MFH markets in the Southeast

[Patrick Murphy]

My job allows me to live anywhere within the Southeast (Florida, Georgia, Alabama, Tennessee, Kentucky, West Virginia, Virginia, and the Carolinas). I am looking to buy my first property in one of these states, but don't hold any preference towards these areas, mostly since I know I will be in that area at a minimum of 2 times a year for work and my family lives outside of these states.

I've already been pre-approved for just over $350k, would want to use an FHA loan, and ideally find a MFH property. My main sticking point is that I am unsure how to find a marketplace that would be worth my time to find MFH properties effectively since I have minimal restrictions. Are there any recommendations to help me parse down areas in an analytical way?

[Bradley Sriro]

@Patrick Murphy it sounds like you have a great opportunity on your hands. I am also assuming that you will be house hacking from your post. @Taylor L. gave you some great advice. 

I would just add that you should consider purchasing in a landlord friendly state. There are quite a few things to consider when evaluating this. Landlords in every state are bound by certain rules and regulations and each state will have their own laws governing landlords and tenants. There are some factors that may make one states laws more appealing to landlords than others. These factors are all dependent on which are ultimately important to you, but they should all be evaluated. The following factors in no particular order are 1) Landlord and tenant rights, 2) Eviction process, 3) Tax and insurance rates, 4) Rent controls, and 5) Registration and licenses.

Each state will have laws that give landlords and tenants certain rights. Some states favor the landlord while others favor tenants. You want to be in a state that favors the landlord so you don’t end up jeopardizing your investment.

The eviction process is also a crucial factor. Evictions are probably one of the things you fear most as a landlord. As a result, you want to invest in a state where the eviction laws are in your favor. Make sure to select a state where it is easier to evict should the need arise.

Taxes & insurance rates are also an important thing to consider with an investment. While you are looking for a potential state to invest in, make sure to take these costs into consideration as they will ultimately affect your ROI.

Some states have rent control which prevent landlords from raising rents to account for inflation and yearly tax increases. These laws are well intentioned to prevent landlords from overcharging tenants but at the same time, they may also hurt landlords by preventing them from being as profitable as possible. I would definitely avoid states with rent control.

In some states, landlords are also required to obtain business licenses and register with the county and/or municipalities in order to rent their property to tenants. This is especially common with short term rentals, but it can also apply to long term rentals. At the end of the day, this is just an added cost that you should try to avoid.

Of the states you mentioned on the east coast, Florida and Alabama are very landlord friendly. While not on your list, some other landlord friendly states include Texas, Arizona, Illinois, Ohio, Pennsylvania, Colorado, and Indiana.

While not ruling out the other states available to you, I would suggest doing a little more research on markets in Florida and Alabama. Aside from picking a market where you have good cash flow and appreciation, ultimately you want to invest where it pays to do so. Picking a landlord friendly state will definitely help in that regard. Best of luck in your search and please let us know where you end up investing.