Owning rental properties is a great way to grow your income and wealth, and even more so if you live in one of the most landlord-friendly states.
While you can make a living by renting out properties anywhere, some states make it more difficult to do so because of certain laws and other conditions.
What Exactly Qualifies as a Landlord-friendly State?
In every state, there are laws that give both landlords and tenants certain rights. Some states tend to lean in favor of the tenants in their laws, and others are more lenient towards landlords.
This is especially true when it comes to laws regarding squatters and evictions. Some of the most tenant-friendly states make it very difficult for landlords to evict delinquent renters, which can result in many months of lost rental income.
Low property taxes
Owning a property in a state or municipality with lower property taxes means you ultimately make more off your rental business. As of 2023, New Jersey had the highest property tax in the US, while Hawaii had the lowest. Below is a table of property tax per state, from lowest to highest. Numbers are taken from Roofstock
|State||Avg State Tax Rate|
|District of Columbia||0.56%|
Overall good state economy
If the economy is generally good in your state, more people have more money, and thus are willing to pay more to rent homes.
There’s also less likelihood that people will have to move out because they lose their jobs or aren’t earning enough income to keep renting your property.
So, the better the local economy is, the better your personal rental income tends to be.
Lack of rent control
Rent control laws limit how much you are allowed to charge for rent in your area, including how often and how much you can raise rent for your properties.
Some states don’t allow landlords to increase rent proportionate to inflation, which can really hurt your bottom line.
Rent control laws vary greatly by state and even city, so make sure you know what they are for any specific area you’re considering buying a rental property in.
The Most Landlord-friendly States
Illinois is one of the best states to be a landlord because it is a very landlord-friendly state when it comes to evictions. Landlords only have to serve delinquent tenants with a 10-day eviction notice before they can proceed with going to court and evicting them.
Arizona is one of the best states to own rental properties because of a number of reasons. For starters, the state is very favorable towards landlords when it comes to tenants failing to pay rent or causing problems on your property.
If tenants fail to pay rent or don’t live up to their end of the bargain in terms of maintaining and caring for your property, you can serve them with a five-day notice to fix the situation.
If they fail to rectify the situation, you can give the tenants a new 10-day notice, then proceed with an eviction lawsuit, if they still don’t comply.
If a tenant commits a serious breach of the rental contract, such as committing crime on your property, you can give them an unconditional notice to vacate the property within 10 days.
Lastly, Arizona does not have rent control, and allows you to raise rent freely with a 30-day notice.
Like other states on this list of landlord-friendly states, Colorado has favorable eviction laws for landlords.
Colorado landlords can give delinquent tenants a 72-hour notice to pay rent or leave their property. After this notice expires, if the tenants don’t pay, they have to vacate the property within 48 hours.
Texas is one of the states that places the most emphasis on landlords’ rights when tenants break the terms of a lease. Landlords only have to provide a three-day notice to delinquent tenants to pay or move out. After that, you can proceed with an eviction in court.
Additionally, there’s no limit on how much landlords can charge for a security deposit in Texas. So, as long as you have a well-written lease, you should be able to cover any and all expenses when it comes to damages and lease violations committed by tenants.
Texas landlord-tenant law also allows landlords to enter into separate repair agreements with tenants, and you can refuse to make repairs if tenants are behind on rent.
Like Texas, Louisiana puts no limit on security deposits. The state also leans in favor of landlords when it comes to evictions. You only have to give a five-day notice to tenants to pay or terminate the lease.
Pennsylvania is another landlord-friendly state in terms of eviction processes. Landlords can serve delinquent tenants with a 10-day notice to pay late rent or vacate the property. After these 10 days are up, you can proceed with a legal eviction case.
According to Georgia’s landlord-tenant law, tenants have seven days to pay rent or move out when they are behind on rent. If they don’t pay, landlords are free to proceed with evicting them through the courts.
Landlords are also completely free to set their own terms for late fees and security deposits in Georgia, so they are more protected in these areas than in other, more tenant-friendly states.
Michigan’s landlord-tenant law has less restrictive policies on rental rates and fees. Lease adjustments can also be made to existing leases, provided they have a clause that allows it and the landlord provides tenants with a 30-day notice.
The Flipside of the Coin: Some of the Least Landlord-friendly States
California is one of the most tenant-friendly states, specifically because it has statewide rent control laws in place.
There are also regulations that restrict how much landlords can charge for application fees, how they screen tenants, and the eviction process.
That being said, California has some of the lowest property tax rates in the country and does provide landlords with avenues to resolve landlord-tenant issues fairly, so it’s not all bad news.
In New York, there are restrictions on how much you can charge for application fees and late fees, and on how much you can collect for security deposits and for rent.
For example, you can only charge $50 or 5% of the monthly rent (whichever is less) for late fees.
Additionally, New York’s rent control laws only allow landlords to raise rent 7.5% every two years until a maximum is reached. Tenants can also challenge these rent increases.
Lastly, certain areas of New York have property tax rates well above the national average, making it more difficult to make a high rental income, depending on where your property is located in the state.
In Maryland, landlords have to be licensed and registered before they can rent properties out, which is a unique restriction that makes it harder to get into the rental business.
The state also has strict rules regarding security deposits, late fees, and lease agreements, and evictions can take up to a couple of months.
Although investing in rental property in a landlord-friendly state is a safe way to avoid problems and guarantee a good income, this doesn’t mean that you can’t run a rental business in tenant-friendly states.
The most important thing is to do your research into local landlord-tenant laws and make sure you have a good understanding of them in your state before you start renting property there.
Of course, you should also make sure you have solid landlord insurance coverage in place to protect yourself.