Last Updated on June 7, 2023 by Mark Ferguson
The United States is an amazing place to invest in real estate or buy real estate as an owner-occupant. The US has some of the best financing options, most choices, most secure real estate, and yes even some of the most affordable real estate in the world. While the US is a great place to be a landlord, not every state has the same laws or advantages. Some states are making it harder to be a landlord to the point where investors are looking to other states to invest in. This article goes over what the best states and worst states are for landlords based on a number of factors I put together and weighted based on how important they are. I have been a landlord, flipper, and real estate broker for many years and I see my local state of Colorado slowly becoming less landlord friendly. You can see Colorado’s ranking as well as every other state below.
Does Landlord-friendly mean tenant unfriendly?
Before I get into the rankings there is a lot of landlord hate in the world these days. Just because a state is landlord friendly does not mean it is bad for tenants. In fact, many of the states that are the most friendly to landlords, are the cheapest for tenants to live in. The problem with states that make it harder on landlords is that those restrictions make it more expensive to be a landlord. If it is harder and more expensive to be a landlord, landlords have to raise rents to make it worthwhile to do business in those areas or they may choose to sell. If there are fewer rental properties, that also means rents will rise higher thanks to supply and demand.
Landlords and tenants can work together and coexist without having to fight each other. One of the biggest misconceptions out there is that landlords are buying all the houses and making it impossible for first-time buyers to purchase. The facts, show landlords selling many more rental properties than they are buying and the owner occupancy rate is going up. This is decreasing the number of rentals and pushing rent prices up as well as purchase prices. If you want more affordable rent, you want more landlords!
What are the most landlord-friendly states?
I made this list based on a number of factors including:
- Population change
- Median house value
- Time to evict
- Property taxes
- Insurance rates
- Vacancy rates
- Rent control
- Rent to Value ratio
I used the most recent sources I could because the world has been changing fast in the last few years, and I weighted the categories differently based on the importance of each factor. I will be changing and updating this list to make it as accurate as possible. If you have suggestions please leave them below. I would love to hear about new laws being passed as I may not hear about them as soon as locals to those areas.
The lower the score the better for this ranking!
|51||District of Columbia||206.50|
How did I come up with a Landlord friendly list?
I have put a lot of thought into this list as there are many others online that I do not agree 100% with. Many lists include income taxes or other factors which do not impact investors unless they live in that state. This list is meant to show how friendly states are based solely on rental properties in that state, not the advantages of living there.
I have weighted the list based on the importance of these categories. The price of real estate is the number one weighted category where as insurance is important but not nearly as important. I thought about adding a category for appreciation but it is so hard to know what areas will appreciate and I think appreciation should be thought of as a bonus for rentals, not the end goal. Many of the categories like population gains will contribute to appreciation as well.
I will not post the entire data set here, but I will create a YouTube video going over all of the data soon on the InvestFourMore YouTube channel. Be sure to subscribe there so you are notified when that video is live! I will also post the sources for all my data below.
If you want to learn more about investing in rentals check out this article: How to Get Started Investing in Rentals.
This video goes over the data I used and how I compiled the list:
Why Alabama is the most landlord-friendly state
Alabama not only won the most landlord-friendly state prize, but they also won it by a wide margin. When I posted this list on my social media, a lot of people showed their natural disdain for Alabama and many other states. I can’t mention everything they said about them, but it was obvious they had never looked at the numbers. Here are some stats that show why Alabama was number 1:
- Alamaba has the 2nd lowest property taxes in the county
- Alabama has the 4th shortest eviction time
- Alabama has the 6th lowest prices
- Alabama has the 4th lowest unemployment rate
- Alambam has the 4th best rent-to-value rate
Alabama has a little higher than average crime rate and higher insurance but the other factors make up for those.