Top Landlord-Friendly States: Picking the Best for Your Goals

Have you ever considered how state laws and regulations can make or break your profitability as a landlord?

In the intricate world of real estate investing, the laws of the state where your rental property is situated play a monumental role. They dictate your rights and obligations and significantly influence your bottom line.

Imagine the peace of mind that comes with operating a rental unit in a state that supports your endeavors, minimizes bureaucratic hurdles, and empowers you to maximize your returns. That's the power of choosing a landlord-friendly state.

Dive into this guide to discover the strategies that will help you make an informed decision and ensure that your real estate investments are both rewarding and hassle-free.

What makes a state landlord-friendly?

A landlord-friendly state prioritizes the needs and interests of landlords and property owners through favorable laws and regulations.

For example, such a state would typically have a streamlined eviction process, favorable security deposit laws, clear and concise lease agreements, low property taxes, and minimal regulations on rent increases. In addition, a landlord-friendly state would have strong job growth and a lower cost of living to attract more renters, making it easier for landlords to fill their properties quickly.

10 key traits of landlord-friendly states

Many investors make real estate purchases based on the ease of business in a property's location. The following factors impact the time and hassle landlords in certain areas may experience when managing rental properties. 

1. Rent control legislation

Rent control policies are a controversial topic that aims to limit rent prices in market-rate rental housing through government-enforced measures. However, only a handful of states have rent control policies in place at either the state or local level.

While 31 states still uphold preemptions preventing local governments from adopting rent regulation laws, notable exceptions exist. States such as California, the District of Columbia, Maine, Maryland, Minnesota, New Jersey, New York, and Oregon have actively implemented rent control policies.

In 2022, the push for rent control experienced a renewed vigor. Advocates lobbied at state and federal levels, urging President Biden to set rental caps on properties mortgaged by Fannie Mae and Freddie Mac. Though rent control measures found limited success, being introduced in 19 state legislatures, Massachusetts looks poised to enact rent control in 2023, with anticipated activity in numerous other states.

The National Multifamily Housing Council reports that most states without rent control maintain these preemptions, barring six states and the District of Columbia. The debate persists: while some champion rent control as a tool for ensuring housing affordability, critics warn of its unintended consequences, such as potential housing shortages.

Currently, tenants' rights groups, especially in Boston, Massachusetts, are campaigning intensively to overturn rent control bans, linking them to rising eviction rates. Moreover, changes in rent control legislation are on the horizon for cities in states like Arizona, Florida, Hawaii, Illinois, Kentucky, New Jersey, New York, and Washington as regulators consider enhancing rent control protections.

2. Tax benefits and obligations

All landlords should be fully aware of their tax obligations when they purchase a rental property. 

For instance, they might be tempted to purchase property in Illinois, New Hampshire, and New Jersey — but these states have some of the highest property tax rates in the country. While some cities appear to have relatively low tax rates, it's essential to look at their historical tax growth — for example, tax rates in Greely, CO, and Anchorage, AK, rose more than 26% from 2019 to 2020. 

On the other hand, Texas, Michigan, New Mexico, and other states restrict how much taxes can grow in a single year. 

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Landlords should also capitalize on all available rental property tax benefits in certain cities and states. Most states offer tax benefits and deductions to attract real estate investors to their jurisdictions. These benefits include writing off rental property-related expenses, such as maintenance costs, utilities, insurance premiums, etc. 

3. Security deposit laws

The landscape of security deposit regulations varies significantly from one state to another, often making a significant difference in a landlord's experience.

Imagine the flexibility in states where there's minimal regulation on security deposits. As a landlord, you have more leeway in setting the security deposit limit or amount based on your property's condition, location, or amenities, which can be a boon when dealing with high-maintenance properties or ones in prime localities. It grants you that extra buffer to safeguard your investment.

On the other side of the spectrum, many states have put caps on the amount a landlord can request as a security deposit. In some locales, you might be restricted to a month or two of the rental amount to ensure prospective tenants aren't unduly burdened financially.

While seen as a limitation from a property owner's perspective, it also often correlates with states' more balanced approach to tenant rights, which could translate to smoother tenant relationships and potentially more stable rental agreement scenarios.

It's also essential to factor in the specifics of the state's deposit return laws. Some states mandate a swift return after the lease or rental agreement's completion, while others stipulate deductions. The speed and clarity of these processes can significantly impact your ease of operation as a landlord.

In choosing a landlord-friendly state, the dynamics of security deposit regulations can be pivotal. It's not just about the amount you can ask for but also the fluidity and fairness of the entire deposit lifecycle, from collection to return.

4. Ease of eviction procedures

Despite their best efforts, some landlords rent their property to problematic tenants who default on payments, damage the property, or refuse to meet predefined obligations. Landlords can minimize this risk by conducting thorough tenant screening and choosing a state that enables fast, straightforward evictions when necessary. Alabama, for example, allows owners to evict tenants for unpaid rent with seven days' written notice, and Florida allows just three days' notice in certain circumstances. 

