Smart real estate investors realize that investing in landlord friendly states will not only increase their ROI, but also make their investment dealings easier and less complicated. As a landlord, when you have the state law on your side, you won’t have to go through painful, drawn-out, costly evictions, or worry about being able to increase the rent when needed. Landlord friendly states protect the rights of the landlord, because, after all, it is their property. Now that it has been confirmed that a landlord friendly state is the only way to go, let’s dive in and answer the question you are researching:
Which states are the most landlord friendly? States that have landlord-tenant laws that lean in favor of the landlord’s rights would be Texas, Indiana, Colorado, Arizona, and Florida. Depending on the state, real estate investors can take advantage of favorable eviction processes, security deposits, rent increases, as well as lower property taxes.
Top Landlord Friendly States for Real Estate Investors
When contemplating the best states to invest in real estate, 9 times out of 10, they are not in your neck of the woods. States with landlord friendly laws, no matter where they are, are the best places to purchase rental properties, and they can end up being 3,000 miles away from your hometown.
Although each state will have its own set of rental laws, rules, and regulations, there is a common list of landlord-tenant rights that you should seek out to ensure that the landlord’s rights are favored. This is an essential step when buying in a state you’re not familiar with. It can save you time, money, and headaches. You can avoid these negative aspects by doing some upfront research, like you are now, for states that have landlord friendly laws. This includes rental laws that favor the landlord pertaining to rent control/rent increases, security deposit amounts and return policies, late fees on past due rent, and eviction procedures. This also includes investing in areas that have no state income taxes, as well as locations that have low property taxes. Let’s dive in and look at the top 5 states that have some, or all of these landlord friendly qualities.
Please note that all rental laws listed below are subject to temporary changes due to the COVID-19 pandemic. This especially pertains to evictions and late fees.
Before you dive in, watch this quick summary of landlord friendly states with the founder of Morris Invest:
The landlord-tenant laws in Florida are not geared towards the tenant’s rights, which is why it has made it to our list of top 5 landlord friendly states. In addition to this, Florida has a high percentage of renters, making it a prime location to scout out profitable rental properties. Key cities that are worth looking into are Tampa, Miami, Orlando, Jacksonville, and St. Petersburg. With that in mind, let’s go over some of the rental laws in Florida:
Rent Control: It’s clear that landlords are favored when it comes to rent control. Currently, there are no Florida rent increase limits. In fact, rent control is prohibited by law in the sunshine state. This is important to factor in because having the state control what you deem as a reasonable rent increase can severely impact your bottom line. This especially holds true if you have performed expensive repairs, or upgrades.
Security Deposit: Florida landlord-tenant laws place no limit as to how much the tenant can be charged for the security deposit. This allows the investors to set a security deposit amount that will ensure they will not be hit financially upon tenant move out, if costly damages were discovered. However, Florida tenant rights are also covered by the fact that the security deposit must be returned within 15-60 days after moving out.
Late Fees: The Florida landlord and tenant act does not include restrictions on late fees that occur when a tenant fails to make their rent payment by the due date. At the same time, the landlord must state the late fee conditions in the lease or an addendum.
Eviction Process: Florida rental laws are in favor of the landlord when it comes to the eviction process. This is one of the biggest factors to look for in a landlord friendly state because if the law sides with the tenant, you could have a tenant living in your property, rent free, for months. You may also endure high legal costs because of it. There are two reasons for the eviction process to start, with the first being the tenant does not pay their rent by the deadline. When this is the case, the tenant shall be notified that if nonpayment continues for longer than 3 days, not including the weekends or holidays, the landlord may proceed to terminate the rental agreement. The second case would be when a tenant is in non-compliance with the rental agreement for any reason. When this happens, they shall be notified that if the corrections are not made within 7 days, the landlord has the right to end the lease.
Property Taxes: Florida has low property taxes, which will successfully keep more money in your pocket come tax time.
State Income Tax: The sunshine state does not charge state income tax. This can certainly increase profit margins for investors who own rental properties in Florida.
