There are tenant-friendly states where laws are more favorable to renters than landlords. Know these laws before choosing an investment location.
Landlords play a vital role in providing housing opportunities to individuals and families. But being a landlord involves navigating a wide range of challenges. You have to deal with high tenant turnover rates, late rent payments, and other property management responsibilities. It is safe to say that you’ll have your hands full when operating a rental property.
Table of Contents
- What Are the Features of Tenant-Friendly States?
- 5 Most Tenant-Friendly States in the US
- How Can Tenant-Friendly States Affect Landlords?
- What’s the Best Location for Landlords?
In addition to these, you also have to deal with rental laws. Navigating the ever-evolving rental rules and regulations can be a daunting task. And sometimes, these laws are more favorable to tenants, depending on the location. It happens when the legal framework prioritizes tenants’ rights and protection over those of landlords’.
Each state has its own unique set of regulations governing rental businesses. Some states prioritize tenant protections to create a more equitable housing market. These tenant-friendly states have legislation in place that aims to safeguard tenants’ rights. For landlords, operating in pro-tenant states can pose both challenges and opportunities.
In some cases, rental laws that heavily favor tenants can also impact your profitability and financial stability. As a landlord, you must navigate these regulations carefully to avoid potential legal pitfalls. Compliance with laws is crucial, as failure to comply can result in legal consequences and financial liabilities.
So what are the most tenant-friendly states in 2023? And what should you watch out for when buying a rental property in such states? Keep reading to learn more.
What Are the Features of Tenant-Friendly States?
As mentioned, landlord-tenant laws vary from one state to another. A key difference between them is how the tenant-landlord relationship is regulated. For example, some states favor the tenant in almost every situation, while others favor landlords when it comes to enforcing their terms.
Here are some of the critical aspects where tenant-friendly states favor the renter:
Strong Tenant Protections
The most renter-friendly states typically have robust laws in place to protect tenants’ rights. These laws often include provisions for security deposits, habitability standards, eviction procedures, and lease termination, among others. They aim to ensure fair treatment and prevent abusive practices by landlords, creating a more equitable rental market.
Here are examples of strong tenant-friendly regulations:
- Security deposit limits: Unlike Florida, the state law in tenant-friendly states set a maximum amount that can be charged for the security deposit.
- Repair policies: Some tenant-friendly states allow tenants to deduct all repair costs from rental payments.
- Termination notices for violation of rental terms: Some jurisdictions don’t allow unilateral termination for a violation of rental terms.
The eviction process: In tenant-friendly states, eviction is often tedious and can drag on for up to six months or more.
Extended Notice Periods
In tenant-friendly states, landlords are often required to provide tenants with extended notice periods. These apply to notices that you need to provide before you can evict a tenant. It also applies before you can implement rent increases or access the premises. This gives tenants more time to find alternative housing arrangements. It also helps prevent sudden displacements.
Rent Control Measures
Some tenant-friendly states have implemented rent control policies. This limits the amount of rent increase landlords can charge. Rent controls are intended to prevent excessive rent hikes. It is more common in areas with high demand and limited affordable housing options. This is not good for landlords since recurring expenses can increase while rental income hits a plateau.
Strong Habitability Standards
Tenant-friendly states have stringent requirements for the maintenance and safety of a rental unit. Landlords are often obligated to ensure that their properties meet specific habitability standards. These include adequate heating, plumbing, electrical systems, and general upkeep. Failure to meet the standards can result in penalties or legal action against the landlord.
Tenant Privacy Protections
Tenant-friendly state laws have provisions to protect tenants’ privacy rights. These may include restrictions on landlord access to rental units. It may also include limitations on entry without notice. Some laws have regulations regarding the use of surveillance cameras or other intrusive monitoring methods.
Tenant Screening Regulations
Some states with favorable regulations for tenants have restrictions on the tenant screening process. These restrictions prevent discrimination. They also ensure that landlords use fair and consistent criteria when evaluating prospective tenants. They may restrict certain background checks or require landlords to provide specific reasons for tenant rejections.
Legal Resources for Tenants
The best states for tenants often provide resources and avenues for renters to seek legal assistance and assert their rights. It can include access to tenant advocacy organizations, renter helplines, or legal aid services. They empower tenants to address any issues or disputes they may encounter with their landlords.
