Are you thinking about buying an investment property in a state other than the one you live in? Before you start searching for your next property, it’s important to check out various states’ economies, regulations, property taxes, and other things to make sure the location you choose has good earnings potential so that you will have the freedom to manage your investments as you see fit. The best way to do that is to invest in a state that is “landlord-friendly.”
What Makes a State Landlord Friendly?
Some states are better suited for real estate investing than others. Be sure to consider the following factors to help you find the right state for your next investment.
Ease of eviction
Evictions are never fun, but they are sometimes necessary. If a tenant falls behind on paying rent, is disruptive to others, engages in illegal activities, or does something else, you may have to evict that person to protect your investment.
A landlord-friendly state will make it easy to evict someone when necessary. It will allow you to promptly remove troublesome tenants to make sure your rentals are profitable and ensure they are peaceful for other tenants.
Favorable tax laws
High property taxes decrease your annual earnings. They can also make it harder to sell a property. According to The Motley Fool, the average property tax rate in the U.S. is 1.11% of a property’s assessed value. A state that is landlord-friendly will have a property tax rate that is either at or below the national average.
Minimal rent control
To maximize revenue, you should periodically increase your rates. If a state or local government has rent control laws that dictate when or how much you can increase your rates, it could negatively impact how much you can earn. Landlord-friendly states will allow you to set your rates and increase them when necessary.
No security deposit restrictions
Some states have laws that restrict how much you can collect for a security deposit. They may also dictate how quickly you have to return the deposit after a tenant moves out.
This could cause problems if you can’t collect a sufficient security deposit to cover potential damages. It could also limit the time you have to inspect a property between tenants.
A state that is landlord-friendly will have minimal or no security deposit restrictions. It will also let you collect the amount that best protects your investment.
Agreeable notice of entry rules
As a landlord, you will have to occasionally enter one of your properties to inspect or repair something. If a state requires you to inform a tenant that you will be entering a property well in advance, it could cause problems if you need to inspect an urgent problem, like a leaking pipe, pest infestation, or a malfunctioning HVAC unit. Long waits could result in more damage. It could also make it hard to schedule a professional for the repair.
A landlord-friendly state will make it easy to enter a property when needed.
No additional tenant rights
Some states give tenants additional rights that could negatively impact the control you have over your property, which could decrease your earnings. States with repair-and-bill laws, for example, allow tenants to take care of repairs themselves and then deduct the bill from their monthly rent.
Instead of finding the best price for a repair, a tenant could go with the first person they call, which could be the most expensive. A tenant could also call a professional for a simple repair that you would prefer to do yourself to save money.
A state that is landlord-friendly will give you full control over property maintenance issues.
The state’s economy
To ensure there is good demand for a rental, it’s important to consider a state’s economy. Are people moving to the state, or are they moving away due to high taxes, excessive regulations, and other factors?
A landlord-friendly state will be one with a strong economy that has been experiencing consistent growth over the past few years.
Top Landlord-Friendly States for 2024
Now that you know what makes a state “landlord friendly,” you may want to focus on them to maximize revenue and avoid regulatory hassles. Here are seven landlord-friendly states to consider for 2024.
1. Texas
Texas has a diverse and rapidly growing economy. If it were a country, Texas would have the eighth-largest economy in the world.
Many people move to the state each year for work, and there is strong demand for rental housing. The cost of living is low, and the weather is great.
Texas’s landlord-tenant regulations are very favorable to landlords. Evictions for nonpayment of rent only require a three-day written notice before you can proceed with the eviction process in court. There are no rent control laws, and landlords can determine their security deposits. Also, landlords have 30 days to return security deposits after tenants move out, which gives them plenty of time to inspect for damage.
Although Texas has a higher-than-average property tax rate of 1.9%, some investors may consider the expense to be worth it if they invest in areas where property values are rapidly increasing. Texas law does not specify a notification period to enter a property for inspections or repairs.
| Average property tax rate | 1.9% |
| Notice of rent payment due before eviction | 3 days |
| Security deposit cap | None |
| Time to return security deposit | 30 days |
| Entrance notification requirement | None specified |
2. Alabama
Alabama residents enjoy a low cost of living and a thriving economy. The state’s housing is also ranked as the fourth most affordable in the country.
Alabama currently has the second-lowest average property tax rate in the country at 0.4%, which helps investors keep more of the money they earn. The state doesn’t have rent control laws, but landlords are prohibited from collecting more than one month’s rent for security deposits. They do, however, have up to 60 days to return a security deposit after a tenant moves out.
If an eviction is necessary for nonpayment, landlords are required to send a seven-day written notice of the payment due. The landlord can then proceed with the eviction process in court if the tenant does not remit payment. Landlords can also evict tenants for illegal activity with a seven-day notice. If a landlord needs to enter a property for an inspection or repair, a two-day notice is required.
| Average property tax rate | 0.4% |
| Notice of rent payment due before eviction | 7 days |
| Security deposit cap | 1 month’s rent |
| Time to return security deposit | 60 days |
| Entrance notification requirement | 2 days |
3. Florida
With nearly 1,350 miles of coast, Florida is a top vacation destination, which makes it ideal for short-term rentals. But that’s not all it has to offer. The state also has the fourth-largest economy in the country, and many people move there each year for work. Many of the state’s new residents, college students, and others will need mid- and long-term rental housing.
Florida’s average property tax rate is 0.89%, which is close to the national average. Although there are no rent control laws in Florida, landlords must give tenants who are on a month-by-month lease a 15-day notice before increasing rent. If an eviction is required for a failure to pay rent, a landlord must provide a three-day written notice that payment is due before beginning the eviction process.
