Nicole,
I'm a licensed Realtor in Houston, TX; Washington, DC; and Maryland.
I currently build duplexes in the Houston metro area. Let me point out some highlights to you. Regardless of where you go, with $40,000 typically would best be used as either soft cost (due diligence) money on a new construction for sale project, or alternatively you can buy a $200,000 property, putting 20% down.
Personally, I prefer the first option. Reason being, at this point in your life it sounds as though you are younger, and truly your money would be best spent multiplied. While you can buy a property and rent it out, a typical return would only be around 5-8% cash-on-cash per year (which you can beat by investing in the stock market). Not to mention, with a rental property, your liquidity will be zero to none and when a problem arises, that $40,000 will have already been utilized as a downpayment on your property. Alternatively, by spending the money to complete due diligence on a new construction project, (where investors in the Houston market target around 22-30% ROI), you would be able to raise capital, complete the construction, and sell it, growing your money by almost 1/3 to 1/4.
Reach out to me if you have any questions about the Houston real estate market, investing, or new construction. I currently live in Washington DC (NOMA)