Note that the specific features and extent of tenant-friendly laws can vary from state to state. As a landlord, you should consult the statutes and regulations of the state where you operate. It can help you fully understand the provisions and their implications.
5 Most Tenant-Friendly States in the US
If you’re looking for the best places to invest in rentals, you should first identify what states are tenant-friendly. Keep in mind that the most tenant-friendly states may not be ideal for landlords. These states prioritize tenants’ rights. It means landlords should first check how they can affect their bottom line before deciding to invest in these states.
Here are the five best states for renters’ rights:
1. New York
New York has robust tenant protections. It has rent control laws in certain areas, such as New York City. This aims to prevent excessive rent increases. The state also provides strong eviction protections. It also has strict standards for rental property maintenance.
Here are a few things that you should know about the New York landlord-tenant law:
- Security deposit: Security deposits in New York have a maximum limit equivalent to one month’s rent.
- Repairs: If landlords in New York fail to make the necessary repairs within a reasonable timeframe, tenants can sue them. They may also cancel the rent agreement or make the necessary repairs and deduct the cost from the rent.
- Eviction: Landlords are required to provide 10 days to 30 days of notice before they can initiate eviction. The notice period varies depending on the reason for removal.
- Rent increase: The state of New York has rent control. Also, state law allows local governments to impose rent control.
- Rent collection: New York landlords are required to provide a grace period of at least five days before they can charge a late fee. Also, they can only charge a maximum late fee of $50 or 5% of the rent amount, whichever is higher.
New York Real Estate Market Data
Here are some key NY rental market data you should be aware of according to Mashvisor’s June 2023 database:
- Median Property Price: $811,130
- Average Price per Square Foot: $636
- Days on Market: 89
- Number of Traditional Listings: 24,620
- Monthly Traditional Rental Income: $3,246
- Traditional Cash on Cash Return: 3.11%
- Traditional Cap Rate: 3.16%
- Price to Rent Ratio: 21
- Walk Score: 50
- Number of Airbnb Listings: 38,579
- Monthly Airbnb Rental Income: $3,772
- Airbnb Cash on Cash Return: 2.99%
- Airbnb Cap Rate: 3.04%
- Airbnb Daily Rate: $223
- Airbnb Occupancy Rate: 56%
California is also known for having strong tenant protections. It has rent control measures in select cities, regulations on security deposits, and strict habitability standards. The state has implemented laws to safeguard tenants’ rights. It also provides legal avenues for addressing disputes and unfair practices.
Here are the important provisions under the California landlord-tenant law that may affect landlords:
- Habitability standards: California landlords should meet the basic health and safety requirements to be able to rent a property. For example, landlords are required to provide hot water and fix repair issues within 30 days. Else, tenants can sue them, cancel the rental agreement, or deduct the repair cost from the rent.
- Eviction: In California, landlords must provide as much as 90 days’ notice before evicting a tenant. The length of notice will vary depending on the reason for eviction.
- Security deposit: The standard maximum limit for a security deposit in California is two months’ rent. California landlords must return the deposit (less allowable deductions) to the tenant within 21 days after move-out. Otherwise, tenants can sue for twice the amount of the security deposit.
- Rent control: California and its local cities have rent control regulations. California landlords can only increase the rent twice every 12 months, but not during a lease term. Landlords must also give 30 to 90 days’ notice to increase the rent.
California Real Estate Market Data
Below are some vital information investors should know about California. These were taken from Mashvisor’s June 2023 location report.
- Median Property Price: $1,075,672
- Average Price per Square Foot: $670
- Days on Market: 62
- Number of Traditional Listings: 50,578
- Monthly Traditional Rental Income: $3,448
- Traditional Cash on Cash Return: 2.65%
- Traditional Cap Rate: 2.68%
- Price to Rent Ratio: 26
- Walk Score: 50
- Number of Airbnb Listings: 92,454
- Monthly Airbnb Rental Income: $4,137
- Airbnb Cash on Cash Return: 2.48%
- Airbnb Cap Rate: 2.50%
- Airbnb Daily Rate: $226
- Airbnb Occupancy Rate: 53%
Is Delaware a landlord-friendly state? Well, not particularly. In fact, Delaware is one of the most tenant-friendly states due to its strong tenant protection laws. These laws prioritize tenants’ rights and well-being. This ensures fair treatment, transparent rental practices, and access to legal recourse when needed.
