Buying and managing rental properties are different for every state. Context always comes into play when real estate investment is involved. In the case of certain investors, they prefer to purchase property out of their backyards to get the best possible returns. If you’re one of those who prefer to buy property out of state, you need to know the best states for landlords so your investment experience is much more rewarding.
The Most Landlord-Friendly States in 2022
Operating as a landlord is a very lucrative career path in real estate. It is a promising semi-passive source of income for the long haul. However, it is also worth noting that a landlord’s success in managing a rental property is also hinged on where the property is located. The most successful landlords today are the ones who know where to put their money. The location makes all the difference.
For this reason, any aspiring rental property owners should pay closer attention to where they purchase rental homes. Each state has different rules and regulations where rental properties are concerned. That’s why many real estate investors prefer to look for properties in other states where tenant rights do not have a lopsided advantage over landlord rights.
When looking for rental properties outside your own backyard, you should first find out if the state is landlord-friendly. Once you identify the best states for landlords, it’s easy to move forward.
What Makes a State Friendly to Landlords?
Before we move any further, it is important at this point to know what makes a certain state friendly to landlords and property owners. Knowing how to identify landlord-friendly states from tenant-friendly states will make all the difference in your rental business.
So, how will one know if a state is landlord-friendly?
Favorable Eviction Procedures
States with strong eviction laws make it difficult for landlords to deal with and evict bad tenants. Landlord-friendly states have eviction procedures that make it easier for property owners to remove tenants from their properties and retake them in as painless and quick a manner as possible.
Landlord Rights Are Upheld
Certain states tend to favor tenants more than landlords which puts the latter at a disadvantage, especially when they have bad tenants. Landlord-friendly states ensure that the rights of the property owner are upheld and protected.
Better Rent Control
While states with rent control limits desire to protect tenants from greedy landlords, it can be unfair to property owners since they are either limited or prohibited from increasing rent prices, even under reasonable circumstances. States that give rental property owners better rent control allow well-meaning landlords to make a decent living.
Registration and Acquisition of Licenses Aren’t Burdensome
Paperwork is always a pain, especially when it comes to registration and licenses. The process of acquiring them can be quite tedious, exhausting, and costly. Investors are generally attracted to states that don’t require both, or at the very least, don’t give them too much trouble acquiring the necessary papers to operate a rental property.
Favorable Tax and Insurance Rates
Generally, tax rates are set by the local municipalities. However, sometimes even insurance rates are set by them. Consequently, some states have higher tax rates compared to others so it would be in the investor’s best interest to look for an investment property in states with lower rates.
How do you know if a state is not an ideal place for property investment?
On the flip side, here are some indicators of what makes a state less than ideal for rental property owners:
- A large populace with a very low demand for rental properties
- High taxes and costs combined with dropping property values
- Laws that are unfavorable to landlords
- High crime rates
- High transportation costs
- Low employment opportunities
- Substandard public school systems
- Poor public health and safety
10 of the Best States for Landlords in 2022
So which states are landlord-friendly? Based on the indicators stated earlier, here are the best states for landlords in 2022:
Investors who want to save a significant amount of money might want to take advantage of Alabama’s effective property tax rates and low income tax. The property tax rate in the state is only at a 0.48% average, the second-lowest in the US. Moreover, the state’s rental laws do not prohibit landlords from charging late rent fees.
Landlords can also take to court an eviction complaint against tenants who breach their contract or fail to pay rent and do not address the issues within 14 days for breaches and 7 days for unpaid rent.
Buying a house in Arizona offers a lot of great advantages, especially to rental property investors. At only 0.62%, Arizona’s property tax rate is one of the lowest in the US. On top of its landlord-friendly laws on leases, eviction procedures, and security deposits, its non-compliance statutes leave tenants with no choice but to make prompt payments and disclose truthful information on leases and applications. Aside from these, Arizona landlords are empowered by the state to put an end to a tenancy for greater problems and issues, such as failure to disclose a criminal background or disruptive and unlawful behavior.
