What a Landlord-Friendly State Means

From tenant-landlord laws to taxes and insurance rates, landlords in every state are expected to abide by countless rules and regulations. However, it is worth noting 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, several existing factors 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 are so extreme that they may actually jeopardize the landlord’s financial standing. On the other hand, several states have developed a more balanced reputation 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 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 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.

Regulations After COVID-19: The COVID-19 pandemic brought about many changes to the real estate industry, including federal and state laws regulating rental properties. These policies mandated eviction moratoriums and rent freezes in certain localities. Many states have begun relaxing the laws set during 2020, and allowing landlords to resume regular operations.

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Bill@kb4propertygroup.com

Bob@kb4propertygroup.com