Each state has its own set of rules and regulations regarding rental properties. Needless to say, some states are more favorable to landlords than others. That is why your rental property’s location is so important. In this post, we’ll look at what makes a state landlord-friendly, as well as the most and least landlord-friendly states in the United States in 2023.
What Characterizes a Landlord-Friendly State?
Before we go any further, it’s necessary to understand what makes a state friendly to landlords and property owners. Knowing how to distinguish landlord-friendly states from tenant-friendly states can make or break your rental business.
So, how can one tell if a state is friendly to landlords?
#1. Eviction Procedures That Are Beneficial
Landlords find it difficult to deal with and evict bad renters in states with strict eviction rules. Landlord-friendly states have eviction processes that make it simpler for property owners to remove tenants and recapture them as quickly and painlessly as possible.
#2. Landlord Rights Are Protected
Certain states prefer tenants over landlords, putting the latter at a disadvantage, especially if they have undesirable tenants. Landlord-friendly states ensure that property owners’ rights are recognized and protected.
#3. Improved Rent Control
While states with rent control rules want to protect renters from greedy landlords, it can be unjust to property owners because they are either limited or barred from raising rent costs under acceptable circumstances. States that offer landlords more rent control allow well-intentioned landlords to make a living.
#4. The process of registering and acquiring licenses is not onerous.
Paperwork is generally inconvenient, especially when it comes to registration and licensing. Obtaining them can be a time-consuming, demanding, and expensive procedure. Investors are often drawn to states that do not require both or, at the absolute least, do not make it difficult for them to obtain the appropriate documents to operate a rental property.
#5. Tax and insurance rates that are favorable
Local towns, in general, decide tax rates. They do, however, sometimes set insurance rates. As a result, some states have higher tax rates than others, so it is in the best interest of the investor to hunt for an investment property in states with lower rates.
#6. Regulations Following the COVID-19 Epidemic
The COVID-19 pandemic caused several changes in the real estate market, including federal and state regulations governing rental homes. In certain areas, these rules required eviction moratoriums and rent freezes. Many states have begun to loosen the rules enacted in 2020, allowing landlords to resume normal business.
10 Best Landlord-Friendly States in 2023
Based on the parameters listed above, we’ve developed a list of the most landlord-friendly states in the United States. States receiving this ranking have a strong track record of being pro-landlord, including regulations that favor landlords, such as no limits on how much can be charged for security deposits and fair eviction procedures.
Three states, in particular, appear to provide more incentives to landlords than almost anywhere else. For that purpose, the following are some of the most landlord-friendly states in 2023:
Texas may be the most obvious of all the states landlords have discovered to be the most friendly to investment initiatives. It turns out, has a plethora of landlord benefits. Still, the single most crucial reason is the state’s proclivity to treat lease infractions seriously. It’s easy to see why rental property owners are attracted to the potential of purchasing properties in the Lone Star State, owing partly to Texas’ proclivity to favor landlords in lease violations.
In fact, Texas emphasizes the protection of landlords’ rights in the event that lease terms are violated. In fact, few places make it easier to get redress, compensation, or repossession of the rental unit if the lease terms are breached. This means that landlords with well-drafted lease agreements can have more “peace of mind” than their counterparts in almost every other state. As if that weren’t enough, Texas has several cheap markets where demand is expanding and rental asking prices remain attractive.
Indiana’s price-to-rent ratio is one of its most landlord-friendly features. Indiana has a typical property value of $145,300, which is significantly lower than the national average, while the median rent is around $1,100. However, it is important to note that profit potential isn’t the only reason landlords consider Indiana to be a wonderful region to buy a rental property. Aside from attractive rental prices, the rules governing security deposits favor landlords substantially. Landlords in Indiana are permitted to keep security deposits for 45 days under state law. As a result, landlords may need to take their time determining if they need to utilize the deposit to cover any damages caused by tenants. Other states do not give the landlord enough time to analyze the property, which may result in them returning the deposit when some of it should have been kept.
Colorado is one of the rare states where local law enforcement is on the landlord’s side. Unlike many states that safeguard tenants’ rights at the expense of landlords’, Colorado does the reverse. As a result, the process of evicting a tenant for nonpayment of rent is simplified. The landlord’s demand for compliance notices is restricted to 72 hours. At that point, tenants have two options: pay their landlords or leave the property. Tenants are permitted 48 hours to leave their residence after the demand for compliance expires. Other states, on the other hand, may allow the eviction procedure to go on much too long, ultimately destroying the owner’s earning potential.
