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If you are considering investing in a rental property but have not yet decided on where, you need to look at several factors prior to making your decision. Factors like the cost of buying the property, what the local property taxes will cost and if there is a market pool of potential renters are all important factors to consider before making your move. Just as important as pricing and the availability of potential renter is what laws are in place that will either enable you to make a profit off of your investment property or will hold you back? Some states are just more landlord friendly than other states and have laws in place that will make dealing with issues caused by tenants a lot more bearable.
Other states have laws in place that could make it virtually impossible to quickly and efficiently evict a tenant for a lease violation or nonpayment of rent. If it takes too long to evict a tenant who is not holding up their end of the lease agreement it is going to cost the landlord additional time and money to keep the rental property profitable, which is why the landlord owns it in the first place. Read on to find out more about which states are landlord friendly and which states should be avoided!
Top Ten “Landlord” Friendly States:
Just to get the general top ten landlord friendly states listed for quick reference, here they are in no particular order. This list was created with a few things in mind, cost, potential taxes, available pool of renters and laws on place that are friendly to landlords.
What Makes A State Landlord Friendly? What Makes A State Less Landlord Friendly?
There are a combination of general factors that make one state more “landlord friendly” than another state. Things like low property tax and lower costs in general are all considered friendly to landlords. Laws that greatly expand tenant rights or control what the landlord can charge a tenant make a state less landlord friendly. Here are some of the legal elements that a landlord should consider before deciding to buy a rental property in a certain state or area within a state:
Expanded Tenant Rights
Some states have what are known as expanded tenant rights. In other words, these states give tenants additional rights and powers that most other states do not. A landlord will want to avoid these states, if possible, in order to retain a higher degree of control over their property and how they use it. An example of a state with expanded tenant rights would be if the state allowed the tenant to perform repairs on the landlord's property and then deduct the costs of the repairs out of their rent. Unfortunately, the landlord would only hear about this after the tenant had taken action that might not be necessary and the property has been altered. Additionally, there would be no guarantee that the repairs were performed correctly and the landlord may have to pay for the repair to be done properly, losing time and money.
Short And Simple Notice Requirements
If you want a tenant out of the unit or property, you must give them proper notice according to what is required by law in your state. Depending on why you are telling the tenant to leave, nonpayment of rent for example, you have to provide the tenant with notice. Some states require that you allow the tenant to “cure” or pay the back rent. The times and requirements of these notices vary and a state with simpler requirements that does not require two to four weeks between the notice and filing for eviction proceedings is easier on a landlord. The landlord would want the nonpaying tenant out of the property and to install a tenant who pays their rent on time, getting the landlord a reliable return on their investment. Convoluted notice requirements that demand an extended period between notice and eviction makes things less friendly for a landlord.
Quick And Simple Eviction Process
If a tenant has been noticed and has either not vacated the property or taken any action to cure, the landlord will want to start the eviction proceedings. Many states have a special court set aside to handle evictions which can help with the caseload. The actual process should not be too detailed or require too many extra steps in order to be a landlord friendly state. The landlord wants the tenant out of the property so that it can be rented to another party. If the laws allow too much leeway (from a landlord perspective) and too many possibilities for the tenants to slow down the eviction process, it would be considered less landlord friendly. Ultimately, if the landlord has done nothing wrong in regard to notice to the tenant, service of the eviction complaint or maintenance of the rental property, it should not be difficult for the landlord to get the eviction order signed by a judge.
If a state places a limit on the amount of security deposit a landlord can require from a potential renter, it would be considered less landlord friendly. With a small security deposit the landlord is risking exposure to paying out of pocket for damages that extend beyond normal wear and tear on a property. Another factor to consider is that some states require the landlord to return any remaining security deposit rather quickly, leaving the landlord less time to adequately assess if any additional work needs to be done to the unity and what the costs of that work will be, especially if the landlord has to hire a contractor or plumber to deal with any repairs. A landlord should look for no security deposit limit and a reasonable amount of time after the tenant vacates the unit to return any remaining security deposit.
This element unequivocally makes a state or an area within a state unfriendly to landlords. The state in question will have laws in place dictating when the landlord can raise the rent and how much the landlord can raise the rent. If the area already has a higher rent median this might not be such a problem, especially if the property does not have a mortgage on it. The landlord might still be able to make a profit. However a lack of control over rent increases and amounts is certainly not friendly to landlords.
Is Illinois A Landlord Friendly State?
Yes, as noted above, Illinois is one of the most landlord friendly states in the country. Illinois has reasonable laws regarding rental properties. If you are in Chicago, the climate does switch to a more tenant friendly situation with regard to the law. Generally speaking, if you are not in the Chicago area, you can count on more landlord friendly laws. Illinois does not place a cap on what security deposit a landlord can require and the notice term to quit is ten days for a violation of the terms of the lease.
Is Indiana A Landlord Friendly State?
Yes, Indiana is considered a landlord friendly state. IF the tenant does not pay rent the landlord can serve a ten day to cure or quit the premises. Indian also does not cap what a landlord can require for a security deposit and give the landlord 45 days in which to return any unused portion of the security deposit.
Is Iowa A Landlord Friendly State?
Iowa is somewhere in the middle when it comes to being landlord friendly. Iowa does place a cap on how much a landlord can require for a security deposit. The landlord must also return any unused portion of the security deposit within 30 days, which is tougher on the landlord. Tenants can also conduct their own repairs in Iowa and deduct the expense of those repairs from their rent.
Is Wisconsin A Landlord Friendly State?
Wisconsin is generally considered a moderately friendly landlord state. Wisconsin does have some complex notice requirements for landlords to figure out, depending on the lease violation and the type of lease involved. Wisconsin does not cap security deposits that landlords can require as long as it is not discriminatory. In Wisconsin a landlord has 21 days to return any unused portion of the security deposit.
Which State Is The Most Landlord Friendly?
Generally Texas is considered the most landlord friendly state. In Texas, the legal system takes lease violations very seriously. If the tenant violates the lease in Texas, the law favors landlords when it comes to issues like eviction, financial relief and regaining possession of the rental property. There is no cap on a security deposit and has 30 days to return an unused portion of the security deposit. Additionally, housing is relatively inexpensive right now so purchasing an investment property does not have to send you into a great deal of debt. Finally, Texas has a large pool of potential renters, meaning you won’t have to wait too long to find a tenant or tenants.
Worst State For Landlords?
The worst state for landlords is California. The properties are expensive to purchase and taxes tend to be high. After the landlord secures an expensive property, there are laws in California that make it a tenant friendly state. California has statewide rent control and eviction laws that strongly favor tenants and is known as the Tenant Protection Act. Tenants can make repairs to the property and deduct it from the rent. The landlord cannot raise the rent more than 5% annually and cannot evict a tenant that has occupied the property for a certain period of time without “just cause.”
No matter which state you choose to purchase and operate a rental property in, there is no substitute for awareness of the relevant law and good planning when you decide to become a landlord. An experienced landlord tenant law attorney in your state of choice will be able to guide you towards choices that will serve to protect your interests if a tenant should fail to hold up their end of the lease agreement. A well-crafted lease agreement and an understanding of what to expect from the local legal system in regard to the eviction process are all necessary tools to have at your disposal. If you are interested in learning more about securing your investment property and making it work for you, feel free to call O’Flaherty Law today, we would be happy to help you with any landlord tenant law questions you may have.
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