Florida landlords can determine the amounts of their security deposits. Security deposits must be returned within 15 days after a tenant moves out, or 30 days if deductions are made with a written statement of deductions. Depending on the circumstances, security deposits must be returned within 15 to 60 days after tenants move out.
Florida requires landlords to provide at least a 12-hour notice before entering a property for inspections and repairs. The entry must be between the hours of 7:30 a.m. and 8 p.m.
| Average property tax rate | 0.89% |
| Notice of rent payment due before eviction | 3 days |
| Security deposit cap | None |
| Time to return security deposit | 15 to 60 days |
| Entrance notification requirement | 12 hours |
4. Colorado
With its beautiful national parks, thriving cities, and family-friendly ski resorts, Colorado is another popular tourist destination that is ideal for short- to long-term rentals. It has an average property tax rate of 0.52%, which is lower than the national average.
Although Colorado does limit how often landlords can increase rent to just once per year, there is no limit to how much the increase can be. Legislation was recently passed that restricts landlords to only collecting up to one month’s rent for mobile home security deposits and up to two months’ rent for other housing types. Security deposits must be returned within 30 days after a tenant moves out, although it can be extended to 60 days if it’s included in the lease agreement.
A landlord can begin the eviction process for nonpayment after giving a tenant three days’ notice that payment is due. Colorado also doesn’t have any specific requirements for notifying tenants before entering properties for inspections and repairs.
| Average property tax rate | 0.52% |
| Notice of rent payment due before eviction | 3 days |
| Security deposit cap | 1-2 months, based on property type |
| Time to return security deposit | 30-60 days |
| Entrance notification requirement | None |
5. Georgia
From Atlanta to Savannah and beyond, the Peach State’s thriving economy attracts many tourists, jobseekers, and real estate investors. It’s also home to many large corporations, such as Coca-Cola, Delta Airlines, Home Depot, UPS, and others. Georgia’s average property tax rate of 0.95% is close to the national average.
Georgia doesn’t have any rent control laws, so landlords are free to set their rates. They are also free to determine security deposit amounts. Security deposits must be returned within 30 days of a tenant moving out if no deductions are made.
Georgia doesn’t have any guidelines for eviction notices, which streamlines the eviction process and prevents delays. The state also doesn’t have any rules governing notifications to enter a property for repairs or inspections.
| Average property tax rate | 0.95% |
| Notice of rent payment due before eviction | None |
| Security deposit cap | None |
| Time to return security deposit | 30 days |
| Entrance notification requirement | None |
6. Arizona
Thanks to a strong economy and affordable housing compared to other West Coast states, Arizona is currently one of the fastest-growing states in the country, making it an attractive target for real estate investors. The state’s average property tax rate of 0.6% is well below the national average.
Arizona doesn’t have any rent control laws, and landlords can set their rates. Rates can be increased if the lease allows it, although month-to-month renters must be given a 30-day written notice before rates can be increased. A landlord can legally collect up to 1.5 times the amount of the monthly rent for a security deposit and have 14 days to return it after someone moves out.
If a landlord needs to evict a renter for nonpayment, a five-day notice is required. If the tenant does not pay or move out after five days, the landlord can begin the eviction process in court. Also, a two-day notice must be given if a landlord needs to enter a property for an inspection or repair.
| Average property tax rate | 0.6% |
| Notice of rent payment due before eviction | 5 days |
| Security deposit cap | 1.5 month’s rent |
| Time to return security deposit | 14 days |
| Entrance notification requirement | 2 days |
7. Indiana
Indiana is an attractive state for many investors because of its affordable housing. The average price of a home in Indiana in 2024 is $255,400, which is significantly below the national average. Indiana’s average property tax rate is 0.83%, which is also below the national average.
Indiana does not have any rent control laws, and landlords are free to increase rent by any amount outside the lease term. Landlords can also collect as much as they like for security deposits. They have up to 45 days to return deposits after renters move out.
If a landlord needs to evict a tenant for nonpayment, a 10-day notice to pay is required. If payment is not received within 10 days, the landlord can begin the eviction process in court. Also, if a landlord needs to enter a property for an inspection or repair, a 24-hour notice must be given. No notice is required for emergencies.
| Average property tax rate | 0.83% |
| Notice of rent payment due before eviction | 10 days |
| Security deposit cap | None |
| Time to return security deposit | 45 days |
| Entrance notification requirement | 24 hours |
Should You Become a Landlord Out of State?
Investing in a rental property in one of these states could be a great opportunity to earn more than you could in your home state. Depending on the market, an out-of-state property could also appreciate at a greater rate. You could invest in short-term properties in high-demand tourist areas, for example—like Destin, Florida; Gulf Shores, Alabama; and Aspen, Colorado—to take advantage of vacationers looking for a place to stay.
These states are also ideal for mid- and long-term rental property investments. Many people move to such places as Atlanta, Austin, and Phoenix for work. Some will need mid-term rentals for temporary assignments, while others may prefer to rent for a while to make sure a new position is going to work out.
Investing in real estate out of state is also a great way to diversify your portfolio. If all of your rental properties are located in one area and something happens to the local economy—like a major employer suddenly shuts down, or there’s a natural disaster—you could lose hard-to-replace renters, and the value of your properties could decrease. Owning properties in other states gives you an important hedge against local market fluctuations.
Final Thoughts
If you are considering an out-of-state property, you may need to find a property manager to oversee it. Depending on where you live, it may not be practical to take care of everything yourself. Although an out-of-state property may be a great investment, it’s important to carefully consider the management fees to make sure it will be worth it.
Also, market research is essential if you are considering an out-of-state property. In addition to the rental demand, also consider the local job growth, population trends, property appreciation, and other factors to make sure an investment has good long-term potential. If possible, visit the area you are considering to get a feel for it. An in-person visit may reveal some important things that you couldn’t have discovered by researching online.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
