Updated: Jan 9, 2021
Investing in a Landlord-Friendly state is one of my criteria when choosing a market to buy real estate in. A landlord-friendly state is one that has favorable laws for home and apartment owners. Landlord-Friendly markets have a direct impact on real estate and the return on investments. This environment is comprised out of several factors:
Factor #1: The Eviction Process
Sometimes, you will have to evict a tenant who causes damage to your property or who has stopped paying. The tenant eviction process can vary from state to state. Some states, such as California, are very tenant-friendly, which means that it can take up to 9 or even 12 months to evict an unpaying tenant. In the meanwhile, you pay for expenses out of pocket. Other states, such as Texas and Florida, are very landlord-friendly and provide owners with a quick eviction process. Selecting a market that allows the eviction to be quick and at a minimal expense is very important when you are choosing a market to invest in.
Factor #2: Property Taxes
A landlord-friendly state is also one that has lower property tax rates. Every state charges annual taxes on property. When evaluating a market, it’s best to look at the tax trends over the last 5-7 years. The higher the property taxes, the more loss to your bottom line. You can find the tax rates at the counties assessors’ websites. Florida, for instance, has a very low property tax of less than 1%.
Factor #3: Rent Control
Rent control restricts when and how rental rates can be increased. Since I buy multifamily properties, renovate them and raise rents, investing in a rent-controlled market is a huge deal breaker for me. New York has recently applied aggressive rent control laws that have been driving investors away from this market. As an investor, this can place you into a very restricted position to maximize your profits or further invests in your properties. I avoid rent control markets like the plague.
Factor #4: Rent Price Growth
A market with a healthy and steady rent growth is a favorable market, since it is a strong indicator that you will be able to raise rents in your property as well. Rent growth also comes hand in hand with an increasing demand – all good signs for a strong market.
As an investor and a property owner, it’s important to also consider additional rules and regulations per state related to lease terminations, property access notices, security deposit timelines, maintenance and repair issues, and more.
Generally speaking, these are the 5 Top Landlord-Friendly states:
Eviction Terms: Property owners can give an “Unconditional Quit Notice” when a tenant has a record of being late on the rent at least once during the prior 6-mo. period. Tenant is required to vacate within 14 days.
Property Tax Rate: 0.63%
Market Rent (2 BR): $699
Eviction Terms: Landlords must use a dispossessory process. An eviction noticed can be extended within one day of late payment, and typically the tenant must vacate with 7-14 days.
Property Tax Rate: 0.91%
Market Rent (2 BR): $788
Eviction Terms: Landlords can give a demand for compliance on any late payment. Tenants must comply within 72 hours, and if not, must evict within 48 hours thereafter.
Property Tax Rate: 0.55%
Market Rent (2 BR): $1,008
Eviction Terms: Landlords must provide tenants with “notice to quit” once a payment is late. The tenants then must pay or evict within 10 days. In extreme circumstances, a landlord can also evict immediately upon notification through an “Unconditional Quit Notice”.
Property Tax Rate: 0.87%
Market Rent (2 BR): $782
Eviction Terms: In Texas, property rights are strongly protected. Landlords can provide notice to vacate, with or without cause, and tenants must comply within 3 days.
Property Tax Rate: 1.83%
Market Rent (2 BR): $829
Want to Invest with Ellie?
If you are interested in learning more about passively investing in apartment buildings, click here to schedule a call with Ellie Perlman.
About the Author
Ellie is the founder of Blue Lake Capital, a real estate company specializes is multifamily investing throughout the United States. At Blue Lake Capital, Ellie helps investors grow their wealth and achieve double-digit returns by investing alongside her in exclusive multifamily deals they usually don't have access to.
Ellie is the host of REady2Scale, a podcast that shares true stories from within the industry, and the critical lessons learned, from the most successful real estate investors, innovators, developers, and more from around the globe!
She started her career as a commercial real estate lawyer, leading real estate transactions for one of Israel’s leading development companies. Later, as a property manager for Israel’s largest energy company, she oversaw properties worth over $100MM. Additionally, Ellie is an experienced entrepreneur who helped build and scale companies by improving their business operations.
Ellie holds a Masters in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.
Sources for this Post: