How do you know if your state is landlord-friendly or not? Landlord-friendly states are those that have high demands for rentals, not too much competition, laws that favor landlords, and other attributes such as low tax rates.
If you’ve recently bought an investment property or are considering buying a rental home or apartment, researching different locations will help maximize your profits. As a landlord, you can avoid losing money by understanding important real estate factors, including tenant rights, tax rates, population and job growth, and demand for rentals in specific states and cities.
While it’s possible to make money from rentals in various locations across the U.S., choosing to buy a home in a landlord-friendly state is the best way to make monthly income and long-term returns on your investment. Than Merill for FortuneBuilders says, “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.”
In this article, learn about the most landlord-friendly states, plus states where you may want to avoid buying an investment property.
What Makes a State Landlord-Friendly?
- High rental demand: States with a younger population, many universities and colleges, and cities where it’s expensive to purchase homes tend to have a high demand for rentals. This makes it easier for landlords to fill vacancies and charge desirable rental rates.
- Not too much competition: To make money on a rental property, landlords need to be able to attract renters who will pay a fair rate. This is most likely to occur where the supply of rentals doesn’t exceed the demand. For instance, if a state has a lot of new construction and a dwindling or aging population, this can lead to low demand and high competition.
- Low or moderate property taxes: Some states have much higher property tax rates and insurance rates than others, which can be an obstacle to initially purchasing an investment property. The most landlord-friendly states don’t require homeowners to pay a lot of taxes or insurance, which depletes their monthly and yearly profits. Landlords ideally want to purchase in states where taxes are not quickly increasing.
- Population and job growth: States that are growing and experiencing booms in businesses attract more renters. This tends to occur in states that are affordable and have growing cities, college towns, and suburbs.
- Fair landlord-tenant laws: Since real estate laws vary by state, some locations will be more supportive of landlords’ rights than others. Certain states are also more lenient in terms of laws related to security deposits, eviction, and other issues, giving landlords more control over their rental agreements.
- Favorable eviction process laws: Landlord-friendly states make evicting destructive or uncooperative tenants easy. The best states to purchase rentals in have a low tolerance for tenants who don’t pay rent, continuously pay late, damage properties, or breach their rental agreements in other ways. These regulations prevent landlords from having to wait months to remove unwanted tenants.
- No (or flexible) rent control: To continuously keep up with inflation and make a profit, landlords need to be able to increase rent over time. Some states don’t allow landlords to increase rents by putting in place rent control laws (in order to prevent price gouging). States that are more landlord-friendly block rent control, giving property owners more leeway to decide their rental rates.
Rental property laws and regulations in the United States vary from state to state. Within a state, laws can also differ from county to county. In some states, it makes more sense to buy rentals in bigger cities, while in other states rentals located in suburbs or smaller towns are more profitable.
Top 12 Landlord-Friendly States in the U.S. in 2023
Below are the most landlord-friendly states in the United States, beginning with the best:
With high demand for rental properties, cities that are drawing in younger populations, and favorable rental property laws, Texas is considered among the best states for real estate investing. In Morris Invest’s words, “Texas offers outstanding real estate investment opportunities . . . the state has steady population growth, and offers a thriving economy and job diversity that result in reliable rental income.”
- Favorable lease violation laws: If a tenant fails to pay rent, pays rent late repeatedly, or violates their agreement in other ways, landlords in Texas are protected in many ways. For example, landlord relief laws in Texas allow landlords with unpaid rent to receive compensation quickly or to repossess properties if their lease terms are violated.
- Affordable markets: Many cities and suburbs in Texas remain affordable and are in demand by renters, including college students and workers just entering the workforce.
- Increasing population: Texas’s population is growing by roughly 1,200 people per day. Many of those moving to Texas are particularly younger people. More than 50 percent of the state’s population is 34 years old or younger.
- High price growth: Now is the time to purchase in cities such as Austin, which are expected to keep experiencing considerable growth in real estate prices.
As an affordable state with a low tolerance for lease violations, landlords are likely to earn a monthly profit on their rentals in Alabama.
- Low property tax rates: Alabama has the second-lowest tax rates in the country, meaning more of the rent that renters pay each month goes directly into the owner’s pockets, making it easier to make a profit on real estate investments.
- Right to raise rent: Landlords can raise the rent as long as they provide a 30-day notice. Rental laws also prevent tenants from withholding rent if a landlord does not make repairs to the property that weren’t listed in the lease agreement.
- Favorable eviction processes: Landlords can give a 14-day notice to end a lease if a tenant violates the lease terms or a 7-day notice of eviction if rent isn’t paid on time.
With affordable prices of homes and apartments, plus moderate rent prices, landlords benefit from favorable price-to-rent ratios in Indiana.