5. Ease of doing business

Landlords must consider the laws that govern their business in each state, such as the capital gains exposure a business has upon selling their property. 

Rental property owners who choose to replace the properties they sell with another purchase can use a 1031 exchange to limit their capital gains exposure — but investors don't always immediately purchase new properties after selling one in their portfolio. Property owners should always consider how long it would take to liquidate their assets and their legal and tax obligations in different states. 

Idaho, Indiana, and Ohio are examples of states allowing property owners to sell or transfer ownership of their assets with low or no wealth-related taxes. On the other hand, New York, Maine, and Vermont tack extra tax obligations onto property owners who inherit or are gifted property to use as business assets. 

6. Demand for rental properties

Landowners should evaluate the local rental market before purchasing rental property in any state. This evaluation should include demand for rental properties, operating costs, and rental rates. 

As costs rise nationwide and hybrid work arrangements are popular, tenants seek more cost-effective rental options. This has made up-and-coming cities such as Boise, Idaho, and Salt Lake City, Utah, popular locations for renters. 

That said, landlords should know the high operating costs of managing and maintaining properties in these popular areas and price their rent accordingly to ensure a comfortable profit margin. 

7. Property maintenance and safety regulations

In evaluating whether a state is landlord-friendly, landlords must understand the property maintenance and safety regulations, including familiarity with the state's requirements for repairs and maintenance, health and safety codes, and habitability standards.

Responsibilities for repairs and maintenance under rental laws may vary from state to state, with some placing it on landlords and others on tenants. It is also important to consider health and safety codes, as states often have regulations to ensure rental properties meet standards for fire safety, electrical systems, plumbing, ventilation, and pest control.

Understanding and complying with these regulations can help ensure that rental properties are safe and habitable for tenants and minimize potential legal and financial liabilities for landlords. 

8. Favorable property management regulations

Some states may have landlord-friendly regulations that support efficient property management. For example, states that do not require landlords to obtain rental licenses or permits or have minimal maintenance and repairs regulations can be considered landlord-friendly as they reduce administrative burdens and costs for landlords.

9. Access to resources and support

States that provide resources and support for landlords, such as landlord training programs, legal assistance, and access to educational materials, can be considered landlord-friendly. These resources can help landlords stay informed, comply with regulations, and effectively manage their properties.

10. Availability of landlord insurance options

States with many affordable and comprehensive options can be considered landlord-friendly. Landlord insurance protects landlords against potential risks, such as property damage, liability claims, and loss of rental income. States with a competitive market for landlord insurance — with multiple providers and coverage options — can empower landlords to manage risks effectively and protect their investments, making owning and operating rental properties easier and more affordable.

The most landlord-friendly states in 2024

Rental property owners can choose from many states serving investors with different needs. Whether you are a buyer looking to purchase a short-term rental property or serve long-term tenants, here are some of the most landlord-friendly states in 2024. 

Alabama

Alabama gives landlords significant leeway in managing their rental properties and inhabitants. As noted earlier, landlords must only give tenants seven days' notice before eviction if they fail to pay their rent and 14 days if they violate their lease terms. Alabama also has no limits on late fees landlords can charge and does not require landlords to obtain a license before renting their property. 

Arizona

Arizona stands out as a landlord-friendly state due to its advantageous legal framework for property owners. In Arizona, landlords benefit from a swift eviction process. If a tenant fails to pay rent, landlords can issue a five-day notice before proceeding with eviction. For lease violations, a 10-day notice is typically required. This prompt approach to eviction is particularly beneficial for landlords dealing with non-paying or problematic tenants.

Additionally, Arizona imposes minimal restrictions on late fees, allowing landlords to set reasonable penalties for late rent payments. Notably, Arizona does not mandate landlords to have a rental license, simplifying the process for new and existing property owners. This combination of factors makes Arizona an attractive option for real estate investors seeking a landlord-friendly environment.

Colorado

Colorado is recognized as a landlord-friendly state, offering several advantages for property owners. The state's eviction laws are relatively straightforward, requiring only a 10-day notice for non-payment of rent and a similar notice period for lease violations. This expedited eviction process is advantageous for landlords needing to address tenant issues promptly.

In terms of financial aspects, Colorado does not strictly regulate the amount landlords can charge as late fees, providing flexibility in managing financial penalties for late rent payments. Furthermore, Colorado does not require landlords to obtain a specific rental license, which reduces bureaucratic hurdles and makes property management more accessible.

Florida

Florida has no rent control, and there are also no limits on late fees and security deposits that landlords can set for their protection. As noted earlier, evictions are often straightforward in the state, where, in some cases, landlords are only required to provide tenants with three days' notice if they fail to pay their rent. 

The state also has low property taxes, with the average property owner on the hook for just 0.98%. Florida landlords should know the state's weather risks (e.g., hurricanes, high winds, and flooding) and purchase the right landlord insurance coverage. 

