A Guide To The Most Landlord-Friendly States

Key Takeaways


Operating as a landlord is one of the best ways to pursue a career in real estate. Few exit strategies, for that matter, have proven more capable of generating long-term profits and facilitating financial independence. It is worth noting, however, that today’s most successful rental property owners are those who know where to invest. The market in which a rental property is located will play an instrumental role in its success or failure. Therefore, landlords must pay special considerations to where they buy their homes. Landlord friendly states, for example, warrant a great deal of consideration.

What Factors Make States Landlord Friendly?

From tenant-landlord laws to taxes and insurance rates, landlords in each and every state are expected to abide by countless rules and regulations. It is worth noting, however, that many of the regulations put in place to maintain order are extremely localized. Outside of a few nationally recognized exceptions, many of the laws governing landlord and tenant relations change from state to state. As a result, there are several existing factors that make some states more conducive to the prospect of owning rental properties than others.

While the factors investors find most attractive are essentially subjective, there are approximately six that are universally found in today’s most landlord-friendly states:

  • Eviction Process: Evictions are perhaps the most feared aspect of rental property investing, which is why many landlords covet states which ease the process. Subsequently, some states make it a lot easier to evict bad tenants than others. While some tenant-friendly states make it nearly impossible, others tend to side with landlords by making the eviction process as quick and painless as possible, exercising a low tolerance for tenants who breach their leases.

  • Landlord & Tenant Rights: Both tenants and landlords are awarded rights in each state, but the degree to which those rights are carried out will vary significantly across state lines. Sometimes tenant rights, for example, are so extreme that they may actually jeopardize the financial standing of the landlord. On the other hand, there are several states that have developed a more balanced reputation—one that favors each party. As a landlord, it may be in your best interest to invest in states whose laws don’t work against your right to earn a living.

  • Rent Control: As its name suggests, rent control is often implemented to control the cost of rent in certain areas. Some states don’t allow landlords to increase rents despite inflation, and yearly increases in taxes and utilities. The idea is to prevent ill-intentioned landlords from price gouging tenants, but the laws may hurt well-intentioned landlords trying to earn a living. Therefore, investors looking to become landlords should pay special considerations to any areas that fall under the rent control umbrella.

  • Registration & Licenses: There are a number of states that require landlords to acquire both registrations and licenses to actively rent their real estate assets to tenants. The licenses and regulations are, not surprisingly, to prepare homeowners for the prospects of becoming a landlord. That said, many of these credentials cost money, and can be more of a burden to some landlords, so it may be in an investor’s best interest to lease in a landlord-friendly state that doesn’t require them.

  • Tax & Insurance Rates: Property taxes, and sometimes even insurance rates, are established by local municipalities. As a result, prospective landlords will want to consider the property taxes that will be imposed on their own assets in the event they rent them out. Consequently, some states have much higher taxes than others, so it may literally pay to look at local taxes before investing in a rental property.

  • Competition: The golden rule of real estate investing still reigns true: location, location, location. The location in which an investor chooses to buy a rental property is more important than ever, in fact. Due largely to the amount of competition in each market, investors will want to choose their location wisely. That said, some states inherently have more competition than others.


[ Want to own rental real estate? Attend a FREE real estate class to learn how to invest in rental properties, as well as strategies to maximize your cash flow and achieve financial freedom. ]


Best states for landlords

The Best States For Landlords In 2020

There are a great deal of states that have developed a reputation for helping landlords in their investment endeavors, but some states boast inherent advantages over others. Three states, in particular, seem to award landlords with more benefits than just about everywhere else. To that end, some of the most landlord-friendly states in 2020 are as follows:

  • Texas

  • Indiana

  • Colorado

  • Alabama

  • Arizona

  • Florida

  • Illinois

  • Pennsylvania

  • Ohio

Texas

Out of all the states landlords have found to be the most conducive to investing efforts, none may be more apparent than Texas. As it turns out, Texas offers a wide variety of landlord advantages, but the single most important reason has to do with the state’s inclination to take lease violations very seriously. Due largely to Texas’ propensity to favor landlords in lease violations, it’s fairly easy to see why rental property owners are enamored with the prospect of buying assets in the Lone Star State.

In fact, the whole of Texas tends to place an emphasis on the preservation of landlords’ rights in the event lease conditions are broken. Few places, for that matter, facilitate easier relief, compensation, or repossession of the rental unit if the lease terms are violated. That means landlords with well-crafted lease agreements can enjoy more “peace of mind” than their counterparts in just about every other state. If that wasn’t enough, Texas boasts several affordable markets where demand is increasing and rental asking prices are still incredibly attractive.