Although you won’t have to pay state taxes if you invest in Florida, you will still have to pay federal income taxes. With that in mind, we recommend picking up Tax-Free Wealth, an incredibly helpful book that will teach you how to save thousands in taxes. It’s written by the personal tax advisor of real estate giant, Robert Kiyosaki.
Arizona landlord-tenant laws were definitely crafted in favor of the property owner. Not only that, Arizona has an ever-growing population with many large cities that are filled with rental communities. This state boasts major job growth, and therefore, has an excellent economy; where there are jobs, there will surely be stable renters. Additionally, unlike California, or other areas of the country, Arizona sports lower housing prices, making it more affordable to own rental real estate. Now, let’s look at the Arizona rental laws that make it a landlord friendly state:
Rent Control: Arizona rental laws do not place any restrictions as to the price of rent that the landlord chooses to put in place. This raises its landlord friendly status, because when inflation occurs, or there are increases in taxes, it’s important to have the ability to raise the price on your rental to cover your costs.
Security Deposit: Landlord-tenant laws in Arizona require that no more than one and one half month’s rent is charged by the landlord for the security deposit. Although it’s always preferred to have no limit on what can be charged, this is a reasonable amount compared to some states that only allow one month’s rent. Additionally, if the landlord wishes to charge more, the tenant can voluntarily pay that amount. Landlords have 14 days to return the tenant’s deposit, minus any portion of it that will go towards damages or unpaid rent.
Late Fees: The state of Arizona realizes the importance of charging late fees when rent is not paid by the due date. Because of this, they have not placed any limits as to what can be charged or by what date. However, the late fee policy is required to be in a written lease for it to be enforceable.
Eviction Process: This landlord friendly state sides with the landlord when it comes to evictions. They may even evict if it’s found that the tenant didn’t disclose their criminal activity while applying. For more common eviction causes, like failing to pay rent or violating the lease, the landlord simply needs to notify the tenant they are terminating the lease. Depending on why they are being evicted, a 5 to 10 day notice is given. At this point, the landlord can file for eviction. Evictions are, by far, the most concerning when it comes to rental laws. If you purchase a rental property in a non-landlord friendly state that favors the tenant over the landlord when it comes to evictions, you can end up being hit hard financially, be left with a damaged property, and endure extreme stress. Why? All because your tenant decided not to follow the rules and the law sides with them! This alone is a prime example of why investing in landlord friendly states, like Arizona, is the wise thing to do.
If you’re leaning toward purchasing a rental property in one of these states that favors the landlord’s rights, but are unsure of how to obtain the funding to do so, you can get a few ideas from these two articles that discuss funding options – How To Use a Self-Directed IRA To Invest in Real Estate, and our Fund & Grow Review – Best Unsecured Credit for Real Estate Investors.
With its super low property taxes, landlord friendly eviction process, and other great rental laws that favor investors, Colorado is a smart choice when it comes to purchasing rental property. In addition to attractive Colorado landlord-tenant laws, the Centennial State also boasts other incentives for real estate investors. This includes its growing population, booming economy, low unemployment rate, and rising rental demand. Great places to invest in Colorado would include Denver, Colorado Springs, Fort Collins, Greeley, and Pueblo.
Rent Control: Colorado landlord rental laws sway in favor of the landlord when it comes to rent increases. Recently, a bill was introduced, that if passed, would have set this landlord friendly state back a few notches with rent control restrictions. However, the bill failed to pass, giving Colorado landlords the right to continue increasing rent when they see fit.
Security Deposit: Rental laws in Colorado are pretty loose when it comes to security deposits. There is no set amount or limit as to what a landlord can charge a tenant for their deposit. Plus, the landlord does not have to give a tenant written notice of receipt when they receive the deposit. Colorado tenant rights are typical in regards to when their deposit must be returned back to them. For instance, the landlord is given one month after the lease has been terminated to return the deposit. There are exceptions, giving the landlord 60 days, if noted in the rental agreement. The whole amount, or a portion of the security deposit funds may be withheld to cover damages, unpaid rent, and the like.
