6 States SFR Investors Should Avoid in 2025
As a single-family rental (SFR) investor, your success in 2025 will depend heavily on where you invest.
High mortgage rates and limited affordability have made it harder to find markets where rental homes generate solid returns. And while some states offer landlord-friendly laws and strong population growth, others have become increasingly difficult if not downright risky for investors.
Here are six states that may be best avoided this year based on taxes, regulation, and projected returns:
1. California
Why It’s Tough for SFR Investors:
• High purchase prices limit cash flow
• Rent control laws in many cities
• Tenant-friendly eviction policies
Despite a large population and strong economy, California’s rent caps, eviction restrictions, and permitting delays make it hard to scale or profit from SFR investments.
2. Illinois
Why It’s Tough for SFR Investors:
• Among the highest property taxes in the U.S.
• Population stagnation or decline
• Lengthy eviction timelines
Even in desirable Chicago suburbs, older housing and high taxes erode profitability for investors.
3. New York
Why It’s Tough for SFR Investors:
• Rent stabilization and control laws
• Costly and slow eviction process
• Expensive insurance and maintenance
From Buffalo to Brooklyn, the legal and financial barriers to success are steep in New York.
4. Hawaii
Why It’s Tough for SFR Investors:
• Extremely high home prices
• A volatile, tourism-driven economy
• Local bans on short-term rentals
Unless you're investing in high-end properties for long-term appreciation, Hawaii offers little for most SFR investors.
5. New Jersey
Why It’s Tough for SFR Investors:
• The highest property taxes in the country
• Aging housing stock needing major repairs
• Strong tenant protections
Even with proximity to New York City, operating costs make it hard to generate healthy returns here.
6. Oregon
Why It’s Tough for SFR Investors:
• Statewide rent control
• New regulations targeting landlords
• Slower job and population growth
Demand remains, but strict policies have capped the income potential for many investors.
Bottom Line:
In 2025, smart SFR investors are focusing on balance: affordable home prices, strong rental demand, and manageable regulation. The six states above may have once offered opportunity but today, they pose major obstacles to profitability, especially for smaller operators or income-focused investors.