Given all the different aspects of real estate, it is now harder to make accurate decisions. The location aspect is no exception either. It has been a dilemma for every beginner real estate investor whether they should invest in state or out of state. That’s why we, at Mashvisor, have put together the most important criteria to help you make a sound choice. However, before we get to that, let’s weigh the pros of both investing strategies:
The pros of investing in houses for sale near me and cons of out of state real estate investing:
One of the major pros of investing in your local housing market is that your investment property is close. This automatically means you can be in control of all the ins and outs of your properties every day. Rental property management can become a lot easier thanks to the close distance. On the contrary (and obviously), an out of state real estate investment property cannot be completely under your direct control every day. So, you might need to hire some type of service which brings us to the next advantage of in-state investment properties and disadvantage of out of state investing: property management fees.
A profitable investment property is one which helps you not only make money but also save it where possible. Property management is one of these costs that you might want to save on unless you are a beginner real estate investor OR you are looking for out of state real estate investing opportunities. Understand that if you choose to purchase rental properties out of state, then you need someone to watch out for them. On the other hand, your local housing market would be the best place to buy an investment property if you want to save that money.
Finally, investing in properties around your local area will also save you travel costs. Even if you try not to travel much for your out of state investments, you will still have to make a couple trips a year to check up on your real estate investment business. Otherwise, it would be hard to keep track of it at all times.
The pros of out of state real estate investing and cons of investing in houses for sale near me:
Just like local real estate investments, out of state investments have advantages as well. First of all, your local real estate market might not be showing very positive signs for the future. Why invest there when another state is showing more potential for profit? Moreover, you might find more affordable investment properties for sale in another state.
Another very beneficial reason to invest out of state is diversification. As you already know, diversification of profit and risk is essential. In case one market crashes, you can still fall back on your investment properties in the other. Also, building your real estate investment portfolio is easier with out of state investing. A real estate investor’s portfolio typically has different types of properties. While your local housing market might be great for single-family homes, a different state might fare better when it comes to multi-family homes.
Sure enough, these things might or might not be available if you are only thinking of local real estate investments. So, I would suggest that you think outside of that location limit and maybe explore a few options first. For this, we, of course, have a list of criteria for you to look for in properties for sale. So, without further ado, here is what you need to look for:
Houses for Sale Near Me vs. Out of State Real Estate Investing: Affordability
Affordability might be one of the top priorities for a real estate investor. The more you are able to save the better, of course. Therefore, when trying to weigh the options of houses for sale near you vs. out of state real estate investing, perform some calculations.
Evaluate out of state property prices and compare them to prices of properties near you. Your best chance at evaluating them would be if you choose similar comparables so that you get a sense of prices in both areas. Your state might offer cheaper investment properties for sale. However, other states might have more foreclosed properties for example. So, really, before you decide on anything, just compare a few prices.
Houses for Sale Near Me vs. Out of State Real Estate Investing: Property Taxes
Taxes are investors’ worst nightmares because they are deducted from their profits. So, imagine investing in a high-tax state and getting a good chunk of your rental income cut off!
At this point, Google might be your best friend. Go ahead a research states and the tax rates for properties. Personally, if my state offers fewer property taxes, then investing in houses for sale near me it is! If not, then consider out of state real estate investments. One thing you must understand; never underestimate property taxes. These add up and increase the expenses of owning rental properties.
Houses for Sale Near Me vs. Out of State Real Estate Investing: Rental Demand
Another criterion to consider is the rental demand. Sure enough, different states/areas have different rental demand. Some states are home for businesses and many different industries. Also, some states experience higher job growth rates. So, basically look for the following:
- Population Growth: Observe statistics of states and see what states experience higher population growth rates.
- Demand vs. Supply: The higher the rental demand while the lower the supply of rental properties, guess what? That’s the place you want to stick to!
- Job Growth: As we mentioned before, check out the job markets in different states and see if the rates are going up or down.
- Study the Real Estate Market: Deciding whether I should invest in houses for sale near me or choose out of state real estate investing should also depend on the market itself. Check how long it’s taking investment properties to sell. Also, check the selling rate over a few years in order to determine whether there is a potential for investment properties to sell faster in the future or not. If the market indicates such an increase, then you can rest assured that that place is the right choice for buying a second home to rent out.
Regardless of your choice, Mashvisor always has something to offer. In fact, we have a way to always make buying an investment property easier for every investor out there. Whether you are looking to find the best real estate agents in the US, perform investment property analysis, comparative market analysis, or even find real estate comps, Mashvisor is the ultimate resource.
Check out Mashvisor’s rental property calculator (investment property calculator) and find out what it does for yourself. Not only that, but you can find a wide choice of listed properties for sale based on your own criteria and analyze each and every one!
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