10 Steps To Take For Out Of State Investing

[Grant Stepanic]

Investing in real estate out of state can be a profitable venture, but it requires careful planning and execution to minimize risks and maximize returns. Here’s a 10-step process to get started with out-of-state real estate investing:

1. Research and Select a Market:
   • Identify markets with strong economic fundamentals, job growth, population growth, and potential for real estate appreciation.
   • Consider factors like rental demand, vacancy rates, and local landlord-tenant laws. I personally work in the Columbus, Oh market because my research lead to this market.
2. Build a Local Team:
   • Find reliable local professionals such as real estate agents, property managers, contractors, and attorneys who are familiar with the market.
   • Network with local investors and attend real estate meetups to get referrals and build connections.
3. Set Investment Criteria:
   • Define your investment goals, such as cash flow, appreciation, or a balance of both.
   • Determine your budget, financing options, and the type of properties you want to invest in (single-family homes, multi-family units, commercial properties, etc.).
4. Financial Preparation:
   • Secure financing or funding for your investment. Options may include traditional mortgages, private lenders, partnerships, or even self-directed IRAs.
   • Calculate all potential costs including property acquisition, renovations, property management fees, taxes, and maintenance.
5. Property Selection and Due Diligence:
   • Use your local team to scout properties that match your investment criteria.
   • Conduct thorough due diligence including property inspections, financial analysis, and reviewing rent comparables (rental rates in the area).
6. Make Offers and Negotiate:
   • Submit offers based on your research and due diligence.
   • Negotiate terms that are favorable to your investment goals, taking into account potential repairs or improvements needed.
7. Close the Deal:
   • Once your offer is accepted, work with your local team to complete all necessary paperwork and close the transaction.
   • Ensure all legal aspects are handled properly, including title searches and property inspections.
8. Manage Property Remotely:
   • Hire a reputable property management company to handle day-to-day operations such as tenant screenings, rent collection, maintenance, and emergency repairs.
   • Establish clear communication channels and expectations with your property manager.
9. Monitor and Adjust:
   • Regularly review your investment performance and financial metrics (cash flow, occupancy rates, expenses).
   • Stay informed about market trends and adjust your strategy as needed to optimize returns or mitigate risks.
10. Long-Term Strategy and Growth:
    • Evaluate opportunities for portfolio expansion or diversification in the same or different markets.
    • Continuously educate yourself on real estate investing best practices and market dynamics to make informed decisions.

By following these steps diligently and leveraging local expertise, you can effectively navigate the complexities of out-of-state real estate investing and build a successful portfolio over time. 

[Jimmy Lieu]

Quote from @Grant Stepanic:

Investing in real estate out of state can be a profitable venture, but it requires careful planning and execution to minimize risks and maximize returns. Here’s a 10-step process to get started with out-of-state real estate investing:

1. Research and Select a Market:
   • Identify markets with strong economic fundamentals, job growth, population growth, and potential for real estate appreciation.
   • Consider factors like rental demand, vacancy rates, and local landlord-tenant laws. I personally work in the Columbus, Oh market because my research lead to this market.
2. Build a Local Team:
   • Find reliable local professionals such as real estate agents, property managers, contractors, and attorneys who are familiar with the market.
   • Network with local investors and attend real estate meetups to get referrals and build connections.
3. Set Investment Criteria:
   • Define your investment goals, such as cash flow, appreciation, or a balance of both.
   • Determine your budget, financing options, and the type of properties you want to invest in (single-family homes, multi-family units, commercial properties, etc.).
4. Financial Preparation:
   • Secure financing or funding for your investment. Options may include traditional mortgages, private lenders, partnerships, or even self-directed IRAs.
   • Calculate all potential costs including property acquisition, renovations, property management fees, taxes, and maintenance.
5. Property Selection and Due Diligence:
   • Use your local team to scout properties that match your investment criteria.
   • Conduct thorough due diligence including property inspections, financial analysis, and reviewing rent comparables (rental rates in the area).
6. Make Offers and Negotiate:
   • Submit offers based on your research and due diligence.
   • Negotiate terms that are favorable to your investment goals, taking into account potential repairs or improvements needed.
7. Close the Deal:
   • Once your offer is accepted, work with your local team to complete all necessary paperwork and close the transaction.
   • Ensure all legal aspects are handled properly, including title searches and property inspections.
8. Manage Property Remotely:
   • Hire a reputable property management company to handle day-to-day operations such as tenant screenings, rent collection, maintenance, and emergency repairs.
   • Establish clear communication channels and expectations with your property manager.
9. Monitor and Adjust:
   • Regularly review your investment performance and financial metrics (cash flow, occupancy rates, expenses).
   • Stay informed about market trends and adjust your strategy as needed to optimize returns or mitigate risks.
10. Long-Term Strategy and Growth:
    • Evaluate opportunities for portfolio expansion or diversification in the same or different markets.
    • Continuously educate yourself on real estate investing best practices and market dynamics to make informed decisions.

By following these steps diligently and leveraging local expertise, you can effectively navigate the complexities of out-of-state real estate investing and build a successful portfolio over time. 

Great advice Grant! My best advice for those who are looking to invest out of state in any market is finding a solid investor agent (someone who invests in real estate themselves) because they can plug you in with their systems, processes, and real estate team (contractors, lenders, property managers, etc). My second best advice is making sure there's checks and balances for EVERYTHING you do! For example, you should never let your contractor run free - you should be working with a project manager or boots on the ground services that they can check the contractor work and make sure everything looks great. Happy to connect and answer any questions you may have.

[Drew Sygit]

Good stuff, although in our experience, most investors going OOS, don't do enough market research.

We really push understanding the property Classes of the market, so someone doesn't put "lipstick" on a Class C or D and sell it to an OOS investor as Class A or B!