Late Fees: The state of Colorado does not set limits or restrictions on tenant late fees.
Eviction Process: If you purchase rental real estate in Colorado, you won’t have to worry about lengthy and costly eviction processes. When a tenant violates the lease, the landlord simply provides the tenant with the proper notification, and if the issue is not resolved within 3 days, the landlord may start the eviction process by filing a Forcible Entry and Detainer with the courts.
Property Taxes: Property investors will be ahead of the game financially when owning a rental property in Colorado because this state is on the top ten list for lowest property taxes.
Indiana landlord-tenant laws that pertain to rent increases, late fees, and evictions, protect the property owners and their rights, making this state landlord friendly, and worth investing in. Having the law on your side can ensure your goal of owning a cash flowing rental property becomes, and stays a reality. Along with favorable investor rental laws, this Midwest state sports a strong and stable economy, and a growing population. Plus, many large corporations have set up camp in Indiana, creating low unemployment numbers, and causing a need for rental properties in the area. Because of its very high occupancy rate, the city of Indianapolis is one of the best cities to invest in rental real estate within Indiana.
Rent Control: Rental price increases are not governed by the state of Indiana. Landlords are free to increase rent as they see fit, just as long as the tenant is given a 30 day notice.
Security Deposit: Indiana security deposit laws do not hinder landlords from charging a security deposit they deem reasonable. Once the tenant moves out of the rental property, the landlord has 45 days to either pay the security deposit back in full, or return a portion of it due to allowable deductions.
Late Fees: Being able to charge a late fee that you feel is best when a tenant does not pay by the deadline is important to most investors. The state of Indiana sides with the landlord on this, and therefore does not dictate what they can charge. Additionally, there are no grace period laws stating when the fees may be applied.
Eviction Process: Indiana rental laws are known to be very landlord friendly when it comes to evictions. A tenant can be evicted for not promptly paying rent. If the rent is not paid by the grace period, the landlord would then provide a 10 day notice to pay in full, and then proceed with the eviction process if payment is not received. Also, the landlord has the right to evict a tenant for any violation of the lease. With Indiana on the side of the landlord, investors will not see an eviction process dragging on for months, the way they can with non-landlord friendly states.
If you have plans to manage your own rental property in one of these landlord friendly states, you may want to check out the Landlord Studio website. Landlord Studio can help track your expenses, increase your income, screen prospective tenants, and save you valuable time. We recommend this real estate investing tool to all our customers.
5. Texas – Top Investor Pick
Our top pick out of our 5 most landlord friendly states to invest in real estate is Texas. When you invest in Texas, the law is on your side, and they don’t mess around when a tenant is in breach of contract – this is where that old saying comes into play “Don’t mess with Texas”. It’s a very pro-landlord state, making it an ideal place to own a cash flowing asset.
The Lone Star State realizes the fact that it’s your property, not the tenants, and they respect your rights as the owner. In addition to great landlord-tenant laws, Texas boasts a high demand for rentals, sports a favorable population that is always steadily increasing, features an incredible economy, low unemployment rate, and is the home of thriving large corporations that provide many stable jobs.
In a recent top 10 most recession-resistant cities list, 5 of those cities were in Texas. That speaks volumes of how this state sets real estate investors up for success. You can read about just how great Texas is for investors in this post we put together on the topic – Is Texas a Good Place to Invest in Rental Real Estate?
Rent Control: When you own a rental property in Texas, you won’t have to worry about rent increase caps because this state does not have rent control laws. You may raise the price of your rental when a lease is expiring and up for renewal. However, you must give the tenant a 30 day notice before the increase takes place.
Security Deposit: The state of Texas keeps things secure for landlords with its landlord friendly security deposit laws. Property owners have no set limits on the amount they choose to charge for a security deposit. This allows for collecting the proper amount of money at the end of the lease, if there were damages, or unpaid rent. Landlords have 30 days to return security deposits after the tenant has moved out. It should be noted that although the state of Texas has no limits on security deposit amounts, there could be city or county laws that enforce limits. With that said, it would be wise to check for specific laws in the city you are interested in.
