One great thing about real estate investing is that it is virtually limitless. You can buy a single-family home or a condo. You can choose a big city or a small town. You can invest in your own state or out of state. You can pay in cash or use mortgage. You can rent out traditional or Airbnb. You can be a landlord or decide to hire a professional property manager. You can own one, two, three, or twenty investment properties. It is all up to your finances, your skills, and your ambitions. While it is generally recommended to start small with an income property around your own location, once you’ve gained enough experience, you can – and indeed you should – think about investing in out of state rental property and about having multiple properties. For these more advanced real estate investors among you, here are some tips how to manage successfully multiple out of state properties and remain sane.
Investing in out of state rental property offers wonderful opportunities such as affordability (if you live in an overpriced state), investment portfolio diversification, owning a vacation home, better markets (if you live in a seller’s market), and more options, among others. Though, let’s be honest – investing in out of state rental property also has some major drawbacks including possible unfamiliarity with the local market, different legal regulations (including Airbnb legal issues), additional distance to travel and time to spare when searching for an investment property or checking up on an existing income property, etc. Add to these the complications of owning and managing a number of investment properties, not just one. Now you are probably starting to get the picture of what a mess it could be to have multiple out of state properties. However, don’t get discouraged. The rest of this article has some practical, feasible recommendations on how to succeed in investing in out of state rental property.
1. Get to know the local market and the local legal and regulatory framework
When it comes to investing in out of state rental property – whether you plan to have a single or multiple properties – the key is to research and study very, very well the local environment including the state of the market and the legal framework regulating real estate investing. Both market conditions and laws vary majorly from one location to another, so don’t just assume that you can be a successful real estate investor in Vermont just because you are an expert on Massachusetts real estate investing. Do your homework diligently by using all available online and offline sources and tools such as websites, apps, books, newspapers, magazines, etc. Don’t forget about networking – investors in your target state can give you tons of precious information not available in a written form.
2. Organize well
Real estate investing on its own requires excessive discipline and ability to organize and schedule well. There are so many things you will be responsible for as a real estate investor and a landlord such as: making mortgage payments, paying property taxes, maintaining your investment property, selecting tenants, checking up on your property, to name some. Now multiple these by the number of income properties that you possess to imagine the chaos you can get yourself into if you don’t plan well. Finally, add to this mix the fact that you are investing in out of state rental property, i.e., you can’t just stop by your property on the way back from work because the water tap is broken. You get the picture, right? Thus, if you decide that managing multiple out of state properties is the right thing for you, make sure to stay extremely organized from the very beginning.
3. Calculate well
Though you don’t have to be an accountant to invest in real estate, you have to have basic math skills in addition to the ability to prepare budgets. You can take an online course on that or ask a professional for help, if needed. In any case, the bottom line is that a real estate investor should make all necessary calculations (even if based on estimates) before purchasing an income property. Consider both the costs and the rental income. Make sure not to underestimate the costs and/or overestimate the income. Any mistake means that you are running the risk of not achieving positive cash flow, and negative cash flow is something that you just can’t afford as a real estate investor, even in the short run. When investing in out of state rental property, factor in the additional costs associated with traveling to your investment property. You should be even more careful when going for multiple out of state properties because if you make a single mistake in the budgets of your properties, the effect will be multiplied by the number of your investment properties. Thus, it is a great idea to get a rental property calculator like Mashvisor’s when dealing with multiple units.
4. Use technology
It is key to stay up to date with technology when investing in real estate. High-tech resources will significantly ease up you work and allow you to go for investing in out of state rental property. Using all available technology is a must when managing multiple out of state properties because it will save you lots of time and energy.
Use websites for:
- General knowledge: Investopedia
- Tips, analytics, and actual properties: Mashvisor
- Listings: Zillow, Realtor, and Trulia
- Assessors: Vision Government Solutions and Patriot Properties
- Legal forms: Nolo
- Credit checks: Landlord Station
- Local real estate associations (REAs)
Use mobile apps:
- Listings: Zillow app, Trulia Mobile, and LoopNet mobile app
- Investment property analysis and pricing: Homesnap and Property Evaluator
Last but not least, use an investment property calculator, like Mashvisor’s. Even if you are not an expert on a particular real estate market, you will be able to get the most important figures (property price, rental income, CoC return, cap rate, occupancy rate, etc. – for traditional and Airbnb) without having to perform real estate market analysis or investment property analysis.
5. Use professional property management
It is true that professional property management can cost a lot of money. However, sometimes you just have to go for it. Such is definitely the case of owning multiple income properties, especially if they are located out of state. When investing in out of state rental property, you cannot visit each of your properties on regular basis to make sure that everything is going fine. Thus, it is highly recommended to hire a professional property manager in this scenario. The saved time and energy will allow you focus on your investment strategies and work on getting new properties.
6. Use handymen
Even if you are one of those people who are really handy with a hammer, you won’t be able to maintain your investment property if it is located out of state. Imagine how difficult it would be if you invest in several properties in different states. So, for those investing in out of state rental property, it is best to find reliable, reasonably priced handymen close to the location of each individual property.
Networking is just so important in real estate investing including when it comes to investing in out of state rental property. Make sure to talk to other investors and extract the best from their experiences in managing multiple out of state properties. They will provide you with valuable word of advice that you cannot find anywhere else, no matter how many other resources you use.
As a real estate investor, your constant goal is to grow in order to generate more and more rental income and wealth. Investing in out of state rental property is an essential part of this strategy because of the wider opportunities than if you decide to stay within the 20-mile radius. Thus, owning and managing multiple out of state properties could emerge as the best approach for real estate investors. The tips above should make your life easier as an investor with multiple out of state properties.