- Attractive cities and suburbs: Cities, including Indianapolis, have seen great long-term gains on real estate investments over the past ten years. This trend is expected to continue as more people seek housing in these affordable cities.
- Appealing security deposit laws: Indiana allows landlords to retain security deposits for 45 days. Landlords can also use deposits on damages caused by tenants.
With growing cities and an expanding population of young people, Colorado is drawing in many renters willing to pay high rent for updated properties and those in appealing locations.
- Real estate prices expected to keep rising: Costs of homes and apartments in Colorado have been going up steadily over the past decade. Growth here doesn’t seem to be slowing down, suggesting a good return on investment.
- Compensation for unpaid rent: When tenants fail to pay rent on time, landlords can give a 3-day notice to remove renters. Other states, however, may allow the eviction process to drag on for far too long, effectively ruining any profit potential for the owner.
Florida has one of the highest rates of renters of any state, as well as an expanding population. The costs of homes in Florida are relatively low compared to other states with bigger populations. Rental laws in this state are also flexible, giving landlords the freedom to develop their own terms.
- High demand for rentals: Whether college kids or older adults, a high percentage of Floridians choose to rent instead of buy.
- Unlimited security deposit limit: Landlords can require as much security deposit as they want, as long as it’s returned within 60 days of the renter vacating.
- Rent control prohibited: Landlords can increase tenants’ rent and also set their own price for unpaid rent or late rent.
Compared to many other states, landlords in Arizona are favored in eviction processes and have a lot of control over their lease agreements.
- Low property taxes: With one of the lowest tax rates in the U.S., Arizona tends to be an affordable state to purchase and maintain rental property in.
- Favorable eviction processes: Landlords can raise the rent on their property with a 30-day written notice. They can also give a 5- to 10-day notice to evict a renter if they break their agreement or damage property.
7. North Carolina
As one of the fastest-growing states with booming cities, North Carolina is becoming home to an increasing number of young adults and families looking to rent.
- Rapidly growing population: Cities such as Durham, Charlotte, and Raleigh are thriving with job opportunities and expanding in size, creating demand for rentals.
- Affordable cost of living: This state remains affordable to live in compared to many others, although prices are rising due to increasing demand. The cost of living is a main driver for people moving to North Carolina.
- Low tax rates: Low property taxes in North Carolina mean that homeowners get to keep more of the monthly rent they’re earning.
Having a high demand for renters, a big population, and favorable real estate laws, this is a state where landlords are likely to profit from their rentals.
- Plenty of renters, especially in cities: Big cities in this state, including Chicago, are home to many renters who are willing to pay high rental prices.
- Easy process to evict: Landlords have the right to evict tenants with a 10-day written notice if they’ve violated their agreement.
- Flexible security prices: Landlords have a say over how much is charged for security deposits, plus the right to use deposits for any property damage.
With plenty of job opportunities and a lower cost of living compared to many states in the Northeast, Pennsylvania is a smart state to purchase property in.
- High average rental rate: The average rental income in Pennsylvania is $1,300, more than the national average (which is around $1,000 to $1,100). Plus, cities including Pittsburg and Philadephia are even more expensive and in demand, although rental laws in these cities can vary from the rest of the state.
- Appealing eviction laws: Landlords in Pennsylvania have the right to give a 10-day notice to unpaying renters, asking them to either pay or move out. After ten days, the landlord can begin the legal eviction process.
Ohio has a growing population, lots of job opportunities near bigger cities, plus a relatively affordable cost of living. These are all factors that renters look for when choosing which state to reside in.
- In-demand cities: Cities such as Cincinnati, Columbus, Dayton, and Canton are attracting renters and workers looking for jobs in diverse cities, especially younger professionals who commonly rent.
- High tax write-offs: Landlords in Ohio can make more income thanks to mortgage appreciation and tax write-offs when improvements are made to the rental property.
- Fast eviction for unpaid rent: If a tenant fails to pay rent, they can be notified by the landlord within three days that they need to pay or move out.
As a state with a very low tax rate, Georgia is an affordable place to become a landlord. Additionally, laws in this state regarding security deposits and late fees favor landlords.
- Flexible eviction laws: Georgia has informal eviction laws, allowing landlords to take action quickly if a tenant has unpaid rent or has done damage. Landlords can give a 7-day notice to evict tenants if they aren’t paying or adhering to the terms.
- Unlimited late rental fees: In the case of unpaid rent, landlords can collect extra money from late fees, which are more lenient in this state than most others.
- No limits on security deposits: Landlords have flexibility in Georgia to establish their own security deposit amounts based on their property and the situation.
Kentucky has low property tax rates plus some of the most unspecified laws related to rental security deposits and late fees. This gives landlords the power to reclaim money from tenants who haven’t rightfully paid. Additionally, there’s less construction of new homes in this state and fewer houses for sale compared to many others, decreasing competition.
