If you’re a new investor with limited capital, the misfortune of renting to a bad tenant in a tenant-friendly state could cost you financially and permanently discourage you from investing.
Having invested in several states including New York, New Jersey, Pennsylvania, Connecticut, and South Carolina, I know the pitfalls of encountering “professional” tenants who call legal aid more often than family members, and know how Take advantage of the system.
anyway, I’ve also had some model tenants in a property in Brooklyn I’ve owed for 20 years – New York is notorious for tenant-friendly laws – and they’ve never been behind on a month’s rent. As you will see, there are many sides to this discussion.
Rule of thumb: Invest where you can evict quickly
landlord It’s a business. you need to correct When your business stops generating revenue. The longer it takes to evict a tenant, the longer your business will suffer.
That’s why I recommend any new investor or anyone with limited resources choose a landlord-friendly state where the eviction process is quick and relatively painless. This article is a great deep Learn more about the most landlord-friendly states and why they’re a great place to invest.
Other considerations, such as taxes and limits on rent increases, also make the state welcoming to landlords.
Why turning a profit in a tenant-friendly state is so hard
when Local Law 18 promulgated In New York City, where Airbnb is outlawed, many potential landlords are reluctant to rent to annual tenants. However, Tony Lindsay, a contractor and filmmaker who owns a home in Bushwick, Brooklyn, told the New York Times, “Those who might be renting out their homes for $99 a night and need the money Working-class homeowners have been hardest hit.” New York Times. “We’re not going to get rich off this.”
this era The article goes on to say:
Every Airbnb host I talk to seems to know one thing about hard Tenants who cannot move out. Mr Lindsay said his father’s tenants in Bushwick had stopped paying rent during the coronavirus pandemic. he ends up serving them and eviction notice but tenant still there.
Small landlords who rely on rental income to survive suffer the most when tenants don’t pay. Wealthy landlords with generational wealth, low mortgages and multiple high-end buildings to offset losses may be better able to weather the storm.
As a former Brooklyn property owner, I’m lucky. I’ve owned a brownstone for twenty years, but never any The problem of non-paying tenants. I Thorough screening, rented to tenants with good jobs, charging slightly below market rent. As the home appreciated, I realized that while I wasn’t going to get rich from renting it, simply holding on to the property and enjoying the depreciation and appreciation was a winning strategy.
How to protect yourself
Have a rock-solid lease
if you is using Generic leases you find online, not leases specific to your state Reviewed by lawyer, you may create problems for yourself. A legally binding lease specific to your state is critical when evicting a tenant. It won’t magically change your state’s laws to result in a streamlined eviction process, especially if your tenants have legal representation, but it can prevent extended eviction proceedings.
Conduct background checks and screenings meticulously
You’d be surprised when seemingly upstanding citizens with good jobs and impeccable backgrounds plan to scam you out of your rent and know every legal loophole in the book, allowing them to live rent-free in your apartment . Professional tenants in tenant-friendly states understand the system better than many attorneys. The best/worst professional tenants are often the most articulate.
horror stories like this New York TimesAn unsuspecting New York City landlord was left $100,000 by a scammer, a scenario all potential landlords should be aware of. It’s worth spending the money to conduct a thorough background check before letting any tenants into your property.
Don’t invest in any bad communities state
I own multiple apartments in Newark, NJ (generally a landlord-friendly state), and as a novice investor I am constantly in landlord-tenant court evicting people who hit the jackpot as soon as they received the eviction notice. Tenants who call legal aid make up excuses that are difficult to counter without spending the money to hire a lawyer. My eviction might have been longer if I used to be Across the Hudson River in New York, it was still torture, stress, and financial crippling, leading me to divest myself of all my units and vow not to make the same mistake again.
No matter what your state’s landlord-tenant laws are, there are good, honest, on-time paying tenants in every state. As a host, your job is to find them by providing quality accommodation and screening them thoroughly.
Consider squatters’ rights
back a video A Queens, New York, landlord surfaced Arrested for trying to change the locks on her shantytown, squatters rights Always a hot topic. Until recently, in New York, squatter Police were unable to evict him for trespassing. Their deportation must go through the legal system. On average, evictions in the city take about two years to complete, according to ABC News.
“People can stay in their homes for years and not face justice because they’re basically living for free,” said New York State Assemblyman Jake Blumencranz, a Republican who represents the 15th District. And let homeowners pay their bills. Channel 7, Eyewitness News. he submitted a bill That is Recently signed into law New York Gov. Kathy Hochul excluded squatters from tenant protections.
with a cost of living crisis With homelessness a huge problem sweeping the country, squatting has become more common. Any landlord should check their state squatters rights laws And make sure they take appropriate steps before leaving a home vacant.
Short-term rentals: a game changer
As seen in New York City, short term rental This is a game-changer for landlords outraged by tenant eviction proceedings. for Airbnb-friendly citiesShort-term rentals allow landlords to avoid the hassle of complying with state-mandated long-term rental agreements and laws when the laws favor tenants. Instead, hosts pay for the space up front, and guests leave after a few days or weeks.
The crux of the matter Can This can happen if you have a mid-term lease of a month or more. you going to need check your Local Landlord-Tenant Laws and consult a lawyer to secure a medium-term tenant will not exceed their welcome or rent.
final thoughts
Real estate investing is fraught with potential risks. As a landlord, you must minimize problems as much as possible. The easiest way to achieve this is to purchase cash investments. It may give you a peace of mind that is priceless, but it contradicts most expert advice about the power of leverage.
So assuming you have the lowest interest rate mortgage possible, buy in a decent neighborhood, screen your tenants carefully, and give them state-specific leases, here’s one of the remaining things that could get you into trouble It’s the loss of rental income that pays your expenses. This does not necessarily mean that your tenant is Jekyll and Hyde’s character, who purposely didn’t pay rent when he moved in.
As a landlord, once your rent is a few days late, you want to stop the bleeding as quickly as possible. Choosing an investor-friendly state will allow you to complete your eviction as quickly and easily as possible.
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Notes on BiggerPockets: These are the opinions written by the author and do not necessarily represent the views of BiggerPockets.