Landlords will definitely enjoy Colorado as its rent laws are stacked in favor of them. On top of lower property prices and high employment rates, one of the things that make CO one of the best states for landlords is its eviction regulations. Compliance demand notices expire after 72 hours. Once served with these notices, tenants can either pay up and stay or pack up and leave. If after 72 hours, the tenant still fails to pay, they are given 48 hours to vacate the premises. This makes asset protection easier compared to other states.
Investing in rental properties in Florida is one of the most gratifying experiences any investor can make. Not only does the state provide high return rates but it has no rent controls and prohibitions on late fees. And as far as security deposits are concerned, owners can set whatever amount they want to (although, they should be rightfully returned to the tenants within 60 days of vacating the property).
With no limits on security deposits and late payment fees and a 0,91% property tax rate, Georgia finds its way here on our list of best states for landlords. Rental property owners get to enjoy highly flexible eviction rules in the state. This flexibility allows them to address non-payments or contract breaches swiftly.
Tenants who fail to respond to the notice in 7 days can expect the owner to proceed with the eviction and physically retake his or her property.
Check out the hottest rental property markets in Georgia here.
Illinois is one of the most recognized best states for landlords with its remarkable tenant pool and established security deposit rules. With the law only requiring a 10-day notice before a landlord goes to court, it is one of the states where evictions are easier to deal with which makes it attractive to rental property investors.
But more than that, what really attracts investors to IL is its vast population. With over 12 million people, there will always be a need for decent housing. As long as property owners take real estate management to heart and keep their properties updated, they won’t have a hard time finding tenants.
Indiana is one of the best states for landlords this year because of its reasonable rental rates, low tax rates, and inexpensive housing costs. It also has a zero-tolerance policy for non-paying renters and security deposit regulations in favor of the landlords.
The deposit is released to the former tenant 45 days after leaving the property. This gives the property owner enough time to inspect the house and assess any damages caused by tenants. On top of that, Indiana law only requires a 10-day notice to be issued to the tenant if the landlord wants to evict them from the property for non-payment or any other valid reason. If the tenant fails to respond within the 10-day period, the property owner can then proceed to court to start the eviction process.
8 North Carolina
What makes North Carolina a landlord-friendly state? Why do investors continue to flock to it?
Well, for one, it has low property taxes at only 0.77%, which is considerably lower than the national rate. It also has a growing economy where job opportunities abound. And unlike in some states, there is no eviction law in NC, making things swing in favor of landlords who wish to deal with bad tenants swiftly. There is also no rent control or restrictions on how the rent could be paid in the state. To top it off, housing costs in the state are some of the lowest in the country at a $260,597-home median value.
One of the most popular states for rental property owners is Texas. It offers landlords a wide array of advantages such as lots of affordable markets, increasing demand for rental properties, and desirable rental asking prices, to name a few.
But what really makes TX one of the best states for landlords – if not the best – is its greater emphasis on preserving the landlord’s rights in case of lease agreement violations. When a violation is committed, the state laws work in favor of the property owners. Tenants are only given a 3-day notice to comply. Once the three days are up, the owners can proceed with the eviction action.
Click here for our list of the best rental markets in Texas.
10. West Virginia
One of the things that make West Virginia attractive to investors is it is easier to find a rental property in the state compared to its neighbors. The average days on market (DOM) for single-family homes in WV is 73 days, clearly above the national average of 43 days. The DOM paired with a low property tax rate of 0.57% is something investors have a hard time ignoring.
Additionally, the state boasts of the country’s lowest average home value and median rent price, $118,581 and $727, respectively. No restrictions on security deposits, evictions can be filed without any notices, a good amount of inventory, and low prices and tax rates. What more can a landlord ask for?
How Does One Buy Out-Of-State Properties?
Acquiring and managing real estate property is rarely simple and easy. Buying out-of-state multiplies the challenges exponentially. It is a high-risk move that requires dedication and commitment from the investor.