Here are a few things that you need to know about Delaware landlord-tenant law:
- Habitability standards: Landlords in Delaware are required to perform the necessary repairs within 15 days of receiving a repair request. Else, tenants can sue them, cancel the rental agreement, deduct the cost from the rent, or withhold rent.
- Security deposits: In Delaware, landlords may collect a security deposit with a maximum limit equivalent to one month’s rent. They need to return the security deposit, less any allowable deductions, within 20 days after the lease term ends.
- Rent increase: The state of Delaware does not have rent control. But, it does not prohibit cities from creating their own rent control laws. Landlords who increase their rent must provide 60 to 90 days notice to their renters.
Delaware Real Estate Market Data
According to Mashvisor’s June 2023 report, here are the pertinent rental market data Delaware landlords and investors should know:
- Median Property Price: $553,919
- Average Price per Square Foot: $351
- Days on Market: 196
- Number of Traditional Listings: 1,144
- Monthly Traditional Rental Income: $2,299
- Traditional Cash on Cash Return: 3.54%
- Traditional Cap Rate: 3.59%
- Price to Rent Ratio: 20
- Walk Score: 40
- Number of Airbnb Listings: 2,096
- Monthly Airbnb Rental Income: $2,719
- Airbnb Cash on Cash Return: 3.09%
- Airbnb Cap Rate: 3.14%
- Airbnb Daily Rate: $236
- Airbnb Occupancy Rate: 42%
Oregon has gained attention for its progressive rental laws. Besides requiring long notice periods on every action taken by the landlord, Oregon became the first state to impose a statewide rent control law. It limits annual rent increases. Plus, it provides additional protections for tenants facing eviction.
Here are a few provisions under Oregon landlord-tenant law that make it tenant-friendly:
- Rent increase: Oregon has statewide rent control, and it does not allow towns and cities to create their own rent control laws. In Oregon, landlords cannot increase the rent by more than 7% plus the consumer price index per year. They are also required to provide at least 90 days’ notice before increasing the rent.
- Housing discrimination: On top of the seven federally protected classes, Oregon state adds extra protections for tenants. Landlords cannot discriminate against renters based on marital status, income source, and status as a victim of domestic violence, sexual assault, or stalking.
- Landlord retaliation: Oregon rental laws prohibited landlords from raising rent, reducing services, or threatening tenants with eviction. If these actions are done in response to tenants who exercise their rights, they are considered retaliation and punishable by law.
Oregon Real Estate Market Data
Oregon landlords and real estate investors will do well to know rental market information like the one listed below. These were taken from the same Mashvisor June 2023 report as the others above.
- Median Property Price: $721,470
- Average Price per Square Foot: $389
- Days on Market: 60
- Number of Traditional Listings: 250
- Monthly Traditional Rental Income: $2,429
- Traditional Cash on Cash Return: 2.58%
- Traditional Cap Rate: 2.61%
- Price to Rent Ratio: 25
- Walk Score: 49
- Number of Airbnb Listings: 12,858
- Monthly Airbnb Rental Income: $3,268
- Airbnb Cash on Cash Return: 2.86%
- Airbnb Cap Rate: 2.89%
- Airbnb Daily Rate: $165
- Airbnb Occupancy Rate: 56%
While Massachusetts is a great place to invest in rentals, it is not one of the most landlord-friendly states. The state has strong eviction protections, including mandatory eviction court hearings and regulations regarding security deposits. Massachusetts also prohibits retaliatory actions by landlords and has specific laws to address habitability issues.
A few things that you need to be aware of regarding Massachusetts rental laws include:
- Security deposit: In Massachusetts, landlords are not allowed to charge more than one month’s rent as a security deposit. Also, landlords must provide a 5% interest or the actual interest rate provided by the bank, whichever is lower. Landlords must also return the remaining security deposit within 30 days after the tenant moves out.
- Evictions: For eviction cases, Massachusetts requires hearings. The court will also postpone the hearings to give time to tenants to file an answer.
- Rent increase: While Massachusetts has no rent control law, landlords must still provide 30 days’ notice or the same period as the frequency of rent payments.
