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Best States for Rental Investments: 7 Landlord-Friendly Locations

Updated: Jul 15

Are you considering purchasing an investment property in a different state from where you currently live? Before diving into property searches, it’s crucial to evaluate various states’ economies, regulations, property taxes, and other factors to ensure the location you choose offers strong earnings potential and allows you to manage your investments freely. Investing in a "landlord-friendly" state can help you achieve this goal.


What Defines a Landlord-Friendly State?

Certain states offer more favorable conditions for real estate investors than others. Here are key factors to consider when choosing a state for your next investment:


Ease of Eviction: Evictions, while unpleasant, are sometimes necessary. If a tenant defaults on rent, causes disturbances, or engages in illegal activities, you may need to evict them to protect your investment. A landlord-friendly state streamlines the eviction process, enabling you to quickly remove problematic tenants to maintain profitability and peace for other renters.


Favorable Tax Laws: High property taxes can significantly reduce your annual earnings and make properties harder to sell. The national average property tax rate is 1.11% of a property's assessed value. A landlord-friendly state will have a property tax rate at or below this average.


Minimal Rent Control: To maximize revenue, you need the flexibility to periodically increase rental rates. States with strict rent control laws can limit your ability to do this, negatively impacting your earnings. Landlord-friendly states typically allow landlords to set and adjust rental rates as needed.


No Security Deposit Restrictions: Some states cap the amount landlords can charge for security deposits and dictate how quickly they must be returned. This can hinder your ability to cover potential damages and manage tenant turnovers effectively. Landlord-friendly states impose minimal or no restrictions on security deposits, allowing you to protect your investment adequately.


Reasonable Notice of Entry Rules: Landlords must occasionally enter their properties for inspections or repairs. States requiring extensive advance notice can complicate urgent repairs, potentially leading to greater damage or delays in scheduling professionals. Landlord-friendly states have more lenient notice requirements, facilitating timely property management.


Limited Additional Tenant Rights: Some states grant tenants additional rights, such as the ability to make repairs and deduct costs from their rent. This can reduce your control over property maintenance and increase expenses. Landlord-friendly states provide landlords with full authority over property maintenance issues.


Strong Economy: A robust state economy ensures a steady demand for rental properties. States experiencing economic growth attract new residents and offer better rental market conditions. Landlord-friendly states typically have strong, growing economies.


Top Landlord-Friendly States for 2024

Understanding what makes a state landlord-friendly can help you focus on regions that maximize revenue and minimize regulatory challenges. Here are seven landlord-friendly states to consider for your next investment:


1. Texas: Texas boasts a diverse and rapidly growing economy, making it a prime location for rental properties. The state has lenient landlord-tenant laws, no rent control, and a flexible security deposit system. Despite its higher property tax rate of 1.9%, the potential for property value appreciation is significant.


2. Alabama: Known for its low cost of living and thriving economy, Alabama has the second-lowest property tax rate in the country at 0.4%. The state imposes minimal restrictions on rent control and security deposits, although landlords must provide a seven-day notice for evictions due to nonpayment.


3. Florida: With a robust economy and desirable coastal locations, Florida is ideal for both short- and long-term rentals. The state’s property tax rate is 0.89%, and it lacks rent control laws, allowing landlords to adjust rates freely. Evictions require a three-day notice for nonpayment of rent.


4. Colorado: Colorado’s scenic beauty and strong economy make it attractive for real estate investors. The state has a low property tax rate of 0.52% and no restrictions on rental rate increases. Security deposits are capped at two months' rent and must be returned within 30 to 60 days.


5. Georgia: Georgia’s booming economy and favorable property tax rate of 0.95% make it a great choice for landlords. The state imposes no rent control or security deposit restrictions, streamlining the eviction process and entry for property inspections and repairs.


6. Arizona: Arizona’s fast-growing economy and affordable housing make it a top pick for investors. The state’s property tax rate is 0.6%, and there are no rent control laws. Evictions require a five-day notice for nonpayment, and security deposits can be up to 1.5 times the monthly rent.


7. Indiana: With affordable housing and a low property tax rate of 0.83%, Indiana is an attractive state for landlords. The state imposes no rent control or security deposit limits and requires only a 10-day notice for evictions due to nonpayment.


Should You Invest Out of State?

Investing in rental properties in these states can offer higher returns and property value appreciation compared to your home state. Diversifying your investments across different states can also protect against local economic downturns.


Final Thoughts

If you decide to invest out of state, consider hiring a property manager to oversee your property. Market research is essential to understand rental demand, job growth, and property appreciation in your chosen area. An in-person visit can provide valuable insights that online research might miss. By carefully evaluating these factors, you can make informed decisions and optimize your real estate investments.

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