- Low property taxes: Low taxes mean that landlords can keep rent at a reasonable price in order to attract renters while still making a profit.
- Flexible use of security deposits: Landlords can use the security deposit funds for any damage done to the unit, unpaid rent, or other costs incurred by the tenants.
- Lenient eviction and violation laws: An eviction process can be initiated by a landlord with a 7- to 15-day notice depending on the violations. Landlords also benefit from unconditional quit notice laws in this state, which force tenants to vacate properties within 14 days if they are in violation of their agreement.
Worst States for Landlords
While some states are ideal for purchasing rental properties, others are riskier and less likely to lead to a return on your investment.
Characteristics of states that are not landlord-friendly include:
- High tax rates
- Too much competition
- High cost of purchasing property
- Strict laws that favor tenants
- Dwindling or stagnant populations
- Expensive building costs
- High crime rates and concerns with safety
- Poor job growth
- Poor public transportation and other transportation issues such as traffic
Among the worst states for landlords are:
- California: Real estate prices and tax rates are very high in California. This state also has a Tenant Protection Act enacted in 2019 that puts strict rent control and eviction laws into place.
- Vermont: Property taxes in this state are high, plus it can be difficult for landlords to keep security deposits when tenants have broken their lease terms. Overall, experts consider Vermont to be one of the worst states for landlords.
- New York: New York is a state with many rental laws to adhere to, high real estate prices, and high tax rates. Many rental laws favor tenants over landlords, such as those related to term violations and security deposits. For example, some eviction laws, including unconditional quit notices, make it a lengthy process to remove tenants from a property when they haven’t paid on time.
- Massachusetts: Like New York, homes in Massachusetts tend to be expensive, plus property taxes are high and eviction laws are more tenant-leaning.
- Nebraska: Nebraska ranks fourth in the country for property tax rates, even though homes in this state are overall affordable. Rent in Nebraska tends to be low, plus strict security deposit and eviction laws can be tougher on landlords.
Know What You’re Getting Into Before Becoming a Landlord
Being a landlord isn’t always a guaranteed way to make money, nor is it necessarily easy to do. Sometimes, being a landlord can feel like a full-time job instead of a passive way to boost your income. Hence why some landlords choose to hire property managers to help take care of their rentals and tenants. This makes sense if the upkeep of your property and dealing with maintenance are too difficult for you.
That being said, if you’re prepared to invest in one or more rental properties and willing to do your homework beforehand, rentals can be a solid investment. However, as explained in this article, you want to avoid purchasing in a state or county where there’s not much demand for rentals—or other issues such as high taxes and strict rent control, which will make your job ten times harder.
- Learn as much as possible about the responsibilities involved in being a landlord.
- Know the laws and demographics in specific locations you’re interested in before purchasing an investment property.
- Speak with a property manager if you need help taking care of your rental.
- Seek help from a local real estate agent for their input and advice on specific locations.
Want to learn more about what it takes to be an effective and profitable landlord? Check out this article: “How to Become a Landlord and Build Wealth.”
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- Morris, C. (2020, November 3). Is Texas a Good Place to Invest in Rental Real Estate? Morris Invest. https://morrisinvest.com/blog/2020/5/30/is-real-estate-good-in-texas/
- Texas Comptroller of Public Accounts. (n.d.). Texas Tops the List of Renter Majority Cities. https://comptroller.texas.gov/economy/fiscal-notes/2017/dec-jan/renters.php
- Winters, M. (2022, April 2). The 15 worst places to buy a home in the U.S. if you want it to increase in value. CNBC. https://www.cnbc.com/2022/04/02/the-15-worst-places-to-own-a-home-if-you-want-it-to-increase-in-value.html
- Santarelli, M. (2023, January 3). Indianapolis Housing Market: Prices, Trends, Forecast 2022-2023. Norada Real Estate Investments. https://www.noradarealestate.com/blog/indianapolis-real-estate-market/
- Fastest Growing States 2023. (n.d.). https://worldpopulationreview.com/state-rankings/fastest-growing-states
- Ormsby, K. (2022, August 11). Best & Worst States To Consider Investing In Real Estate. WalletGenius. https://walletgenius.com/home-ownership/best-worst-states-to-consider-investing-in-real-estate/
- Christensen, K. (2022, November 30). Is Ohio a Good Place to Invest in Real Estate in 2021? RealWealth. https://realwealth.com/learn/is-ohio-a-good-place-to-invest-in-real-estate/
- Baker, G., & Morito, J. A. (2022, July 1). 10 States With the Strongest & Weakest Housing Markets. Fit Small Business. https://fitsmallbusiness.com/states-with-strongest-weakest-housing-markets/