Are Your Rentals in a Landlord-Friendly State? Here’s Why That Makes a BIG Difference.

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One of the most severe and crippling blunders real estate investors can make is failing to check if a market is landlord friendly before buying a rental (especially if you are buying from out of state).

This is an often overlooked and seldom talked about issue that can really affect both brand new and experienced investors. Sometimes we take our markets and how easy they are to work in for granted. If you haven’t invested out of state, you might not realize how good you’ve got it. The reverse is also true. Some don’t realize that the grass may be a lot greener for landlords on the other side of the state line.

Related: The Landlord’s Guide to Dealing With Problematic Tenants

So what’s a landlord friendly state? Just how much difference can it make?

While some markets have a good economy, as well as job growth and population growth, you also have to look into how landlord friendly they are.

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States Unfriendly to Landlords Could Cost You BIG

There are several components to this factor. The most commonly recognized of them is the eviction process. In some states, this might take a matter of weeks — and perhaps just a few hundred dollars if the tenants put up a fight. In others, it can be a six-month or longer process to evict a non-performing tenant. And it can cost thousands. If you aren’t prepared for that type of timeline or emergency expense, it can literally turn a positive cash flow year to negative. It may not only destroy the ability to hold and profit from that property, but can also erode your profits on other assets.

Then there is the litigation issue. Some state laws and legal systems just favor tenants over landlords and vice-versa. This can lead to massive exposure to malicious lawsuits and financial issues. States like Massachusetts can be incredibly hard on rental property landlords. They put heavy burdens on landlords to perform even if tenants are not or are no longer even legally occupying the unit.

Do Your Due Diligence

Landlord Station names Texas, Indiana, and Colorado as its top three landlord friendly states. Arizona and Florida are also on the list.

Related: How to Safely Navigate Landlord-Tenant Laws as a Real Estate Investor

It’s also essential for buy and hold investors to dig in and look at the county and city level too. One disruptive emerging trend in several areas is limiting the number of investors, landlords, and tenants in a city or neighborhood. If you buy a property and only then find out you cannot legally rent it out, you could been reaching deep in your pocket to bail out and find an investment elsewhere. Do your due diligence in advance.

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Which are your favorite states and places to buy rentals? Why? Or do you have eviction horror stories to share?

Let me know with a comment!

About Author

Sterling White

Sterling White started in the real estate industry at a early age back in 2009. The company he co-founded Holdfolio is a real estate crowdfunding platform based in the Indianapolis market. Before founding Holdfolio Sterling and partner Jacob Blackett were involved in the purchasing and selling of 100+ single family homes nationwide. In his free-time he trains for a World Record

16 Comments

  1. William Morrison

    Sterling, it’s nice to know if a state or county is landlord friendly before adding properties there although sometimes it might be better to know if they are tax friendly. Grin. Multi state taxes are a big step for one property across a state line.
    I noticed the tone of the referenced article seemed to focus on the advantages not of the good landlord but of the slow lazy one.
    My first rentals were/are in a county considered tenant friendly. The good news the standard lease that they have developed over time defines the rules for both of us. It’s worked pretty well. Now, I am renting in A and B neighborhoods.
    That standard lease is I think 45 pages of boiler plate before my part. The first time I read through it I saw a few things I wished were in my rental agreement when I was in college as a tenant. I’m an old guy. I was charged for some things that were broke when I moved in, no walk through required, so I couldn’t prove it. I couldn’t move twice, kind of stuck.
    It’s still good to know. Still do the numbers where you are first. Add some for more strict tenant placement and maybe buy up a neighborhood. Then buy accordingly. That said just for thought. Someone has to rent and own at every level, so everyone can’t move up.
    By the way after doing a little checking in that first rental county every item in that long list came from multiple extreme cases of landlord abuse of power. My words would be just nasty people with money. Ok rant done.

      • William Morrison

        Sterling, I’m in a couple. The one I entered first and referenced above is considered tenant friendly with strong tenant rights leases. Mine are A and B type neighborhoods as I said so I may not have the same headaches as the level below. We’ve had some and it’s just stuff if you know the rules in advance and have an appropriate reserve.

        • Sterling White

          Makes perfect since William. Having higher quality tenants help. By investing in those A/B neighborhoods do you still encounter longer eviction periods? In the case that you have encountered this situation.

  2. Aly W.

    Very true, good article. While my state of NJ is tenant friendly, some cities (Trenton) are landlord friendly as long as you follow the law and use an attorney experienced in landlord/tenant law. Other NJ towns/cities strongly favor the tenant regardless.

    Broward County, FL has also been landlord friendly, again, within the scope of the law. Be meticulous about filling out forms if you’re doing it yourself.

  3. Andrew Syrios

    This is a very good point. I’ve heard in NY it can take up to a year to evict someone. Deadbeat rights or something. In the end this just hurts tenants as no landlord in their right mind would ever take a risk on anyone with anything of note that came up on their background check. And given the rental demand in places like that, there’s no need to. But as an investor, you can’t change those things and just have to know them and invest accordingly.

  4. Thomas F.

    Excellent article and I had no idea some cities and counties were limiting the amount of properties that can be turned into rentals, at least for areas outside of major metropolitan centers.

    • Sterling White

      Thank you for the kind words Thomas. In my market I have seen the restrictions of rental properties in more of upscale suburban type neighborhoods.

      What market are you currently purchasing your properties, Thomas?

  5. The power differential already lies with the landlord at the outset of a landlord-tenant relationship. Tenants often need someone in their corner. One important purpose of law in general is to protect the weak, not confer more advantages upon the already strong. A good landlord who screens well and respects tenants should be fine in any state.

  6. Sharyn Umaña-Angers

    California seems to be one of the WORST states in the entire country as far as being ‘landlord-friendly.’ I had one rental property and it took upwards of six months to get the tenants out (although, they could’ve legally stayed much longer). My husband and I are Southern California residents and want to start buying properties to hold for passive income – but we are extremely reticent to buy anything in California. Buying out of state is a daunting prospect as well, but perhaps better than the alternative.

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