Would We Ever Invest in Tenant-Friendly States?

0:00Is investing in a tenant-friendly state a deal breaker? or are investors who avoid them leaving money on the table. Landlord-tenant laws vary dramatically across the country. Eviction timelines can range from a few weeks to over a year. Rent control can cap your cash flow, and permit restrictions can slow down your rehabs or stop them completely. But there's also a flip side. The states with the strictest laws are often the most desirable places to live. They have strong demand, strong rent growth, and strong appreciation. So today, we're breaking it down. What makes a state landlord or tenant friendly?

0:40Which states are the best for investors? And what can you do to protect your portfolio if you're already investing in a tenant friendly state? If you own rentals or you're about to buy your first one, this episode could save you a lot of money and prevent a lot of stress.

1:01What's up, everyone? I'm Dave Meyer. He's Henry Washington. We're the co-hosts of the BiggerPockets podcast. Henry, how are you? What's going on, man? I'm excited to talk about this because I technically live and invest in a landlord-friendly state. But every time I look at lists of the most landlord-friendly states, my state doesn't make the list. And so I'd like to dive into a little bit about why I think this is landlord-friendly and why or why not that actually matters. All right. So, Henry, what are some of the factors that you think about when considering whether a state or a city is landlord-friendly or tenant-friendly?

1:37What comes to mind for me, and I think what comes to mind for a lot of investors when they're considering markets and debating whether it's landlord or tenant-friendly, is they're thinking about evictions. So how difficult is it going to be to get a problem tenant out of your property? Like that's what people are typically worried about or focused on. But you're right. That's just one factor I think that makes up whether a market is tenant or landlord friendly. Yes, eviction speed is important because if you have a bad non-paying tenant and you're in a market that it takes a year to put them out or more, that's a lot of money you could be leaving on the table.

2:17I was just talking with someone who has a tenant whose rent is$4 ,000 a month and it takes a year to evict them. And they're in the state of New York. That's 50 grand. That's a crap ton of money. That's insane. Yeah. So important variable. Right. Yeah, absolutely important variable. But I think people only think about this one variable when they're trying to select a market. And there are so many others that even if this variable is in your favor in the market you choose, if several of these other variables aren't, you could still find yourself in a position you don't want to be in. So evictions are just a part of the process.

2:54You also have different rules around what kind of notice a landlord is required to give a tenant before the eviction process starts. So the eviction process is truly like an official process, but the eviction process can't start until you have given the proper amount of notice. And so if you're in a state that has short timelines around giving notice, then that can help you get to the eviction process sooner. If you have to give a lot of notice to people, that just adds to the delays because the eviction process hasn't even started yet. You're just dealing with the notice, which is like the precursor before the eviction process starts.

3:33And then on top of that, there are states that have what they call just cause rules. landlords have to have just cause to put a tenant out, essentially. In other words, you can't just go, hey, I changed my mind and I want to sell this property. So I'm canceling your lease in the middle of the lease in certain states. In some states, you can. So some of these just cause rules can really put handcuffs around landlords. But in all honesty, I think just cause rules are like their tenants should have some protections if they're living in a place like I think that's a good thing, in my opinion. You shouldn't just be able to put somebody out for no reason, but it is something you need to pay attention to.

4:14And then I think the other big one people think about is rent control. There are some states where you can only charge a certain amount of rent within whatever the market rents are. And then once that rent is set, you then are only allowed to raise rents by a certain percentage in those markets. And those rules can vary from state to state. Just to add some sort of data to what Henry was saying, if you look at Texas, Florida, Ohio, Georgia, their notice range for eviction is only three days. That's Arkansas as well. That might be a little short. To me, I get why they are. I wouldn't be worried personally about investing if they said you have to give two weeks notice.

5:00Yes, I think that there's some intricacies though, right? So in a lot of these markets where you can give three-day notice, there are situations where you can and situations where you can't. So like in Arkansas, I can give you a three-day pay or quit, but only if you've not paid rent, right? So if you've not paid rent or violated the lease in some sort, then I can give you a three-day pay or quit. And then that gives you three days to either get caught up or then I can start the eviction process. But if you're paid up and I want to evict you for some other reason, I can't just serve you a three-day notice.

5:39It's got to be a 30-day notice. So that makes sense. That seems somewhat reasonable to me. I personally, like I live in Washington state that is sort of on the other end of the spectrum. I think the key thing here is like, you know, when I talked to James, he owns a lot of rentals here. You just have to underwrite it. Like he plans for this stuff, right? You know, if you own a multifamily, right. And you own 30 units, like you're probably going to have a non-paying tenant at some point. So you just have to underwrite that into your deal, which is why I wouldn't think about it so much. Just prepare for it.

6:13It wouldn't be a deal breaker for me. It would only be a deal breaker for me if I underwrote it with a higher vacancy. It's essentially just another form of vacancy, right? Correct. So it doesn't work with that higher vacancy rate. Then I just wouldn't buy the deal. But I wouldn't write off an entire market because of this, personally. I mostly buy singles and small multifamilies. So if I'm underwriting a deal and it's in a market where timelines are longer to evict a tenant, I'm going to prepare for the worst case scenario. Because as a real estate investor, a lot of the times we're getting good deals because a current owner wants to get out of a headache, right?

