The Worst States for Landlords Across the United States

One of the biggest decisions landlords make is where to invest in rental property. Along with researching local market conditions, investors should consider how state and local laws, taxes, rental rates, property values, and other factors may affect their investment. While some locations have more extensive landlord-tenant regulations than others, no state is universally good or bad for landlords. Continue reading as we look at factors investors may consider when comparing rental markets. Then, we’ll reveal some states with notable regulatory or financial considerations.

Key Takeaways

• There is no single “worst state for landlords,” as rental property performance depends on several factors. Today we’ll look at purchase prices, rental demand, taxes, operating costs, regulations, and an investor’s strategy.
• Landlord-tenant laws vary significantly by state and locality, particularly regarding rent increases, security deposits, lease termination, property access, and tenant remedies.
• Some states and local jurisdictions have rent stabilization or rent control laws that can limit rent increases for covered properties.
• Property taxes, home prices, rental rates, and historical appreciation can help investors compare markets, but statewide averages may not reflect conditions in a specific city or neighborhood.
• Investors should research current state and local laws before purchasing a rental property, as regulations and market conditions can change over time.

Factors that Determine the Worst States for Landlords

Real estate is generall a worthwhile long-term investment for those looking to generate income through rent or appreciation. However, figuring out the worst states for landlords begins by examining which factors matter to the overall success of owning rental property in a given location. Let’s review these factors below –

1. Average Rental Rates – For many rental property investors, generating positive cash flow is an important goal. Therefore, the median rent in the area is essential to a landlord’s decision. While rent can vary greatly across states and even neighborhood to neighborhood, average rental rates are still vital in determining the worst states for landlords.
2. Landlord-Tenant Law and Regulations – State and local laws govern many aspects of the landlord-tenant relationship. For example, owners should research laws about the security deposit, late fees, lease termination, eviction, right of access, and permitted use of a property.
3. Property Tax Rates – Property taxes can significantly affect a rental property’s operating expenses and cash flow. Investors should research current tax rates, assessment practices, recent trends, and any additional local taxes that may apply.
4. Appreciation Rates and Property Value – Historical appreciation trends can provide useful context, particularly for long-term investors. However, past appreciation does not guarantee future growth, so investors should consider it alongside rental demand, purchase price, operating costs, and other market conditions.

States With Notable Considerations for Landlords

When investors search for the worst states for landlords, they’re often comparing locations based on a combination of regulatory, financial, and market factors. However, each state has different considerations that may affect an individual investment.

Top 5 Worst States for Landlords Overall

Investment conditions depend on the property, location, rental strategy, and current market. However, some states have more extensive rental regulations or requirements that investors should understand before purchasing property.

1. California – California has extensive rental regulations investors should understand. Under the state’s Tenant Protection Act, rent increases for most covered properties are generally limited to 5% plus the change in cost of living or 10%, whichever is lower, over a 12-month period. Some cities and counties have additional rent stabilization requirements, and statewide eviction protections also apply to many properties.
2. Vermont – Vermont landlords generally must return security deposits with an itemized statement of deductions within 14 days after the applicable move-out date. Tenants may also repair certain minor defects and deduct the reasonable cost from rent, up to one-half of one month’s rent, if the landlord fails to make the repair within 30 days after receiving notice and other requirements are met.
3. Nebraska – Nebraska landlords generally must return the remaining security deposit and provide a written itemization within 14 days after the tenancy ends. For certain material lease violations, landlords may provide notice that the tenancy will terminate no less than 30 days after receipt if the violation is not remedied within 14 days.
4. Rhode Island – Rhode Island security deposits are generally limited to one month’s periodic rent and must be returned, minus lawful deductions, within 20 days after applicable statutory conditions are met. Tenants may also make certain limited repairs costing less than $500 in aggregate per year and deduct the reasonable cost from rent when statutory requirements are satisfied. For certain material lease violations, landlords generally must give tenants 20 days to remedy the violation.
5. Washington State – Washington’s rent stabilization law limits rent increases for many residential tenancies. Generally, landlords may not increase rent by more than 10% or 7% plus the Consumer Price Index (CPI), whichever is lower, during a 12-month period. Rent generally cannot be increased during the first 12 months of a tenancy. Additionally, landlords generally must provide at least 90 days’ written notice. Certain properties and tenancies are exempt or subject to additional requirements.

