Out of state real estate investing has started to gain significant traction among investors. It is not uncommon for long distance real estate investors to invest in a vacation home or Air bnb types of rental property. However there are a lot more opportunities for buying a rental property that aren't necessarily in popular vacation areas. Here are some of the reasons why out of state real estate investing can contribute to better performing real estate investor portfolios.
Investor-Friendly State and City Laws and Incentives – Every city or state has laws and regulations for the real estate market. If the property laws in your city are not investor-friendly, consider out of state real estate investing. In addition to finding investor friendly laws, certain markets offer incentives for commercial developers, like tax abatements.
Diversification – Most investors either know or understand that diversifying your portfolio is one of the smartest investment decisions you can make. There are so many unexpected and or unknown things that could negatively have a detrimental effect on your portfolio. You definitely don’t want to keep all your eggs in one basket, if the basket breaks so does your investment portfolio. Therefore, it is advisable to diversify your real estate portfolio through out of state real estate investing.
Lower Home Costs – Investors buy rental property with the aim of making a good return on investment or passive income. If the real estate markets in your town or city are too expensive, buying a rental property out of state would make sense.
Higher Returns In Out of State Tertiary Markets – Investors in tertiary markets will see lower vacancy rates and a higher return on their investment due to low supply and high demand.
6 Steps to Out of State Real Estate Investing
1. Decide What Your Investment Strategy Will Be
Selecting the correct investment strategy I.e, one that fits with your investment goals and aligns with your budget is critical for out of state real estate investing. The type of strategy you choose will be determined by your financial situation, risk profile, age, and location choice. Here are some strategies you could consider:
BRRR – This involves buying a rental property, renovating it, renting the property, refinancing and repeating the process.
Buy and hold – This is when you buy a Turn-Key property and hold it for the long or medium term.
Buy and flip – You could purchase a low-priced property and immediately list it at a higher price.
2. Discover the Right Investment Property in the Right Market
When it comes to out of state real estate investing, choosing the right market is crucial. The investment market you decide to invest in will directly affect your return on investment or cash flow of the investment property. This can be difficult to do but there are lots of tools as well as companies available to help you make the right choice.
3. Funnel Down Your Options
In your average market, you will most likely come across various rental properties listed for sale. After carefully selecting an area known for producing high returns on investment, browse and select the type of investment property you are going to purchase. Before you actually select a property do your due diligence and survey the market. Take a look at what type of properties are doing well is it multi-family or single family homes Etc. What kinds of things are the renters in the market looking for, features such as a garage, basement, more bathrooms, and more bedrooms.
4. Perform an Investment Property Analysis
After funneling down your property options to your most preferred options, it would be wise to perform an investment property analysis to check the return sustainability of properties based on their performance. This analysis can be done utilizing online software at a price or it can be outsourced to real estate investment consulting firms like Reunion Investments.
5. Seek Out and Work With a Local Real Estate Investment firm
Real estate firms can do alot for real estate investors who are trying to find the best properties for out of state real estate investing. An experienced real estate firm will help ensure you find properties that are cash flowing and are performing well. They will also help you find the best deals. It is almost impossible to invest out of state if you don’t have someone on the ground floor.
6. Financing Your Out of State Real Estate Investment
Finding financing for out of state real estate investing can sometimes feel like a daunting task. Property financing often looks like the following options: conventional bank loans, fix-and-flip loans, home equity loan, rent to own, private money lenders, seller financing, etc. Selecting the incorrect financing option can have negative consequences on your investment goals. However if you work with a real estate firm like reunion, they should have qualified partners that can help assist you with making the correct financing decisions.
Out of state real estate investing can be one of the most rewarding real estate investment opportunities if done correctly. Finding the right properties for investment is easy using the correct real estate investment tools and resources.