Some real estate investors find themselves feeling nervous at the idea of buying a piece of property. This is especially true for those considering investing in real estate out of state. While investing in out of state properties may be a smart investment strategy, there are many things to take into consideration. So many of the anxieties that surround buying out-of-state properties disappear once you learn how to do it right.
Top considerations before investing in real estate out of state
1. Consider the location
When it comes to buying an investment property, the main source of difficulty is being able to find the right location. This is even harder when investing in real estate out of state since you’re not familiar with the different real estate markets.
The key is to focus on locations that have affordable prices and high demand for rental properties. Investing in real estate out of state not only depends on the state which you choose but the city and the neighborhood as well. Finding a neighborhood that is profitable is not always easy. You need to make sure that the neighborhood has investment properties that offer a high return on investment and cash on cash return. That is why you need the right real estate investment tools to make your search easier. And where do you find the best tools? Here at Mashvisor of course!
When you use Mashvisor, you can find and analyze any neighborhood of your choice in a matter of minutes. We have all the necessary tools from our heat map analysis tool to our property finder tool; we can make your search for out-of-state properties as easy as one, two, and three.
Our property finder tool allows you to filter out properties that don’t match your search criteria. You will be able to locate the best performing properties based on high rental income, occupancy rate, and cash on cash return. This is all done within the comfort of your own home so you won’t even have to spend money on traveling to find your investment property.
Do you have a free Mashvisor account? Click here to use our Property Finder and find properties in a matter of minutes!
2. Consider the area’s median property price
Why do so many property investors prefer investing in real estate out of state? Mainly because they are looking for cheap property prices. This is especially true for real estate investors living in expensive real estate markets where buying an investment property is not affordable.
After you’ve narrowed down your search and found the best place to invest in, look at each area’s median property price. Again, with Mashvisor’s tools like the rental property calculator, you can find each area’s median home price. For example, using our rental property calculator, we were able to locate the best cities to invest in for this year that offer a great median home price. If you want to know more about these cities, read: Where to Invest in Real Estate for Affordable Investment Properties.
3. Consider each state’s Tax Laws
Another important factor that must be taken into consideration before investing in real estate out of state is each state’s tax laws. Knowing the state’s tax laws will help you better understand each areas property taxes since these rates differ entirely based on the property’s location. These differences can drastically affect the overall cash flow that you will receive from your rental property. Some states don’t have certain taxes that other states do. For example, Florida does not have an income property tax.
4. Consider Airbnb regulations
You can decide on the rental strategy you want to invest in depending on the area you choose. Many investors would say that the best investment strategy for investing in real estate out of state is investing in short-term rentals. However, this is not always true, but if you find an area that has a high tourism rate and rent out your property through Airbnb, you can make money in real estate in no time. But before anything, you need to check the legal issues concerning Airbnb rentals in your chosen location. Some cities might have certain restrictions on Airbnb rentals such as the number of days you can rent out your property or whether or not you need a license to do so. Check to see what Airbnb regulations apply to your chosen city.
5. Consider property management
No matter if you’re investing in real estate out of state or in your local real estate market, you need to continuously manage your property. Normally, when investing in your area, you can easily manage your property by yourself without hiring professional property management. However, when investing in real estate out of state, self-managing your property becomes nearly impossible.
What you need is a professional property management company. Property management services may be costly but they will save you the time and the hassle when investing in real estate out of state. If you buy an investment property with a company, like a turnkey property, the property management services are already included. This brings us to our next point.
6. Consider turnkey properties
It is said that the best type of property when investing in real estate out of state is turnkey properties. Turnkey properties can be rented out to tenants instantly after the purchase. Turnkey properties are a great way to make money quickly. The downside to these types of investment properties is that they tend to be more costly. But even so, they are an excellent choice for investors thinking about investing in real estate out of state.
7. Consider the economic and population growth
The economic and population growth for any real estate market is very important for your investments. You need to know how your chosen market is doing in term of its economic and population growth. Ask yourself has there been a steady growth in population? How are the employment rate and job sector faring? What is the average amount of time that investment properties stay on the market before selling? Are people attracted to this area and is there a high demand for real estate? There are so many questions to ask before making any decisions.
The bottom line
The key to investing in any market, out of state or not, is having the right amount of information! You need to know the “who, what, where and whys” of your investment strategy to ensure you’re not missing out on anything. If you finished your homework and you are diligent in your research, then you have nothing to fear. Investing in real estate out of state is no different from investing in your local market. All you need is the right knowledge.
To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.