Other States With Important Landlord-Tenant Requirements

• New York – New York has extensive landlord-tenant regulations, and requirements can differ depending on whether a rental is regulated or unregulated. State law generally limits security deposits to one month’s rent. For non-rent-regulated units, landlords generally must return the security deposit and provide an itemized statement of deductions. This must be done within 14 days after the tenant moves out. Rent-regulated properties are subject to additional rules, and landlords should also check applicable local requirements before purchasing or managing a rental.
• Massachusetts – Massachusetts has detailed requirements for landlords who collect security deposits. A security deposit generally cannot exceed one month’s rent and must be kept in a separate, interest-bearing Massachusetts bank account in accordance with state requirements. Landlords generally must return the deposit or remaining balance within 30 days after the tenancy ends, subject to lawful deductions and other requirements. Because violations of the state’s security deposit rules can carry significant consequences, landlords should understand the requirements before collecting or handling tenant funds.

States With Rent Control or Rent Stabilization Laws

Rent control and rent stabilization laws generally regulate how much landlords can increase rent for certain covered properties. However, these laws vary significantly by state and locality, and they often include exemptions based on factors such as property type, age, or ownership.

California, Oregon, and Washington have statewide rent increase limitations that apply to certain residential properties. Other states, including Maryland, New Jersey, and New York, have local or property-specific rent control or rent stabilization requirements. Washington, D.C., also regulates rent increases for certain covered rental units.

Rent regulations can change and may differ significantly between cities within the same state. So, investors should research the current state and local requirements that apply to a specific property before purchasing or increasing rent.

FAQ About Landlord-Friendly States

What makes a state landlord-friendly?

There is no universal definition of a landlord-friendly state. Investors often consider factors such as landlord-tenant regulations, eviction procedures, rent increase restrictions, property taxes, rental demand, home prices, and operating costs. The importance of each factor depends on the investor’s goals and rental strategy.

What are the worst states for landlords?

There is no objective list that applies to every investor. States with higher property costs, taxes, or more extensive rental regulations may present additional challenges. However, they may also offer strong rental demand or other investment advantages. Investors should evaluate individual markets and properties rather than relying solely on statewide rankings.

Which states have rent control or rent stabilization laws?

Several states and local jurisdictions regulate rent increases for certain rental properties. The rules, limits, exemptions, and properties covered vary significantly by location and can change over time. Investors should check current state, county, and municipal requirements before purchasing or increasing rent.

Do landlord-tenant laws vary by city?

Yes. In addition to state law, counties and municipalities may impose their own rental licensing, inspection, rent stabilization, notice, or other requirements where permitted by state law. Two properties within the same state may therefore be subject to different requirements.

Should landlord-tenant laws determine where I invest?

Landlord-tenant laws are an important consideration, but they’re only one part of evaluating a rental investment. Investors should also consider purchase price, expected rent, vacancy rates, property taxes, insurance, maintenance expenses, rental demand, financing costs, and other factors that can affect potential returns.

How can landlords keep up with changing rental laws?

Landlords can monitor state and local government resources, review updates from housing agencies, and stay informed about major changes. Property owners should verify current requirements before changing lease terms, increasing rent, handling security deposits, or taking other legally regulated actions.

How to Maximize Your Rental Investment

When it comes to investing in real estate, location plays an important role. However, landlord-tenant laws are just one factor to consider when choosing where to invest. Rental demand, property prices, taxes, insurance costs, operating expenses, expected rent, local regulations, and long-term market conditions can all affect a property’s potential performance. Before purchasing, research both the financial outlook and the legal requirements that apply to the specific property and jurisdiction.

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