4 Considerations for Out-of-State Real Estate Investing
For those just joining us in the world of real estate investment, you’ll quickly discover that there is a slew of opportunity out there. Everyone has a different style when it comes to tackling real estate investment — there are countless different types of real estate to invest in on top of other considerations, such as whether or not you’re going to invest locally or in another state (or country!).
Investing in real estate that’s out-of-state may be your best option. If you live in an area where renting just doesn’t make economic sense (property prices may be highly inflated for instance, making it nearly impossible for investors outside of a certain affluence to break in and achieve positive cash flow) then you may turn your attention to another state.
At Memphis Invest, a majority of our investors are from out-of-state. We think that’s great! Go where the opportunity is.
But when you’re considering investing in out-of-state properties, there’s a lot to consider. After all, it’s about as hands-off as real estate investing can get — and that’s not necessarily a good thing.
Before Investing in Real Estate Remotely Ask...Can I handle not being there?
Let’s be honest — some personality types just can’t deal with not being there, involved and in person. If you’re that type of person, then remote investing may not be the best choice for you. It’ll probably drive you nuts if you can’t be present conveniently.
Am I leaving my investments in reputable hands?
This is the biggest, most important question to ask yourself. It’s probably unwise to buy from someone you can’t meet face-to-face. Don’t go into an out-of-state investment without some sort of trust in place. This is where turnkey companies come in handy — they can handle finding managers, tenants, contractors and running the day-to-day tasks and property management.
Just be sure to do your research.
Talk to other investors who are local. Investigate company reviews for anyone you intend to work with. The last thing you want is to find out you were cheated into buying a property with delinquent managers or a property that, unbeknownst to you, was never renovated...and you already paid for it.
The best way to avoid being ripped off is careful research. Dig into objective reviews and hold conversations with the people you intend to work with as many times as you can before you commit to investing time, money and energy into out-of-state companies and investments.
How can I utilize local knowledge for my benefit?
Just as you investigate the local landscape for any investment, you need to pay the same attention to remote locations. If you can get there at all, do it. Do the same as you would for any property — talk to neighbors, get a feel for the area, and make professional connections.
If you can, meet these people face-to-face on the front end of the process. If that isn’t in the cards, seek out someone who does know the area — another professional, a family member or friend, anyone who can keep an eye on what’s going on.
Local knowledge is indispensable for any real estate investment, and particularly so for remote properties.
What research can I do?
If seeing the property and location first-hand isn’t possible, it doesn’t mean you have to be left in the dark. You can find out plenty about the property online. Remember that the real estate market may be different in another part of the country — and what seems high or low to you may not be in the area.
It’s important to look now only at the property, but at comparable properties in the area. Look into local costs of rent and property prices through websites like Zillow, EAppraisal and Rentometer for rental prices. Just be sure to take their calculations with a grain of salt — these aren’t hard numbers and may be too high or otherwise incorrect. You’re using them here for comparisons, not for projecting profit.
Hotpads and Craigslist may also be helpful resources.
The property itself is one one part of the issue. You need to know the area.
City-Data, CLRSearch and Homefair offer plenty of information regarding demographics, wealth, education and crime that will help you evaluate the worth and potential of a property.
Use several different resources so that you’re as thorough as possible, period.
Investing in real estate remotely is possible and profitable, if done right and with other reputable individuals.
What has your experience been with out-of-state investing? Share with us in the comments.
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