Buying Investment Property The Advantages and Disadvantages of Buying Rental Properties Close to Home by Sylvia Shalhout December 12, 2017February 10, 2019 by Sylvia Shalhout December 12, 2017February 10, 2019 Buying rental properties close to home versus out of state is a decision that real estate investors have to study closely when trying to choose the best real estate investments. While there are many factors that the decision depends upon, many real estate investors choose to invest in local properties. This is because there are many advantages to having investment properties close to home. As with any investment decision, buying rental properties locally has a few disadvantages as well. The Advantages Familiarity with the Local Housing Market You may be a first-time real estate investor, or you may have multiple rental properties. Either way, you’re looking into buying rental properties in a housing market you are already familiar with because you live there. You’ll have inside information on any new construction or if any major sights that attract tenants are being torn down. Economic trends will also be familiar to you as they affect your daily life. Doing research online may tell you what state or city is a good place to find the best real estate investments. However, just because a city has a booming market, it doesn’t mean every neighborhood will be the best place for buying rental properties. Research will never compare to having driven day in and day out past the neighborhoods in your area. You’ll be able to determine the best place for buying rental properties because you’ll know the areas potential tenants will want to live in. You’ll have real experience with popular malls, restaurants with great cuisine, supermarkets with great service, and wonderful neighbors. Easy Inspection of Potential Properties The process of buying rental properties can be a long one: you go through many potential properties before making the final decision. While you can get key information about any property from Mashvisor, like property price, cash on cash return, cap rate, and rental income, that will help you to make your decision, you still need to see the properties for yourself. If you’re looking at multiple rental properties near you, you’ll be able to visit them all easily and eliminate any that may not suit you. With out of state real estate investing, you will have to travel to the location in order to see the property and inspect it. You can’t always trust pictures online to tell you the whole story of a property. Less Expensive There are a few expenses that are either cheaper or completely eliminated when buying rental properties close to home. The first thing to think about is your lender. Lenders may consider out of state real estate investing to be riskier. So, when you’re buying rental properties that are near you, fees for mortgage interests, down payments, and homeowners insurance are likely to be cheaper. The second thing to consider is property management. With investment properties close to home, you’ll be owning and managing an investment property with greater ease. You won’t be forced to hire a professional property manager and will save expenses by being the landlord. Because you’ll be handling the property management, when certain repairs come up, you can easily be on location to take care of them. Professional property managers usually hire someone else to do the repairs and then you end up paying for the services, even if it’s something as simple as a clogged drain. Related: When are Property Management Fees Worth It for Real Estate Investors? Out of state real estate investing also means you’ll be complicating your tax situation. It might get harder to do your taxes on your own, and you’ll have to pay a tax professional to help you out. Buying rental properties in the same state where you live might make doing your taxes easier and save you the money on enlisting a professional. Related: 11 Costs First Time Real Estate Investors Should Consider Reputation and Good Contacts If you already have investment properties close to home, you have probably built some kind of reputation for yourself. Local buyers and sellers who you’ve had interactions with will know what kind of person you are and will want to do business with you. Tenants will know what kind of landlord you have been in the past, and word of mouth will hopefully ensure your rental properties are always occupied. If this is your first rental property, you probably still have a reputation in town because of your daily socializing or because of the line of work you are in. At the end of the day, working with people who already know you or have heard good things about you is much easier than trying to work with strangers out of state. You probably have a lot of good local contacts: real estate agents, contractors, handymen, etc. who you know in your area. Even if you don’t know them personally, you’ll find it easier to get in contact with reputable workers through your local network. Choosing Tenants Personally Buying rental properties near your home means you get to personally interview your tenants instead of having a professional property management company do so. This might make you more comfortable: knowing exactly who you are trusting to stay on your investment property. Related: How to Pick the Perfect Tenant from Multiple Applications Convenience Even if you hire someone else to be the landlord, it’s always recommended that you check up on your investment properties. Buying rental properties that are a short drive away means that you’ll be able to stop by and check up on your property, talk to your tenants, and be around to oversee any major repairs. This is naturally much more convenient than having to take time off work and plan a trip to any out of state investments. The Disadvantages The Extra Effort While there is the advantage of saving money, handling property management and repairs yourself will take extra effort and time. Being a landlord is a full-time job, which is made more difficult if you have multiple rental properties. Some real estate investors may prefer the idea of throwing money down and having problems solved rather than being hands on. Both out of state investments and local ones may have some kind of homeowner’s association fee. However, if you’re actually close to the location of your investment property, your association might require you to be more involved than just paying a simple fee. Limiting Your Options Looking into buying rental properties that are exclusively in your area means you’re automatically limiting your options. If you’re open to investing out of state, then you may find properties with a better potential rate of return on your investment. Local properties may be expensive. If you’re only looking to invest locally, you’ll miss out on cheaper investment properties that are out of state. No Vacation Home Of course, if you’re buying rental properties that are close to where you live, you’re not going to get the advantage of a vacation home. Out of state real estate investments can sometimes be used as vacation homes when they are unoccupied by tenants. Emotions over Logic Sometimes, owning and managing an investment property that you are constantly visiting leads to emotional attachments. Whether it’s because you are putting more of your own sweat into it or you’ve gotten to personally know some of your tenants, you could start making decisions based on emotions. This is a route every real estate investor should do his/her best to avoid. Buying rental properties in your local area has both advantages and disadvantages. To make a smart investment decision, you have to consider them both and weigh them against each other. In the end, no matter where you choose to invest, know that it will have its hardships as well as its great benefits. To find the best investment properties, where close to home or out of state, start your trial with Mashvisor now. Start Your Investment Property Search! START FREE TRIAL Start Your Investment Property Search! START FREE TRIAL Home InspectionLocationNetworkingProperty PricesTenants 0 FacebookTwitterGoogle +PinterestLinkedin Sylvia Shalhout Sylvia was the Content Marketing Manager at Mashvisor. As a real estate writer, she has been covering topics for the beginner and advanced real estate investor, helping them make smarter decisions as well as real estate agents looking to take their business to the next level. Previous Post What Are the Main Obstacles of Investing in Real Estate Properties and How to Overcome Them? Next Post What Are the Most Important Aspects of Real Estate Investment Management? Related Posts 10 Expert Tips on How to Buy Multiple Properties in Real Estate 5 Tips on Researching Investment Properties Comparative Market Analysis: Make Sure You Are Not Losing Money When Buying an Investment Property The Best Place to Buy a Vacation Home: Santa Rosa, California How to Master the Art of Buying an Investment Property How to Start a Real Estate Business With Zero Experience in the Field Buying a Rental Property 7 Easy Methods for Investment Property Financing Where Should You Invest in Multi Family Homes in New York State? 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