Learning how to invest in out-of-state real estate can be overwhelming. While it’s not easy, learning to invest is unbelievably rewarding, whether it’s your goal to diversify your portfolio or capitalize on an open market. Here are some tips to save you time and prepare you for your journey to becoming an out-of-state investor. Remember that every state has different rules and regulations, so the investing process is unique to the state you’re investing in.
Do Your Research
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Above all, when investing in out-of-state real estate properties, you need to do your research. When looking for a property, find areas with a strong or growing economy. If a large company is building a new office for their employees in a city, that’s a good sign because the company believes the city or area is worth investing in. Something else to consider is affordability—make sure you can afford the properties, city and state taxes, utilities, and more. Also, the housing market varies by state, so consider the cheaper housing markets near your permanent residence.
Set an Appropriate Budget
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When buying a property, you need to determine how much you can afford to invest in a property you won’t frequently visit. A lot of people underestimate the total cost of buying a home. There are a lot more costs than just the property’s down payment and closing costs such as utilities and repairs (tenants can be responsible for utilities). If you want to learn more about the hidden costs of home ownership, check out this article. Saving up is also a great option, but you must consider how much you can realistically save to make all your payments on time. It’s better to save more in case there are issues with the property or other payments that need to be made.
Don’t Do it Alone
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Investing out-of-state does not have to be a solo operation. Find a real estate agent local to the area you want to invest in because they know the area and can provide good advice and help you understand the local market. After finding an agent, you would look for an inspector and optionally a property manager if you don’t want to self-manage. Regardless, you should always hire an inspector for any property you plan on purchasing to ensure there are no hidden or unseen issues with your home.
Visit the Area
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This might be the most important aspect of successfully investing—visit the area and property you plan on buying because the internet isn’t always truthful! When you find the right location, explore and observe the area. Talk to the locals so you can understand the community better. You should also visit the property to ensure everything is in order and up to your expectations. While I highly recommend you visit the area, it might not be plausible. In that case, you can leverage technology and ask your inspector or agent to report the property’s status digitally. Then you can confidently sign the closing documents digitally as well.
How to Find Properties
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Next, let’s go over how to find a property. First, you can work with your real estate agent to find properties that fit your budget. Working directly with your agent allows for more custom options that fit your requirements. Again, when your agent finds a property, arrange a video call with them so they can show you around the property. You could also use different websites like Zillow, Facebook Marketplace, and Realtor.com. Alternatively, you can mix and match these methods to see which ones work for you!
How to Finance Your Rental
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Setting an appropriate budget is only half the money aspect of out-of-state real estate investing. Saving money is imperative to successfully investing, however, you typically wouldn’t pay the full amount out of pocket. That’s where the banks and lenders come in. If you plan on buying a single-family property, you shouldn’t have trouble using a nationwide lender such as Nationwide, a lender, or a local credit union. One important aspect of using hard money lenders is the interest rate can get pretty high and swamp you with debt if you aren’t careful. Find mortgage lenders, credit unions, or a small local bank to work with as they offer superior flexibility and cater to investors.
Freebies
- Free Out of State Investing Training- https://www.outofstatemoney.com/
- 8 Steps to Buying Out of State- https://www.outofstatemoney.com/long-distance-investing-guide
- The Remote Landlord’s Toolkit- https://www.outofstatemoney.com/remotelandlordtoolkit
- The Creative Financing Playbook- https://www.outofstatemoney.com/creativefinancingplaybook