Buying a rental property and becoming a landlord is one of the best ways to build wealth in real estate. Besides knowing how to find rental properties in the US housing market, landlords should also know where to buy investment property. The neighborhood, town or state where your investment property is located will play a major role in the success or failure of your real estate business.
Before buying a rental property, real estate investors need to consider whether the state they are targeting is landlord-friendly. Landlord friendly states are those where the landlord-tenant laws favor landlords more than tenants. They have a rather friendly legal environment for those owning a rental property.
Here are some of the factors to consider when looking for the best states for landlords:
- Property tax – Local municipalities decide the property taxes which will be imposed on rental properties. Landlord friendly states charge property taxes that are relatively affordable.
- Registration and licenses – Some states and local governments require real estate investors to acquire licenses and registrations before renting out their investment property to tenants. To avoid incurring unnecessary expenses, investors should look for landlord friendly states which have minimal regulations.
- Rent control – This is a crucial consideration when deciding where to invest in real estate. Some states limit how much landlords can raise rents despite yearly increases in utilities and taxes. Such rent controls can frustrate your efforts to make a decent return on investment from your rental property.
- Eviction process – The landlord-tenant law in some states makes it very difficult for landlords to evict bad tenants. It can even take months to complete the eviction process in some locations. The best landlord friendly states make the eviction process as painless and fast as possible for landlords.
Related: Real Estate Investor’s Guide: What Is Rent Control?
The Top 6 Landlord Friendly States in 2020
Here are some of the most landlord friendly states 2020. All of the data provided below comes from Mashvisor’s real estate database. Note that we have included Airbnb data. However, Airbnb regulations may prevent real estate investors from renting out non-owner occupied properties on Airbnb in any of the following locations. Be sure to check local Airbnb laws before buying a short-term rental property.
1. Alabama
According to a 2019 report by tax-rates.org, Alabama has a property tax rate of 0.33%, making it one of the best places to invest in real estate. Rental laws in Alabama don’t allow tenants to withhold rent if a landlord doesn’t handle important repairs in the rental property. Landlords can also raise the rent as long as they give tenants a 30-day notice.
Alabama Real Estate Market Data
- Median Property Price: $261,422
- Price per Square Foot: $138
- Traditional Rental Income: $1,106
- Traditional Cap Rate: 1.6%
- Airbnb Rental Income: $2,776
- Airbnb Cap Rate: 6.1%
- Airbnb Occupancy Rate: 51.5%
This is one of the best places to invest in the Alabama housing market:
Birmingham Real Estate Market
- Median Property Price: $225,854
- Price per Square Foot: $92
- Traditional Rental Income: $1,050
- Traditional Cap Rate: 2.2%
- Average Airbnb Daily Rate: $116
- Airbnb Rental Income: $2,506
- Airbnb Cap Rate: 4.2%
- Airbnb Occupancy Rate: 59%
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
2. Arizona
In the Arizona real estate market, it is easy for landlords to terminate a tenancy. For instance, a tenant that commits a crime within the rental premises can be given an unconditional quit notice that requires them to vacate within 10 days. And just like in Alabama, landlords can increase the rent after giving a 30-day notice
Arizona Real Estate Market Data
- Median Property Price: $434,149
- Price per Square Foot: $365
- Traditional Rental Income: $1,619
- Traditional Cap Rate: 1.5%
- Airbnb Rental Income: $2,471
- Airbnb Cap Rate: 3.1%
- Airbnb Occupancy Rate: 56.8%
Here is one of the top cities in Arizona for real estate investment:
Mesa Real Estate Market
- Median Property Price: $345,060
- Price per Square Foot: $178
- Traditional Rental Income: $1,549
- Traditional Cap Rate: 1.7%
- Average Airbnb Daily Rate: $125
- Airbnb Rental Income: $2,253
- Airbnb Cap Rate: 2.9%
- Airbnb Occupancy Rate: 54.3%
3. Florida
Florida rental laws don’t limit the amount a landlord can ask for as a security deposit. Tenants that have repeatedly violated lease terms can be given an unconditional quit notice that requires them to vacate within 7 days before the landlord can pursue eviction in court.
