Real estate investing can lead you to financial freedom. It’s an asset class that has stood the test of time. No matter what happens, people always have and will need places to live and work.
But investing in real estate is not always easy. You need to find the right deals at the right time in the right place. As they say, it’s all about location, location, location.
So what if your local real estate market isn’t so hot? Maybe it’s hard to sell or buy. How can you still take advantage of this coveted asset class?
The answer is simple—invest in out-of-state property.
Benefits of Investing in Out-Of-State Properties
Shopping for out-of-state properties drastically widens your net for potential deals. Instead of limiting yourself to one region or state, you open yourself up to several.
This way, you take advantage of where the housing markets are hot and maximize your ROI.
Drawbacks of Investing in Out-Of-State Properties
Of course, out-of-state investing has its challenges as well:
For one, you won’t know the market as well as you know your own. So you’ll need to spend a considerable amount of time learning the market first.
Then, you’ll have a harder time putting together your real estate investing team. You’ll probably have to rely on the internet to find an agent, property manager, contractors, and lawyer. You’ll also have to navigate a different set of state and local laws and regulations.
If anything ever goes wrong, you won’t be able to visit the property on short notice. And unless you hire a property manager, you’ll be an absentee landlord.
So weigh the challenges and risks carefully. But remember, there’s no reward without risk.
How to Invest Out-Of-State Properties
To invest in out-of-state property, you’ll first want to research the target market thoroughly. Because you don’t live there, you should do your due diligence and learn the market until you know it inside and out.
Find a local real estate agent to help. They should know the market like the back of their hand and be able to point you in the right direction. Sure, you can monitor online marketplaces like Zillow, but their listings go fast. A local agent can help you act fast and point you to off-market or pocket listings.
For example, if you’re investing in South Carolina from California, find an agent licensed to practice in South Carolina and ask them if they have any experience working with out-of-state investors. If they do, they could be a good fit. If not, they may struggle to find deals, make offers, and negotiate for someone from afar.
When you find a property you think is a good deal, run the numbers with a program like dealcheck.io and then have another experienced investor look over them if possible. It’s always good to get a second opinion.
If the deal looks good, get qualified for the financing, whether you wish to get a loan through a bank, a lender like Turning Point Lending, or another form of funding altogether, and have your agent put the property under contract.
Once you own the property, you’ll want to find a great property manager if you can. Make sure to properly vet them by going over their reviews and ratings and asking for references. You want to find an excellent property manager since you’ll always be away.
Then find other local contractors in the same way to handle the maintenance and cleaning for you. With the right team, being an out-of-state property owner can be easy.
Now, before you take the plunge, here are some final tips for out-of-state investing:
- Even though it requires making a trip, never buy an out-of-state property without seeing it in person at least once.
- Get a professional inspection. Inspectors are trained to spot issues that you can’t. If they detect issues, you can negotiate the price down or avoid the deal altogether.
- Finally, if you don’t have enough money for a down payment, look into real estate investment trusts (REITs), real estate crowdfunding platforms, or even token real estate platforms. Each has very low minimum investment requirements, so you can invest in out-of-state properties with little capital.
In recent years, investing in real estate from afar has become increasingly easy. Whether it’s online management software or new financial instruments like REITs, the average investor has many new tools at their disposal.
Investing in out-of-state property is more feasible than ever. So if you want to diversify your real estate portfolio or get more exposure to the best housing markets, now is the time.