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Tenant-Friendly vs. Landlord-Friendly States: How to Tell the Difference

Tenant-Friendly vs. Landlord-Friendly States: How to Tell the Difference

3 min read
Whitney Hutten

Whitney is a real estate investor and personal finance trainer whose vision is to launch 10,000 families on the path ...

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A common question in the forums is, “How do I pick a market to invest in?”

While it may be tempting to invest in your own backyard, the cards may not be stacked in your favor. And since real estate is illiquid and immovable, market (and submarket) choice is super important.

Here are a few variables I research for every market/submarket I look to invest in:

  • Population growth
  • Job growth
  • Job diversity
  • Income growth
  • Housing prices and value growth
  • Rent increases
  • Poverty decline
  • Vacancy stabilization or decline
  • Tax rates

While you can technically invest anywhere, I want to stack as many cards in my favor — putting the economic winds at my back, so to speak. The last (but certainly not least) variable I research is if the area is tenant-friendly or landlord-friendly.

When you sign the lease with a tenant, you are giving control of a high-dollar asset over to them for the duration of the lease. Therefore, I want to know that, as the property owner and possible debt holder, I have legal recourse to take back control of the property should major issues arise and be compensated if there are damages. However, property issues are handled differently between landlords and tenants in nearly every state.

As such, I want to be in areas where I, as the business owner, am calling the shots on how my investment is run.

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How To Tell

When you are researching if a state is landlord- or tenant-friendly, it’s not quite as binary as checking a box. State laws cover many aspects of the landlord-tenant relationship, from security deposits to landlord access to rental property. Below is a list of resources to read through regarding your state of choice.

Related: How to Be a Landlord: Top 12 Tips for Success

But I know that most investors’ eyes would glaze over if they were asked to analyze all of the data in the above links. Therefore, I’m all about making this a bit easier for you.

There is a simple chart on RentCafe.com that rates states based on an index of which are landlord-friendly and which ones are tenant-friendly according to their aggregated index. (Keep in mind local laws are changing right now with COVID-19.)

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Landlord-Friendly States

  1. West Virginia
  2. Arkansas
  3. Louisiana
  4. North Carolina
  5. Alabama
  6. Mississippi
  7. Wyoming
  8. Idaho
  9. Ohio

Related: The 5 Most Common Reasons Tenants Leave Your Rentals

Tenant-Friendly States

  1. Vermont
  2. Delaware
  3. Rhode Island
  4. Maine
  5. South Dakota
  6. Kansas
  7. Arizona
  8. Nevada
  9. Oregon

Once you have determined the overall sentiment of the state, look up local policy to understand if the local market has additional laws, bill of rights, or healthy home programs that you as the landlord will need to be familiar with.

The presence of local laws and programs does not mean you can’t invest in the area, you just need to know how they work and how it could impact your investment.

Wrapping It Up

While it’s true that great investments can be found (and made) anywhere, deciding on where to invest based on how the law of the land treats landlords is just another way to protect your “ass”ets.

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How do you protect your investment while maintaining good tenant relationships?

Let us know in the comments.