Step 1: You Need to Have a Team.
If you’re considering buying investment property in other landlord-friendly states, you need to remember this: you can’t do it alone.
Buying rental properties across state lines requires a great amount of collaboration and teamwork. If you truly believe you can get the job done without any help, you’re lying to yourself. You need to surround yourself with people who will help you throughout the entire process.
Real estate agents, contractors, property management team, insurance agents, title company folks, and more are going to help you at some point in your project. Working with a team reduces the risks of failure, lessens stress on your part, and just makes the overall process a lot easier and faster.
Step 2: Put In the Work.
While you may be considering investing in property in another state for practical reasons, failure to perform due diligence is perhaps the most counterproductive thing you can ever do in light of your investment goals.
Buying real estate in an unfamiliar market is very risky. A good ROI alone is not enough. You should perform your own extensive research about the market you’re considering, its tax laws, the local rental regulations, occupancy rates, and a whole lot more. Connect with some local real estate agents to get a better idea of what the market is like.
And while this may seem like a lot of work, technology has made things very easy for real estate investors. Websites, like Mashvisor, help speed up the research process. What used to take weeks can now be done in minutes. Mashvisor, in particular, has certain tools and features that not only locate the best properties in the hottest markets but also help investors gather and analyze accurate data to help them make the most confident decisions.
For instance, in this case, investors looking to buy out-of-state property can utilize Mashvisor’s Property Finder tool to locate profitable rental properties all over the US. If you’ve already determined which landlord-friendly state you wish to invest in, the search for the best properties that align with your goals can be made easier by this particular tool.
The Property Finder tool can help you locate the right property for your rental business. It will give you all the updated and accurate data you need in analyzing a property’s profitability. The tool allows investors to have access to the following information:
- Number of listings
- Occupancy rates
- Monthly rental income rates
- Daily rates (for Airbnb rentals)
- Cash on cash returns
- Cap rates
On top of that, users also have access to highly accurate market-specific numbers like:
- housing costs
- home median prices
- price per square foot
- one-time startup costs
- recurring expenses; and
- other stats that can be used for data analysis
For investors, this is one of the most efficient ways of locating out-of-state properties. What took weeks and lots of money for research and analysis are made simpler and faster by just using the Property Finder on the website.
Start your free trial with Mashvisor now and get 15% off on your subscription.
Step 3: Find the Right Property Management Team.
It may be an extra expense on your end but every investor who’s purchased out-of-state property knows how valuable a property management team is. They help weed out bad tenants, serve as your point of contact for rental and tenant concerns, minimize tenant turnover, ensure you get paid on time, help landlords avoid legal issues, and more.
Finding the right team and getting them in your corner will save you from all the unnecessary headaches associated with rental properties.
Step 4: If Possible, Look For Areas That Are Already Familiar to You.
It could be the place where you went to college or were temporarily assigned for work. Or it could be one of your parent’s hometowns that you’ve already paid several visits to. Familiarity with a market can help lessen your anxieties and worries and give you a slight advantage compared to locations you’re totally alien to.
Step 5: Never Buy a Property You Have Not Seen and Inspected.
We all know how the internet is laden with photoshopped pics to make properties look better than they actually are. Sometimes the information that you find online is outdated or incomplete. And then there are instances when the seller or agent will lie just to make the sale. It’s always a best practice to go and see the property yourself. This way, you can have it thoroughly inspected and have whatever questions and concerns you have answered and addressed.
Step 6: Get Pre-approved.
When you’re satisfied with the inspection and your concerns have been addressed, make time to meet some of the local lenders while you’re in town. Find out what the mortgage types and interest rates are so you can start preparing for it financially. Getting yourself pre-approved will save you precious time in closing the deal.
The Bottom Line
Knowing the best states for landlords can help increase your chances of success where out-of-state rental property purchase is concerned. While buying rental property out of state is a lot riskier, finding and acquiring one in the most landlord-friendly states will make your investment significantly more rewarding and the overall experience a more pleasant one.