Texas

The Lone Star State gives potential investors a market with high rental property demand, relatively low prices, and significant landlord protections. Landlords in the state must only provide three days' notice before evicting tenants who default on rent. They can also seek compensation for any inconveniences or financial losses due to the tenant. 

Indiana

While property in Indiana is cheaper than in other states, the median rent in the state has reached $1,100 and is expected to rise in the coming years. Landlords here can expect high returns while receiving protections such as a 45-day deposit hold to cover damages and a 10-day notice period for defaulting tenants. 

Georgia

Unless the lease specifies it, landlords in Georgia don't have to provide their tenants with written notice before eviction proceedings. Disputes and issues are settled quickly, with arbiters usually favoring landlords. Late fees and security deposits are also left to the discretion of landlords, with no laws restricting how much they can charge. 

Louisiana

Multiple factors support Louisiana's reputation as a landlord-friendly state. Firstly, it boasts one of the lowest effective property tax rates in the U.S. Additionally, rent control is preempted by Louisiana laws, and the eviction process is known for being swift, taking as little as two to five weeks to complete.

In addition, the state's landlord-tenant law is known for its flexibility regarding lease agreements.

Differences within states

It's important to note that while the states mentioned are generally considered landlord-friendly, each state can have significant regional variations. Local laws, economic conditions, and real estate markets can differ considerably between urban, suburban, and rural areas.

Therefore, investors must conduct localized research and consider these nuances when making investment decisions in these states. Additionally, staying updated on any changes in state and local regulations is crucial for effective and compliant property management.

Tips for landlords in less friendly states

Operating as a landlord in states with more tenant-friendly laws can be challenging, but there are strategies to navigate these environments effectively:

• Understand local laws: Familiarize yourself with state and local regulations regarding rent control, eviction processes, security deposits, and tenant rights. Knowing the law helps prevent costly legal mistakes.
• Build a strong lease agreement: Ensure your lease agreements are comprehensive and compliant with local laws. Clearly outline rent payments, property maintenance, and lease termination terms to protect your interests.
• Thorough tenant screening: Conduct detailed background and credit checks. Reliable tenants reduce the risk of rent defaults and property damage, which is especially important in states where eviction processes are lengthy and complex.
• Maintain your property well: Keeping your property in excellent condition can attract and retain good tenants, reduce overall maintenance costs, and justify rent increases within legal limits.
• Professional legal assistance: Consider consulting with a lawyer specializing in landlord-tenant laws in your state. This can help you navigate complex legal situations and stay compliant with state regulations.
• Open communication with tenants: Establish a good relationship with your tenants through open and transparent communication. Addressing issues promptly and respectfully can prevent disputes and maintain a positive rental experience.
• Utilize property management tools: Services like Azibo can be invaluable in less landlord-friendly states. They offer tools for efficient rent collection, tenant screening, and lease management, helping you stay organized and compliant.
• Stay informed: Laws and regulations can change. Stay updated on any legal changes in your state that could affect your rights and responsibilities as a landlord.
• Build a network: Connect with other landlords and real estate professionals in your area. Networking can provide support, advice, and insights into managing properties effectively in a tenant-friendly environment.
• Plan for longer vacancies: Plan for potentially longer vacancy periods in states with stringent rent control and eviction laws. This includes having financial reserves to cover times when the property may not generate income.

By adopting these strategies, landlords in less friendly states can successfully manage their properties, mitigate risks, and maintain profitability.

The best landlord-friendly states in 2024

Selecting the right state for your real estate investment is a critical decision that can significantly impact your success as a landlord. The most landlord-friendly states, characterized by favorable laws and regulations, create an environment where property owners can operate with greater ease and potential for profitability.

These states typically offer streamlined eviction processes, flexible security deposit laws, and minimal restrictions on rent increases. They also tend to have strong job growth and a lower cost of living, making them attractive to a vast pool of renters.

However, it's important to remember that success is attainable even in less landlord-friendly states. Landlords can navigate these environments by understanding local laws, drafting strong lease agreements, conducting thorough tenant screening, and maintaining open communication with tenants.

Comprehensive property management tools like Azibo can further streamline this process, offering practical solutions for rent collection, tenant screening, and lease management.

Ultimately, whether you invest in a state known for being landlord-friendly or one with more tenant-centric laws, your approach and management strategy can make a significant difference. Stay informed, be proactive, and leverage the right tools and resources to ensure your real estate investments are successful, rewarding, and aligned with your goals.

Please note that the information provided in this article is for general informational purposes only. It is not intended to be a comprehensive guide to real estate investing nor should it be considered as legal or financial advice. Laws and regulations regarding real estate, taxation, and landlord-tenant relationships vary by state and are subject to change. We recommend consulting with a qualified professional in real estate, law, or finance to obtain advice tailored to your specific circumstances and to ensure compliance with the current laws in your area.