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Generally speaking, Southern states tend to favor landlords, and Northern states tend to favor renters. This dates back to our nation's early days: Southern states were mostly agricultural states filled with landowners, so laws were written to favor landlords. On the other hand, Northern states were largely manufacturing states, and to encourage immigration, laws tended to favor renters.
There have been some changes since then, and of course, the country is no longer divided between only the North and South. But even so, some states are friendly to landlords while some are not.
If you're considering becoming a residential landlord, you might want to know which states to avoid.
States with laws that make it tough on landlords
Probably the biggest reason to not be a landlord in a certain state is to avoid too much government control over your business. Here's a rundown of states that have lots of laws that make it tough for landlords.
The policy making it tough to be a landlord is not valid throughout the Evergreen State; it's particular to Seattle only. But it's groundbreaking and difficult enough for landlords to make the list. The law is the "first-in-time rule," or the FIT rule, colloquially known as the first-come, first-served law.
The FIT rule means landlords must rent to the first qualified tenant who applies. In other words, landlords are no longer allowed to choose their tenants in Seattle; they must time-stamp their applications and rent accordingly. And this policy makes Seattle a bad place to be a landlord.
Being a landlord in The Big Apple is not for the faint of heart, but keeping up with all the rent laws in much of the state is practically a full-time job.
There are differing rules for the type of building you own and your rental, such as whether you're renting a co-op, condo, rent-regulated place, or you have a sublet situation.
There are also restrictions based on the following:
- The length of time you rent.
- Whether the unit is deemed residential.
- How much you can charge for background checks, application fees, and late fees.
- Security deposit restrictions.
- Screening techniques.
- How much you can charge for rent.
Rent control states
In 2019, the Beaver State won the distinction of being the first state in the U.S. to implement a statewide rent control policy. Now landlords throughout the state must follow a myriad of new laws, such as:
- Landlords must not raise the rent more than 7% per year.
- Oregon landlords are limited in their ability to evict for no reason tenants who have been there at least a year.
- If an Oregon landlord does not comply with the new laws, they face paying their tenant up to three months' rent in damages.
This tenant-friendly state has a variety of regional rent control laws. The Garden State also has statewide mandates for landlords: the Rent Security Deposit Act, which governs the security deposit, and the Landlord Registration Act, which requires landlords to register their properties with the state, sometimes involving a registration fee.
The Golden State has rent control in many cities, and there are other hoops landlords must jump through to comply with state laws. These involve how much a landlord can charge for a security deposit and credit check, just-cause evictions only, and protections for people getting government subsidies.
The Old Line State has rent control in certain jurisdictions, so it makes the list. Maryland is also tough on landlords because of the mandatory statewide registration policy with an annual fee tacked on, as well as the length of time evictions take in Baltimore specifically (at least 60 to 75 days or more versus as little as two weeks in some states).
A word on evictions
Probably the worst experience you can have as a landlord is needing to and then actually evicting someone. According to 2016 data from the Eviction Lab at Princeton University, these are the top 10 states with the highest rate of evictions, from highest to lowest:
- South Carolina (8.9%)
- Virginia (5.1%)
- Delaware (5.1%)
- Georgia (4.7%)
- North Carolina (4.6%)
- Oklahoma (4.2%)
- Indiana (4.1%)
- Mississippi (4%)
- Arizona (3.9%)
- Maryland (3.6%)
Note: Just because a state has a high eviction rate doesn't necessarily make it a bad state in which to be a landlord. In fact, landlord-friendly states tend to make it easier for landlords to evict. But a great way to help avoid evictions in the first place is to screen your tenants first.
Expensive to buy and own
The more expensive it is to buy and maintain a home, the more it cuts into your profit margin as a landlord. According to data from MIT and the Bureau of Labor Statistics (BLS), the top 10 most expensive states in the United States (making these bad states for landlords) as of 2020:
- New York
- New Jersey
- Rhode Island
The bottom line
There's a world of difference in being a landlord in a state that's landlord-friendly versus one that makes life difficult for landlords. If you care about where you'll conduct your landlord business, you'll want to know the worst states to be a landlord and avoid them if you can.
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