Massachusetts Real Estate Market Data
According to Mashvisor’s June 2023 MA rental market data, these are the numbers landlords and investors currently face:
- Median Property Price: $795,593
- Average Price per Square Foot: $5,677
- Days on Market: 98
- Number of Traditional Listings: 4,518
- Monthly Traditional Rental Income: $2,941
- Traditional Cash on Cash Return: 2.63%
- Traditional Cap Rate: 2.65%
- Price to Rent Ratio: 23
- Walk Score: 51
- Number of Airbnb Listings: 11,309
- Monthly Airbnb Rental Income: $3,407
- Airbnb Cash on Cash Return: 2.18%
- Airbnb Cap Rate: 2.20%
- Airbnb Daily Rate: $263
- Airbnb Occupancy Rate: 52%
How Can Tenant-Friendly States Affect Landlords?
Tenant-friendly states can have significant implications for a landlord’s bottom line. When you invest in these states, there is a potential adverse impact on your profitability and financial stability. Here are a few ways tenant-friendly states can affect landlords like you:
Most tenant-friendly states impose limitations on rent increases. As a result, they prevent landlords from raising rents to match market rates or adjust for inflation. Due to this, landlords may experience reduced rental income. They may also notice a slower growth in rental revenues compared to states with fewer rent controls.
Tenants are afforded more protections and legal rights. This may discourage landlords from taking actions that could lead to high turnover rates. Consequently, landlords may face more extended periods of vacancy between tenants. It results in potential income gaps and increased expenses associated with preparing the unit for occupancy.
High Maintenance and Repair Costs
Tenant-friendly states generally have stricter habitability standards. Compliance with these standards may involve increased maintenance and repair costs. Failure to meet these standards can result in penalties or legal consequences, further impacting landlords financially.
Risk of Accepting Problematic Tenants
Some states have regulations restricting landlords from conducting extensive background checks during tenant screening. This limitation can increase the risk of selecting tenants with payment issues or property damage. This results in higher rates of non-payment, evictions, or property-related expenses.
Complex Legal Compliance Requirements
Operating in tenant-friendly states means landlords must navigate complex regulations and ensure strict compliance. It may involve additional time and resources spent attending to paperwork and seeking legal advice. These compliance-related costs can add to landlords’ financial burdens, reducing their net income.
What’s the Best Location for Landlords?
As a landlord, it’s essential to find the right location for your rental business. The right location will vary depending on your chosen investment strategy. For example, if you plan to invest in Airbnb for sale, you have to find the best short term rental markets with favorable Airbnb laws. For long term rentals, you must find landlord-friendly states for your investment.
How to Find the Best Location for Rentals?
To find the best location for your rental investment, it’s best to use a real estate tool like Mashvisor’s Market Finder. It allows you to find the best markets based on your preferred rental strategy.
Market Finder is fairly easy to use. You only need to select your preferred investment strategy, and you will see the top-recommended states. You can choose a state, and you will see the top cities based on different factors such as:
- Mashmeter score
- Rental revenue
- Cap rate
- Crime rate
Click on a market to see its general overview. You will find information that can help you decide whether it will make a good investment location or not. Plus, you will also see the most optimal rental strategy for that particular area. It helps you make the best investment decision possible.
Once you have decided on the best location for your chosen investment strategy, the next step is to find a property that will help you meet your financial goals. Mashvisor can also help you with that. With Mashvisor’s Property Finder tool, it’s easy for you to search for properties for sale in your chosen location.
Just type in the city or neighborhood of your choice, and you will see all the for-sale listings in that area. To narrow down your search, you can set the custom filters based on your criteria. Set your preferences like budget, property size, rental strategy, and more to get more personalized search results.
Want to know how Mashvisor’s Market Finder and Property Finder tools work? Start your 7-day free trial today.
The Bottom Line
The fact that some states favor tenants should not deter you from becoming a landlord. In fact, owning a rental property in tenant-friendly states can be a smooth and profitable venture as long as you know what to watch out for. You also have the option to look for the most landlord-friendly states to ensure a seamless rental process.
Make sure to use Mashvisor’s Market Finder tool to help you find the most profitable investment location. After that, you can use Mashvisor’s Property Finder tool and start looking for the top-performing income properties in your chosen area. With Mashvisor, you’ll definitely find the perfect investment property that meets your needs.
Don’t miss out on the best investment opportunities. Start a demo with Mashvisor today to learn more about our platform.