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2 Cities Where You Absolutely Should Not Buy an Investment Property

If you’ve been thinking of getting into the rental property investing game, you might be turned off by what you’re seeing in the housing market. And it’s certainly understandable if the current environment of low supply, high prices, and rising interest rates isn’t exactly lighting a fire under you.
But it’s these less-than-ideal conditions that are driving more would-be homebuyers to become renters, and that increased demand is driving rent prices ever higher. So if you find a property you want to invest in but think it’s too expensive, it could still be well worth seeing what similar properties are renting for and crunching the numbers.
But while it’s true that rental properties are incredibly hot in most of the country right now, here’s one important caveat: Be sure to familiarize yourself with the rental regulations in any area where you’re considering investing. Let’s take a look at a few cities where those laws could easily make rental property investing more trouble than it’s worth.

Image source: Getty Images.

1. Portland, Oregon
A recent study by ECONorthwest revealed that Portland lost nearly 4,000 rental units between 2017 and 2020. While it’s impossible to definitively prove the cause of these losses, many fingers are pointing at the rent control laws Portland passed in 2017, combined with statewide rent control laws that went into effect in Oregon in 2019.
You may think of New York when you hear the term “rent control,” but there are several other cities like Portland where you could encounter it. Even if the rent you would currently be allowed to charge works for you, that could change in the future. When your costs of doing business increase, rent caps may not keep up. As such, landlords can avoid some potential future difficulties by steering clear of cities with rent control.
Further, if you decide not to renew a tenant’s lease or to make substantial changes to the terms of the agreement at renewal time, Portland requires you to pay tenant relocation costs of thousands of dollars. This could obviously be a huge obstacle for landlords to navigate. 

Image source: Getty Images.

2. New York City
And speaking of New York, yes, it’s making an appearance here, too. The Big Apple is known for having one of the most complex rent control systems in the country, and as with Portland, that could easily make managing a rental property here more trouble than it’s worth for the average mom-and-pop landlord.
And to add insult to injury, New York also restricts late fees to the point where they almost may as well not be allowed at all. So even if the amount of rent you can charge works for you (for now), you may still be left holding the bag if you find yourself with a less-than-conscientious tenant.
The key: Knowing what to look for
This very short list is far from exhaustive. The idea is to highlight the existence of these rental property laws that can potentially negate anything else that might make a city an appealing place to own rental property. If you have your eye on other cities, familiarizing yourself with this list of potentially troublesome rental property laws to look out for should leave you well positioned to buy in a city where you can enjoy being a landlord while avoiding several potential pitfalls.
And if you live in or near a city with these types of restrictive landlord laws, you may want to consider looking to the surrounding suburbs for rental property instead. Just make sure to check out the laws you would be subject to there as well.
The Motley Fool has a disclosure policy. –

If you’ve been thinking of getting into the rental property investing game, you might be turned off by what you’re seeing in the housing market. And it’s certainly understandable if the current environment of low supply, high prices, and rising interest rates isn’t exactly lighting a fire under you.

But it’s these less-than-ideal conditions that are driving more would-be homebuyers to become renters, and that increased demand is driving rent prices ever higher. So if you find a property you want to invest in but think it’s too expensive, it could still be well worth seeing what similar properties are renting for and crunching the numbers.

But while it’s true that rental properties are incredibly hot in most of the country right now, here’s one important caveat: Be sure to familiarize yourself with the rental regulations in any area where you’re considering investing. Let’s take a look at a few cities where those laws could easily make rental property investing more trouble than it’s worth.

Image source: Getty Images.

1. Portland, Oregon

A recent study by ECONorthwest revealed that Portland lost nearly 4,000 rental units between 2017 and 2020. While it’s impossible to definitively prove the cause of these losses, many fingers are pointing at the rent control laws Portland passed in 2017, combined with statewide rent control laws that went into effect in Oregon in 2019.

You may think of New York when you hear the term “rent control,” but there are several other cities like Portland where you could encounter it. Even if the rent you would currently be allowed to charge works for you, that could change in the future. When your costs of doing business increase, rent caps may not keep up. As such, landlords can avoid some potential future difficulties by steering clear of cities with rent control.

Further, if you decide not to renew a tenant’s lease or to make substantial changes to the terms of the agreement at renewal time, Portland requires you to pay tenant relocation costs of thousands of dollars. This could obviously be a huge obstacle for landlords to navigate. 

Image source: Getty Images.

2. New York City

And speaking of New York, yes, it’s making an appearance here, too. The Big Apple is known for having one of the most complex rent control systems in the country, and as with Portland, that could easily make managing a rental property here more trouble than it’s worth for the average mom-and-pop landlord.

And to add insult to injury, New York also restricts late fees to the point where they almost may as well not be allowed at all. So even if the amount of rent you can charge works for you (for now), you may still be left holding the bag if you find yourself with a less-than-conscientious tenant.

The key: Knowing what to look for

This very short list is far from exhaustive. The idea is to highlight the existence of these rental property laws that can potentially negate anything else that might make a city an appealing place to own rental property. If you have your eye on other cities, familiarizing yourself with this list of potentially troublesome rental property laws to look out for should leave you well positioned to buy in a city where you can enjoy being a landlord while avoiding several potential pitfalls.

And if you live in or near a city with these types of restrictive landlord laws, you may want to consider looking to the surrounding suburbs for rental property instead. Just make sure to check out the laws you would be subject to there as well.

The Motley Fool has a disclosure policy.

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