Many of Alabama’s state regulations make it an appealing state for landlords. Property taxes are the second-lowest in the country, at 0.42 percent, making real estate investing appealing. Landlords can raise the rent if they give a 30-day notice. Rent rules prohibit tenants from withholding rent if a landlord fails to make necessary repairs to the property. In addition, landlords are given preferential treatment during the eviction procedure in Alabama. If a tenant violates the rental agreement, landlords can terminate the lease with a 14-day notice. If tenants fail to pay their rent, the landlord may issue a 7-day eviction notice. Due to the fact that Alabama state rules do not address late rent costs, landlords are able to determine their own prices for late rent fines.
Landlords can raise the rent on their property with a 30-day notice, much like in Alabama. In Arizona, landlords are given preferential treatment during the eviction process. If a tenant fails to pay rent or fails to maintain the property, the landlord has the option of issuing a 5-day notice to remedy the situation. If a tenant violates the terms of the rental agreement, the landlord may issue a 10-day notice. So, if the problem is not resolved, the landlord may launch an eviction lawsuit. In more extreme circumstances, such as vomiting a crime on the property, a landlord can issue an unconditional quit notice requiring the tenant to depart the property within 10 days.
Although Florida has one of the biggest populations of renters in the country, the state’s rules are vague, creating ideal conditions for landlords and allowing them to determine many of their own rental guidelines. For example, there is no limit to the amount a landlord can ask for a security deposit as long as it is repaid within 60 days after a tenant vacates the property. Rent control is illegal in Florida, and landlords can charge whatever they want for late rent costs. If a tenant is causing damage to the property, landlords can offer a 7-day notice to quit before filing eviction lawsuits.
Landlords in Illinois can also charge anything they want for a security deposit on their rental properties. Unless the tenant owes money in rent or has caused damage to the property, the security must be returned within 45 days. Late fees are restricted to $20 or 20% of the monthly rent. If a tenant violates the lease terms, landlords can give the tenant a 10-day notice to quit before proceeding with the eviction process.
Pennsylvania’s eviction regulations are also appealing to landlords in the state. If a tenant fails to pay rent or violates the lease terms, the landlord may serve a 10-day notice to pay or vacate. After 10 days, the landlord has the option to initiate the legal eviction process. The average rental income in this state is roughly $1,300, making it an appealing cash flow for landlords. Cities such as Philadelphia and Pittsburgh have distinct landlord-tenant laws than the state, so when investing in Pennsylvania, make sure to research these restrictions.
In Ohio, becoming a landlord entails the possibility of tax write-offs for mortgage appreciation and property renovations. In addition, in this state, the eviction process benefits the landlord. If a tenant fails to pay rent, he or she is required to vacate the property within three days after getting notice from the landlord.
Georgia is another state having informal eviction rules, which allow landlords to easily settle unpaid rent difficulties. Tenants have seven days (unless otherwise indicated) to pay rent after landlords issue an eviction notice. If they do not, landlords may initiate judicial proceedings to evict renters. In Georgia, there are no limits on late rental fees or security deposits, giving landlords more leeway in determining these amounts based on the property.
States with the Least Landlord-Friendly Policies in 2023
On the other hand, here are some indicators of why a state is unsuitable for rental property owners:
- A sizable population with low demand for rental units
- High taxes and costs, along with falling property prices, are a recipe for disaster.
- Landlord-unfavorable legislation
- High levels of crime
- Expensive transportation
- a scarcity of job opportunities
- Inadequate public school systems
- Inadequate public health and safety
The Top 10 Least Landlord-Friendly States In 2023
Certain states prefer tenants to landlords. In general, tenant-friendly states are located in the northern half of the country, whereas landlord-friendly states are located on the southern side. This schism dates back to the country’s founding.
The southern states were dominated by landowners and relied heavily on agriculture. As a result, regulations were enacted to protect landowners and their properties. To encourage immigration, the northern states, which were more reliant on manufacturing and trade, created rental regulations that favored renters.
Landlords find it more difficult to dismiss renters in tenant-friendly states, screening is more circumspect, and security deposit regulations are quite severe.
#1. New York City
Aside from having one of the most expensive property markets in the country, New York has a number of restrictive rules for landlords and investors. These regulations vary according to the kind, size, and unusual condition of the rental.
These regulations define how long you can rent, how much you can charge for application and late penalties, and how much you can collect as a security deposit and for rent. As an example, you can only charge a late fee of $50 or 5% of the monthly rent, whichever is less.