Indiana

One of the most landlord-friendly attributes of Indiana is the state’s price-to-rent ratio. With a median home value of $145,300, which is well below the national average, the median rent in Indiana is about $1,100. It is worth noting, however, that the profit potential isn’t the only reason landlords find Indiana to be such a great place to own a rental property. In addition to attractive rental rates, the rules that govern security deposits lean heavily in favor of landlords. Laws in the state of Indiana allow landlords to retain security deposits for 45 days. As a result, landlords may take an appropriate amount of time to determine whether or not they need to use the deposit on any damages caused by tenants. Other states don’t give the landlord enough time to evaluate the property, potentially leading to them giving back the deposit when at least some of it should have been kept.

Colorado

Colorado is unique in that it is one of the few states where local law enforcement takes the side of the landlord. Whereas many states protect the rights of the tenants at the expense of the landlord, Colorado does the opposite. As a result, the process of evicting a tenant for unpaid rent is made simpler. Any demand for compliance notices initiated by the landlord are limited to 72 hours. At that time, tenants are given two options: pay their landlords or leave the property. After the demand for compliance expires, tenants are given a mere 48 hours to get out of the home. Other states, however, may allow the eviction process to drag on for far too long, effectively ruining any profit potential for the owner.

Alabama

Many of the state laws in Alabama make it an attractive state for landlords. Property tax rates are the second-lowest in the country at just 0.42%, making real estate investing options attractive. Landlords are able to raise the rent as long as they provide a 30-day notice. Rental laws prevent tenants from withholding rent if a landlord does not make repairs to the property. In addition, landlords are favored in the eviction process in Alabama. If a tenant breaches the rental agreement, landlords can give a 14-day notice to end the lease. If tenants do not pay the rent, the landlord can give a 7-day notice of eviction. Alabama state laws do not cover late rent fees, meaning that landlords have the freedom to set their own price for late rent fees.

Arizona

Similar to Alabama, landlords are able to raise the rent on their property with a 30-day notice. Landlords in Arizona are favored in the eviction process. If a tenant fails to pay rent or fails to maintain the property, the landlord can give a 5-day notice to rectify the situation. If a tenant breaches the rental agreement, the landlord can give a 10-day notice. If the issue is not rectified, the landlord can then file an eviction lawsuit. In more cases of more serious violations, such as vomiting a crime on the property, a landlord can give an unconditional quit notice to vacate the property within 10 days.

Florida

Although Florida has one of the highest population of renters in the US, the laws in this state lack detail which creates favorable circumstances for landlords and the freedom to set many of their own rental guidelines. For instance, as long as it is returned within 60 days after a tenant vacates the property, there is no limit to the amount a landlord can charge for a security deposit. Rent control is prohibited in Florida, and landlords can set their own price for late rent fees. If a tenant is causing destruction to the property, landlords can give a 7-day notice to vacate before proceeding with eviction lawsuits.

Illinois

Landlords in Illinois are also able to set their own prices for a security deposit for their rental properties. The security must be returned within 45 days unless the tenant owes money in rent or has caused damage to the property. Late fees are limited to $20 or 20% of the rent. If a tenant breaks the terms of the lease, landlords are able to give a 10-day notice to vacate the property before proceeding with the eviction process.

Pennsylvania

The eviction laws in Pennsylvania are also attractive to landlords in Pennsylvania. If the tenant fails to pay rent or violates the terms of the lease, the landlord can issue a 10-day notice to pay or move out. After 10 days, the landlord can begin the legal eviction process. The average rental income in this state is around $1,300 which is attractive cash flow for rental owners. Cities such as Philadelphia and Pittsburgh have different landlord-tenant laws than the state, so be sure to research these regulations when investing in Pennsylvania.

Ohio

Becoming a landlord in Ohio comes with the potential for tax write-offs such as mortgage appreciation and improvements made to the property. In addition, the eviction process favors the landlord in this state. If a tenant fails to pay rent, the tenant must move out of the property within three days after receiving notice from the landlord.

Summary

While great rental markets exist in every state, there’s no doubt that some states reward investors who choose to set up shop in certain locations. Make no mistake, certain states are simply better to invest in than others. Landlord-friendly states, for example, tend to place the rights of homeowners ahead of their tenants, which bodes incredibly well for any rental property portfolio. These states tend to favor landlords in the eviction process, as well as offering low property taxes. Combined with great cash flow, there’s no reason a landlord friendly state couldn’t simultaneously put an asset over the top while mitigating risk. Therefore, pay special considerations to the rules in regulations in your particular state.

Ready to start taking advantage of the current opportunities in the real estate market?

Whether you’re brand new to investing or have closed a few deals, our new online real estate class will cover everything you need to know to help you get started with real estate investing. Expert investor Than Merrill explains the best real estate strategies to help get you on the path towards a better financial future.

Click here to register for our FREE 1-Day Real Estate Webinar and get started learning how to invest in today’s real estate market!

🔒 Your information is secure and never shared. By subscribing, you agree to receive blog updates and relevant offers by email. You can unsubscribe at any time.