Florida Real Estate Market Data
- Median Property Price: $443,483
- Price per Square Foot: $255
- Traditional Rental Income: $1,825
- Traditional Cap Rate: 0.8%
- Airbnb Rental Income: $2,671
- Airbnb Cap Rate: 2.3%
- Airbnb Occupancy Rate: 54.3%
Key West Real Estate Market
- Median Property Price: $1,087,452
- Price per Square Foot: $758
- Traditional Rental Income: $5,726
- Traditional Cap Rate: 3.7%
- Average Airbnb Daily Rate: $267
- Airbnb Rental Income: $6,644
- Airbnb Cap Rate: 3.9%
- Airbnb Occupancy Rate: 66.5%
4. Illinois
Just like Florida, Illinois law does not place a limit on what a rental property owner can charge as a security deposit. In case a tenant fails to abide by the lease terms, an unconditional quit notice can be issued which gives the renter 10 days to leave before the property owner files for eviction.
Illinois Real Estate Market Data
- Median Property Price: $267,652
- Price per Square Foot: $144
- Traditional Rental Income: $1,594
- Traditional Cap Rate: 1.5%
- Airbnb Rental Income: $2,586
- Airbnb Cap Rate: 3.9%
- Airbnb Occupancy Rate: 50.1%
Here is the best place to buy a rental property in Illinois:
Moline Real Estate Market
- Median Property Price: $108,928
- Price per Square Foot: $81
- Traditional Rental Income: $910
- Traditional Cap Rate: 1.7%
- Average Airbnb Daily Rate: $68
- Airbnb Rental Income: $1,928
- Airbnb Cap Rate: 7.6%
- Airbnb Occupancy Rate: 64.4%
5. Pennsylvania
In case of a tenant not paying rent, the tenant has 10 days to move or clear the outstanding rent before the property owner can file for eviction. An unconditional quit notice can also be issued when lease terms are not adhered to.
Pennsylvania Real Estate Market Data
- Median Property Price: $266,239
- Price per Square Foot: $174
- Traditional Rental Income: $1,344
- Traditional Cap Rate: 1.6%
- Airbnb Rental Income: $2,295
- Airbnb Cap Rate: 4.6%
- Airbnb Occupancy Rate: 49.5%
Philadelphia Real Estate Market
- Median Property Price: $314,847
- Price per Square Foot: $374
- Traditional Rental Income: $1,445
- Traditional Cap Rate: 2.2%
- Average Airbnb Daily Rate: $115
- Airbnb Rental Income: $1,988
- Airbnb Cap Rate: 2.6%
- Airbnb Occupancy Rate: 51.3%
Related: 10 Best Cities to Invest in Pennsylvania Real Estate
6. Ohio
Landlords in Ohio are allowed to charge a security deposit which protects them in case the tenant damages the rental property or fails to adhere to the terms of the lease. When rent is delayed, renters have three days to move out after receiving a notice to vacate the premises. If the tenant violates the Ohio landlord-tenant laws, the landlord can file for eviction which could result in the renter having to pay court costs, damages, and the landlord’s attorney fees.
Ohio Real Estate Market Data
- Median Property Price: $206,347
- Price per Square Foot: $110
- Traditional Rental Income: $1,188
- Traditional Cap Rate: 1.7%
- Airbnb Rental Income: $2,357
- Airbnb Cap Rate: 6.5%
- Airbnb Occupancy Rate: 51.4%
Dayton Real Estate Market
- Median Property Price: $133,455
- Price per Square Foot: $81
- Traditional Rental Income: $940
- Traditional Cap Rate: 2.6%
- Average Airbnb Daily Rate: $156
- Airbnb Rental Income: $1,385
- Airbnb Cap Rate: 3.9%
- Airbnb Occupancy Rate: 57.4%
To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today and enjoy 15% off for life.
Related: Ohio Housing Market 2019: 5 Best Cities for Investment
Start Investing Today
Other landlord friendly states to consider include Indiana, Georgia, Kentucky, and Texas. Being a landlord in such states can make your rental ownership journey stress free and profitable. However, you must remember that your tenants have rights too. Therefore, be sure to fulfill your obligations as a responsible landlord.
To learn more about how Mashvisor can help you find profitable investment properties, schedule a demo.