck. They can also help you optimize your taxes after taking the plunge for maximum returns.

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