In New York, property taxes vary greatly. Property owners in New York pay 0.88 percent in property taxes, whereas landlords in Suffolk County pay up to 2.37 percent. The statewide average property tax is 1.69 percent.
While California is one of the states with the lowest property tax rates, numerous communities in the state have residential real estate rent control. California was among the first states to enact statewide rent control legislation. Furthermore, various restrictions limit the amount you can charge for application fees, how you screen renters, and the eviction procedure.
In 2019, Oregon became the first state to enact a statewide rent control scheme. This imposed a number of restrictions on landlords in the state. Among them are the following:
- Rent cannot be increased by more than 7% every year.
- Renters who have lived in a home for up to a year cannot be evicted without cause. The most prevalent legal reason for eviction in Oregon is nonpayment of rent.
- Landlords who breach these provisions face fines of up to three months’ rent plus damages.
Washington is in between landlord and renter-friendly. Evictions may take more than a month depending on the reason for the eviction. However, before initiating eviction procedures, a landlord must provide at least a 5-day eviction notice. Rent control exists in cities such as Washington, DC. In addition, landlords in Seattle must follow the “first-in-time” or FIT regulation.
This rule, which was passed in 2016, requires landlords to rent their homes to the first tenant who fits the conditions. Landlords in Seattle are prohibited from actively selecting their tenants, forcing them to assess applications based on the date they were submitted and offer tenancy to the first qualifying renter.
Several provinces in the Old Line State have rent control programs. Before admitting renters, landlords in Maryland are required to be registered and licensed. In addition, Maryland has stringent rules on security deposits, late fines, and lease agreements. For delinquent rent, landlords must provide renters with a written 10-day notice. Evictions might take up to two months to complete.
Vermont is the most tenant-friendly state in the United States, according to RentCafe, based on a ranking system that focuses on specific areas of the landlord-tenant relationship, such as regulations on security deposits, eviction notices, and rent hikes.
Eviction for overdue rent must be preceded by a 14-day written notice from the landlord. Before raising rent, landlords must provide a 60-day notice. Landlords must give a 48-hour notice before entering the property and a 14-day notice for eviction owing to nonpayment of rent.
Nebraska has a substantially higher median property tax rate of 1.76 percent than the national average. Landlords are permitted to keep security deposits for up to 14 days after the tenant has moved out. Tenants have the right to withhold rent if major repairs are not completed.
#8. Rhode Island
The average tax rate in the Ocean State is 1.36 percent. Eviction requires a 20-day notice, and tenants are permitted to make repairs and deduct the cost from their rent. Before entering the property, the landlord must give a 48-hour notice.
If the landlord fails to make critical repairs, tenants can withhold rent and “fix and deduct.” Late fees must be explicitly indicated in the lease agreement and cannot exceed 5% of the rent.
Delaware state law allows renters to withhold rent payments if substantial repairs are not completed or to deduct the cost of repairs from their rent. Non-payment of rent requires a 5-day notice before eviction. Landlords must offer their renters 60 days’ notice before raising the rent.
Should You Only Invest in the Land Friendly States?
Finally, landlord-friendliness should not be the only element affecting your investment decision, but it should have some effect because you cannot change the location of your real estate investment.
Investing in one of the most landlord-friendly states might save you a significant amount of time and money. However, renting out property in a landlord-friendly state with few potential purchasers would not make you as much money as renting out property in a tenant-friendly state with a thriving housing market. As a result, demand is a crucial element to consider when deciding where to invest.
It is also feasible to have a landlord-friendly city within a tenant-friendly state, and vice versa. As a result, in addition to state property rules, look into local laws as well.
To summarize, while successful real estate can be found anywhere in the United States, certain states have real estate rules that make them better suited to preserving your investment. Investing in landlord-friendly states will make your life as a property owner lot easier, less stressful, and more rewarding.
Frequently Asked Questions
Is North Carolina Landlord Friendly?
Yes, North Carolina is landlord-friendly, especially because evictions can be issued immediately in certain instances and no notice is required to enter the property.
Is Minnesota a Landlord Friendly State?
Minnesota is widely regarded as a landlord-friendly state. In various ways, Minnesota rental rights favor landlords, including the minimum notice required for evictions and the lack of rent regulation.
Is Oregon a Landlord Friendly State?
Oregon is regarded as one of the least landlord-friendly states in the United States. This is because there are numerous rent control rules and tenant protection measures that can harm the landlord.