6:53So they may know, yeah, I got a problem tenant in here. That's why I'm selling you this property. You got to deal with it. And I'm going to give it to you at a discount. So you underwrite it so that you prepare. Like if it's going to take you a year, well, How much is rent? How many months are in a year? Add that up. Add it into your underwriting so that you can take care of it when the situation comes. Like plan for the worst case scenario in your underwriting. Then if you get it handled in just a couple of months through some other means, great. That's more cash flow, more return on your investment for you.

7:24I will just say, like, if you are concerned about eviction timeline, like there is big differences in here. Like I sort of worked with AI here to sort these states into buckets. And what you see is there are states where the notice period is three days, total timeline to evictions like three to six weeks. And those are some of the states I mentioned, Texas, Florida, Ohio, Georgia, Mississippi, Arkansas, Iowa. You know, it's a lot in the southeast and the Mountain West. Then on the total other end of the spectrum, there are a couple states that are just very slow. It could take up to six months in states like New York, New Jersey, California, Connecticut, Rhode Island, Vermont, Hawaii.

8:05Everything else is like kind of in the middle. You know, it's like you're somewhere between four to eight weeks. Like most states are kind of in that range. So if you are curious about this for your own market or markets that you're going into, check this out. Because I think that's the key to what Henry and I were saying is like, if you go into it, eyes wide open, knowing what the process is, you can mitigate that risk. But this is a considerable issue for certain people. And if you just want, for example, if you're a turnkey investor and you don't want to get into some of the hairier parts of property management, you might want to go with some of those states that have a faster processing time.

8:43And when you look at that list, a lot of those markets that are more tenant friendly markets are also markets where you get a lot more appreciation, where there's more demand. People want to live in New York and they want to live in California and coastal areas. And there's a lot of kind of a, what's James call it? Juice. There's a lot of juice. Yeah. It's got a lot of juice in those because you get a lot of appreciation and like real true wealth is built through debt pay down and appreciation. Right. So like, uh, if I, if I'm thinking about investing in one of those markets, yes, I want to underwrite the deal appropriately so that I can afford to take care of whatever tenant situation I may be walking into.

9:25But that isn't all of the tenant situations that you may have to deal with. You may also put your own tenant in there after you take care of a bad tenant and that tenant doesn't turn out well. And then you could go a whole nother year where you're not getting rent. And so it's not just planning for the tenant situation you're dealing with when you buy it, but it's planning like, how do I operate this? One of the correlations you see is in a lot of the states where they're quote unquote tenant friendly, they also have a lot of supply constraints. They don't allow development. If you look at cities like Seattle, it's very hard to develop or San Francisco or New York, or there's just not enough room in a lot of those places to develop stuff.

10:04And that pushes prices up. So it's just, again, all of these things are trade-offs. There are two other regulatory things I want to talk about, which is rent control. And another one that I don't hear people talking about, which is rental licensing. But we got to take a quick break. We'll be right back. Most investors spend more time chasing deals than reviewing their insurance. But a quick coverage check can be fast, easy, and one of the smartest ways to protect and even improve your property's cash flow. As the months get colder, frozen pipes, icy walkways, and seasonal wear and tear can increase the likelihood of claims.

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13:55welcome back to the bigger pockets podcast henry and i are here talking about the best and worst landlord states people always ask me about this what is this state landlord friendly is it not i think as we're discussing this we're seeing it's not so black and white there are regulations that you need to understand and mitigate but it's all about finding the regulatory and return environment that is comfortable for you because regulation and returns don't always match. The markets with the strongest regulations don't necessarily have the worst returns. Sometimes you see quite the opposite. So we're breaking down individual issues to help you understand what markets might align best with your strategy.

14:36Before the break, we talked about sort of like the bad tenant mitigation situation, but I want to talk rent control. And I'll just say, I am not a fan of rent control. I think there are almost no issues that every single economist I've ever read hates, but rent control is one of them. It's pretty tough to find a single academic study that supports the idea of rent control. In fact, most studies show that it increases rent. I'm not going to get fully into this, but there's been many studies that show that rent control decreases the supply of rental properties. which means there's less rental units out there and more people are competing for fewer rental units.

15:21And although it can decrease or hold rent steady in the short run, long term, and there have been many, many studies of this, it shows that it pushes up rents. So for me, rent control not only impacts you as a business owner and the flexibility that I think you should be able to have to have pricing on your units, but it doesn't even help the people who's intended to help. Like, why is their rent control. It's a whole other topic. It's obviously just politically expedient for people like they like the idea of it, but it's easy to sell the idea of it, but it doesn't work. Yeah, that's what it is.

15:56And so I just don't like it. And I would be hesitant to invest in places with rent control personally. People like it because politically it's a way to get you some votes quickly. Because what people hear is if I'm a renter, rent's going to be cheaper. So I'll vote for that. They don't don't truly understand the impact of what it is that they're voting for. And don't get me wrong, I think rents should be affordable. I think landlords have a role to play in making sure that rents are affordable. I also think states, local government, and the federal government have a role to play in making sure that rents are affordable.

