Out-of-State Investing: The Good and the Bad

The decision to invest out of state should not be taken lightly—you need to do your research, practice due diligence, and weigh the pros and cons to ultimately decide whether it’s right for you. The right out-of-state investing strategy can prove to be highly lucrative and allow you to scale your investing, but there are also many factors you should consider before diving in headfirst.

Out-of-state investing can be costly, time-consuming, and nerve-wracking. It’s important to keep these and other factors below in mind as you explore this strategy, and ultimately make the decision that’s right for you.

The Challenges of Out-of-State Investing

Investing Out of State Can Be Nerve-wracking

When investing out of state, you may be buying properties that you’ve never seen. You’ll have to rely on contractors you’ve never met, and pay for work that you’ve not personally inspected.

This can make anyone nervous—you need to be prepared to give up a level of control you’d usually have when investing locally.

It can take time to invest out of state

It takes time to establish any team, but can take even longer if you’re not on the ground. It also takes time to choose the right market, and really learn the ins and outs of that market.

You’ll need to dig around for information on the best rental areas, what kind of returns you can expect, where you should flip, and what areas you should stay away from. You won’t have a high level of familiarity with the area, which means you’ll need to put in more time to even begin investing out of state.

Investing out of state can be more expensive.

You no longer have the option of managing your own rental property or renovation. This means higher management and contractor fees. Fortunately, this doesn’t necessarily have to be a bad thing.

The Good News: All of These Things Can Be Overcome

Just look around—there are plenty of people successfully investing out of state. With the right team in place and boots on the ground you can trust, investing out of state will open up a world of new opportunities for you to explore.

And with the right systems in place, you can greatly reduce your risk.

The Possibilities Are Limitless With Out-of-State Investing

You can live anywhere and invest anywhere. If you find a hot market somewhere, you can jump in and take advantage, regardless of your physical location or current situation.

You can pursue markets with less competition and scale more quickly. If you look hard enough, you’ll be able to find the right market and property for your budget, and can very likely also find the returns that you’re looking for that might not be available where you live.

Investing Out of State Provides Freedom

Once you’ve built your team and hire contractors, the large majority of your time will be spent receiving reports and paying the bills. You no longer actively manage the property or the renovation. Instead, you’re sitting back, watching it get done, and getting paid.

Once you remove yourself from the management role, you will have much more bandwidth and freedom to pursue other things, or more investment projects.

Out-of-State Investing Allows You to Diversify Your Portfolio

Having properties in multiple cities and multiple states can help protect you against a recession or a large employer going out of business in any one area. Also, fluctuating markets or new restrictions will not affect you as much if your portfolio is spread across multiple cities and states.

Just like anything worth pursuing, you have to put in the work, but with the right mindset and a solid understanding of the pros and cons, out-of-state investing may be worth considering.

Have you thought about investing out of state?

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.