Late Fees: Texas passed new legislation on September 1, 2019, that puts into effect a new late fee law. It states that for single-family homes that contain 4 units or less, late fees for a single month must be reasonable. The state’s definition of reasonable is charging no more than 12 percent of the rent. However, a landlord may charge more than the 12 percent if this percentage does not cover the expenses associated with overhead and late fee collections. The new rental law also states that there must be a 2 day grace period before a late fee can be charged.
Eviction Process: Texas rental laws protect the landlord’s rights with strict eviction processes. If the tenant is not paying rent or violating the lease, the law is set up so the situation does not linger. For non-payment of rent, the landlord provides a 3 day notice to vacate that lets them know that the rent must be paid to avoid further action. If the rent is not paid within that time frame, the landlord may then start the eviction process by filing a Forcible Entry and Detainer Suit. The landlord may also evict the tenant for violating the lease agreement in any way.
State Income Tax: Texas does not have state income tax. So, if you own a cash flowing rental property in Texas, you get to hold on to more of your cash. This certainly makes for a more profitable investment.
What City in Texas Has the Best Rental Market?
Lubbock, located in West Texas, has an incredible rental market. It’s referred to as a Hub City because it’s known as an economic, education, health care hub within a multi-county region. This makes for a bustling, economically sound community filled with stable renters. In addition to this, Lubbock has access to five main freeways, allowing for renters to live in this city and commute to other cities for work.
There are many Fortune 500 companies within Lubbock, as well as many other businesses that keep renters employed. This landlord friendly community is the home of Texas Tech. There are over 40,000 students, and Texas Tech successfully adds more than a billion dollars to the economy. But, most of all, this college provides Lubbock with a high need for rental properties. If you had to choose one city in Texas to invest in real estate, we absolutely recommend Lubbock.
Morris invest loves Lubbock, Texas, and frequently invests in real estate in this landlord friendly city. We have turnkey properties available in Lubbock, and we take care of absolutely everything for you – from placing a tenant, to assigning a professional property manager for you. Everything is done by us, and you are instantly set up with a cash flowing rental property, with money coming in the very first month. You can read more about how turnkey properties can generate wealth in our latest article – Are Turnkey Properties a Good Investment? If you would like to hear more about how you can own your very own property in Lubbock, you can give one of our Morris Invest team members a call. We will be happy to walk you through all the details.
Also, if you’re a foreign investor interested in United States properties that are landlord friendly, we would like to refer you to our article that details The Best Strategies for Buying U.S. Real Estate if You’re a Foreign Investor.
Additional Real Estate Articles by Morris Invest
Whether you’re new to the game, or a long time, serious investor, you will find the following rental real estate articles helpful:
- Can You Use a Self Directed IRA to Purchase Real Estate?
- How to Find Cheap Real Estate Investment Properties
- Why Investing in Real Estate VS Stocks is a Smart Strategy
- The 1% Rule for Real Estate Investing
- A New Construction Cost Segregation Study Can Save You Thousands
- The BRRRR Method for Real Estate Investing
- Top Self Directed IRA Tips That Will Make You Rich
- How to Find Off-Market Properties
Build Great Wealth by Investing in Real Estate in Landlord Friendly States!
Don’t ever think you have to stick with the area you live in when it comes to investing in rental real estate. It’s common for the most lucrative rental markets to be out of state. Cash flowing properties in other states seem out of reach for some investors, but with a professional full-service investment company, like Morris Invest, no property is out of reach. We hope this article has started the ball rolling for you when it comes to taking the first step in purchasing rental properties in landlord friendly states. Please feel free to contact us if you have any questions regarding out of state rental properties.
Get inspired by going on a new construction property walk-through with Clayton Morris in Lubbock, TX:
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