Madison is home to the best residential real estate investment market in South Dakota.
The 57042 zip code in Madison presents the greatest opportunity for the best real estate investments among the 1,548 individual real estate markets in South Dakota we evaluated. We looked at property values, population trends, and six other metrics for each market. We used that data to calculate each market's InvestScore.
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Data sources
Most of the data in this article comes from the Zillow Home Value Index and the U.S. Census American Community Survey.
We update our data when the original sources update their data, usually monthly. Sometimes we'll update data more frequently.
Clever also performs regular quality checks to identify outdated data, broken data connections, and other data issues that may arise.
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5 best places to invest in South Dakota
| Rank | City | InvestScore | Affordability | Property value appreciation |
|---|---|---|---|---|
| 1 | Madison | 100 | 3.5 | 57% |
| 2 | Sioux Falls | 86.4 | 3.6 | 38% |
| 3 | Mitchell | 80.9 | 3.7 | 41% |
| 4 | Harrisburg | 80 | 3.2 | 36% |
| 5 | Tea | 78.6 | 3.1 | 39% |
🚨 This article is for informational purposes only. It isn't intended to convey financial or legal advice. We recommend you talk to a real estate agent or real estate attorney when buying a home in South Dakota.
1. Madison
We've identified the 57042 zip code in Madison as South Dakota's best real estate investment market. Here's why.
🔎 Key data about Madison (57042)
| Data point | Value | Rank in state (of 1,548 markets) |
|---|---|---|
| InvestScore | 100 | Highest |
| Typical property value | $254,537[1] | 5th lowest |
| Five-year appreciation | 57%[2] | highest |
| Household income | $71,868[3] | 22nd highest |
| Affordability ratio | 3.5 | 8th most affordable |
| Five-year population growth | -1.8%[4] | 30th highest |
| Unemployment rate | 2.3%[5] | 3rd lowest |
| Property taxes | $2,538[6] | 7th lowest |
| Educational attainment | 37%[7] | 14th highest |
Madison (zip code 57042) is the best residential real estate investment market in South Dakota. It has the highest property value appreciation among markets we evaluated, with a 57% appreciation of the typical property over the last five years.
Madison is the 8th most affordable market among the 1,548 South Dakota markets we evaluated, with an affordability ratio of 3.5.
2. Sioux Falls
The 57105 zip code in Sioux Falls is the runner-up spot for the best real estate investments in South Dakota.
🔎 Key data about Sioux Falls (57105)
| Data point | Value | Rank in state (of 1,548 markets) |
|---|---|---|
| InvestScore | 86.4 | 2nd highest |
| Typical property value | $278,418[1] | 8th lowest |
| Five-year appreciation | 38%[2] | 15th highest |
| Household income | $77,292[3] | 16th highest |
| Affordability ratio | 3.6 | 9th most affordable |
| Five-year population growth | 2.3%[4] | 10th highest |
| Unemployment rate | 2.3%[5] | 3rd lowest |
| Property taxes | $3,087[6] | 17th lowest |
| Educational attainment | 44%[7] | 5th highest |
The 57105 zip code in Sioux Falls features a typical property value of $278,418, the 8th lowest in the state.
Property values have appreciated 38% over the past five years, the 15th highest increase among evaluated markets in the state. Sioux Falls homes have an affordability ratio of 3.6, the 9th most affordable in the state.
3. Mitchell
The 57301 zip code in Mitchell comes in at No. 3 in our ranking of the best residential real estate investment markets in South Dakota.
🔎 Key data about Mitchell (57301)
| Data point | Value | Rank in state (of 1,548 markets) |
|---|---|---|
| InvestScore | 80.9 | 3rd highest |
| Typical property value | $239,643[1] | 4th lowest |
| Five-year appreciation | 41%[2] | 9th highest |
| Household income | $65,620[3] | 28th highest |
| Affordability ratio | 3.7 | 10th most affordable |
| Five-year population growth | -0.2%[4] | 22nd highest |
| Unemployment rate | 1.3%[5] | lowest |
| Property taxes | $2,540[6] | 8th lowest |
| Educational attainment | 23%[7] | 28th highest |
With a typical property value of $239,643, Mitchell's 57301 zip code features the 4th lowest property values in the state.
Mitchell homes have an affordability ratio of 3.7, the 10th most affordable among the markets we evaluated.
4. Harrisburg
The 57032 zip code in Harrisburg ranks No. 4 among South Dakota's residential real estate investment markets.