16:37I just don't think rent control is the solution. I agree that I am not advocating for maximizing rent in every scenario. In fact, I think we've talked about a lot of times that I think raising rents modestly is actually a good win-win business strategy in many, many scenarios. The reason when we're talking about landlord friendliness, tenant friendliness, that I would be hesitant to invest in one of these markets is one, a lot of times what rent control incentivizes landlords to do is raise rents more than they need to when they have turnover, because a lot of the laws are that you can't raise rents on an existing tenant.

17:19But if there's turnover, you can raise rents. And so what the studies show is that landlords then go above market rate because they know if that tenant is going to stay in that unit, they need to mitigate the risk of not being able to keep up with expenses. And so they have to go above market rate, which is just worse for the tenant. And so this is a reason I don't want to be put in a position where I have to be thinking about that. The other thing is rent control doesn't work. Anyone who's intellectually honest and looks into it can see that it does not work. And so investing in a place where politicians are doing that just to get votes doesn't bode well, in my opinion, for what the regulatory environment is going to be for real estate investors in general.

18:08And so those are the reasons why I would consider rent control pretty seriously in your analysis. And as I was researching for this episode, just about rent regulation and where these things are happening, what I found was that the National Apartment Association was tracking around 172 rent control bills. That was back in the spring of 2025 and 131 active bills in the fall of 2025. And so these are potential rent control bills that are being looked at. Now, most of them aren't being passed, but that's a lot of volume. That tells me there's a lot of politicians that are lobbying for some sort of rent control.

18:47You know, I've heard about rent control since I started investing in real estate and I haven't seen a lot of markets where it actually gets passed. But this research shows me that there is a lot of markets that are strongly considering it, so much so that they're drafting bills, even though they may not be getting passed. Politicians are reacting to the reality that rents are unaffordable. And that's hard. But the solution is to build more supply. Like, that is just the solution. unfortunately because of the way elections work in this country where people are re-elected every two to four years and because it takes probably five to ten years to effectively build more supply politicians don't focus on that they focus on rent control but i digress anyway this is something you should think about in your analysis one other thing i never see on these lists but i have encountered in at least two of the markets i invest is in rental licensing do you have that No.

19:48This is something that exists in Denver. It exists in Michigan in certain places. But in certain markets now, you need to apply for a license to be a landlord. And the idea, at least in the two markets I invest where I've had to apply for licenses, it's basically they send an inspector out to make sure that the property is safe. And they collect a fee, obviously. I'm also fine with them making it safe. But it is another thing that you should factor in because I've had fine experiences so far. But just like with an inspector or an appraiser, you kind of don't know what you're going to get with some of these things, right?

20:33That's so true. And so I've heard from my property manager, like I had one done a couple months ago and they were like, man, you got lucky. I thought they were going to tell you to change all these things. But like the property is safe. Don't get me wrong. But like sometimes you meet a persnickety person who all of a sudden you buy a rental property that you thought was turnkey and now you're investing 10 grand into renovating that property. So this is something that has become more popular in recent years, just like, you know, in a lot of places, short term rentals, you now need a license or you have to pay a fee.

21:08Well, I just want to make sure that we define some of these words for our listeners so they don't get confused. Could you give us a definition, maybe a facial expression of what persnickety is? I feel like I just outed myself as like a 1880s old grandpa just saying persnickety. So, I mean, I think this is something to consider when you're evaluating landlord friendliness, because again, like everything, there is a spectrum, you know, in Denver, for example, I think it's like 200 bucks to get an inspection. You don't need an inspection every year, but you do pay an annual fee per unit, but it's cheap.

21:51It's like, I think it's like 30 bucks a unit. So like, it's not onerous, but in Baltimore, in DC, in Philly, in New York, they have pretty strict rentals. So this is just something to keep in mind. Like in Seattle, I'm just looking at it, it's 115 bucks per the first unit and then$20 per unit after that. So it's not going to break your bank. You should put it into your underwriting. For me, the risk is more when you need an inspection, you should factor the potential for needed upgrades into your stabilization budget. Like when you're going out and buying something, you need to understand that someone's going to come in and tell you that you have to do something.

22:36I have not had bad experiences personally, but I am betting in the comments we're going to hear someone say that they've had bad experiences in this because of those persnickety people out there. All right. So those are many of the variables on the regulatory side that you should be thinking about. Again, it's sort of the whole bucket of things that happen when you unfortunately have to deal with someone who's not paying rent or has violated their lease in some way. We've also talked about rent control and rental licensing as well. But at least in my mind, the regulatory side is one part. The return side is a whole other thing because just like everything, regulation offers risk and challenges and operations that you need to navigate.

23:23But like sometimes it's worth it if the returns are there, right? So I think we should talk about like how to balance the opportunity for return. versus some of the regulatory things that you're going to need to navigate. So let's get into that, but we do got to take one more quick break. We'll be right back.

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