🔎 Key data about Harrisburg (57032)
| Data point | Value | Rank in state (of 1,548 markets) |
|---|---|---|
| InvestScore | 80 | 4th highest |
| Typical property value | $352,579[1] | 19th lowest |
| Five-year appreciation | 36%[2] | 18th highest |
| Household income | $111,528[3] | 18th highest |
| Affordability ratio | 3.2 | 3rd most affordable |
| Five-year population growth | 9.5%[4] | highest |
| Unemployment rate | 2.3%[5] | 3rd lowest |
| Property taxes | $3,777[6] | 25th lowest |
| Educational attainment | 42%[7] | 9th highest |
Property values in Harrisburg's 57032 zip code have seen the 18th highest increase among evaluated markets in the state, with an appreciation of 36% over the past five years.
Harrisburg's affordability ratio of 3.2 makes it the 3rd most affordable among the 1,548 markets we evaluated.
5. Tea
The 57064 zip code in Tea rounds out our top five residential real estate investment markets in South Dakota.
🔎 Key data about Tea (57064)
| Data point | Value | Rank in state (of 1,548 markets) |
|---|---|---|
| InvestScore | 78.6 | 5th highest |
| Typical property value | $374,795[1] | 23rd lowest |
| Five-year appreciation | 39%[2] | 13th highest |
| Household income | $119,022[3] | 13th highest |
| Affordability ratio | 3.1 | 2nd most affordable |
| Five-year population growth | 5.4%[4] | 6th highest |
| Unemployment rate | 2.3%[5] | 3rd lowest |
| Property taxes | $4,227[6] | 28th lowest |
| Educational attainment | 44%[7] | 7th highest |
Property values in Tea's 57064 zip code rose 39% over the last five years, ranking the city 13th highest among evaluated markets in South Dakota.
Tea homes have an affordability ratio of 3.1, the 2nd most affordable among the markets we evaluated.
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Frequently asked questions
See our article Steps to Buying Your First Rental Property to learn the basics of real estate investing for beginners.
You'll learn the importance of setting goals, picking the right market, and more.
Cash investors often use what's called the 70% rule, which suggests they should pay around 70% of a house's after-repair value minus the cost of renovations.
By buying for about 70% of the after-repair value, they're positioning themselves to pay for repairs and other costs, and to lock in a profit.
The 70% rule isn’t a hard-and-fast formula, but a quick guideline investors use to evaluate potential deals.
Investing in residential real estate can be one of the best passive real estate investments in South Dakota.
Residential real estate offers accessible passive income and the potential to compound your original investment.
Renting out residential units is the top way to invest in real estate. House hacking also offers a great opportunity for passive real estate investment income.
How we rank residential real estate markets in South Dakota
To determine the best real estate investments in South Dakota we evaluated 1,548 markets on eight metrics, and then assigned an InvestScore based on a proprietary weighting framework. Each market corresponds to a specific zip code in South Dakota.
What is InvestScore?
InvestScore is a score on a scale of 0 (worst in state) to 100 (best in state) that estimates the residential real estate investment potential of a given market. It takes into account a suite of key data points for each city.
- Typical property value: This measures the typical home value in this zip code, according to the Zillow Home Value Index. It reflects the typical value for homes in the 35th to 65th percentile range, including all homes, with the numbers smoothed and seasonally adjusted. We prefer lower property values, which indicate both more room for growth and a greater ease of purchase.
- Property value appreciation: This measures how much property values have increased in the area over the past five years, according to the Zillow Home Value Index. We prefer a higher appreciation, as it indicates better returns on housing. However, past performance isn't indicative of future results.
- Median household income: This is the inflation-adjusted median household income in the zip code, according to U.S. Census American Community Survey data. We prefer a higher household income, as it indicates local residents have more income to spend on housing.
- Affordability ratio: This is the ratio of the typical home value to the median household income in the area. A lower ratio is better because it means more households can afford a home, which indicates higher demand.
- Population growth: This is how much the area's population has grown over the past five years, according to U.S. Census estimates. Higher is better, as it indicates residents are moving into the area at a rapid clip.
- Unemployment rate: This is the unemployment rate in the area, according to U.S. Census data. We prefer a lower rate, as it indicates the availability of steady employment in the area, meaning residents will find it much easier to afford homes.
- Property tax: This is the median real estate property tax paid in the area, according to U.S. Census estimates.
- Educational attainment: This is the percentage of residents in the area that have obtained a bachelor's degree or better, according to U.S. Census estimates. We prefer a higher rate because it indicates local residents who have higher earning potential and thus should be able to afford homes.
