If you live in a high-cost area, you’re likely intrigued by the appeal of buying property in a lower cost geographical location, purely for the amount of land you can get for your money. Some landlords are simply seeking a way to diversify their real estate portfolio. Buying property in another state is not without its fair share of challenges, however, and is very different than running a property in your own area. Consider these facets of an out-of-state purchase before taking the leap to determine whether this investment is right for you.
Consider the Regulations
Before jumping into a state that has tons of below market value properties for sale, consider the laws and regulations that apply to landlords and property owners. Some states have harsh and stringent restrictions on the workings of a rental property, which will cause you more than your fair share of headaches when trying to deal with issues remotely. Find landlord-friendly states that will work with you rather than against you. These states have rules that will make it possible for you to evict tenants who may not pay their dues, for example. Without this government protection of sorts, you may find yourself in hot water should you rent to a nightmare tenant.
Is the Location Desirable?
You may have found the house of your dreams to rent out, but that doesn’t means it’s a tenant’s dream living location. You need to take location into consideration. How has the job market been faring in recent years in the chosen area? Has the population been growing or decreasing? Are there local amenities constantly being installed in the area, i.e. restaurants, schools, etc.? Prospective tenants will be asking these questions, so you need to be asking them as well.
How to Find the Property
It’s much harder to locate a property out of your vicinity, but there are a few ways you can go about it. Many investors choose to enlist the help of a local real estate agent or investor that can do the grunt work for you, traversing the area and focusing on those homes which are listed under market value. Usually, these types of individuals have close working relationships with other helpful agents including real estate attorneys and property inspectors that can verify to you the place in question is a good buy. Once you interview a variety of realtors over the phone, ask them to send you listings, and plan a trip out to browse a cache of homes that you liked. Make sure you see multiple homes during your visit to make the most informed decision on the offerings available in the area.
You can also seek out a turnkey property company and purchase one of their offerings, which means you’ll pay more but buy a home in good condition that may or may not have tenants already living in it. The route you choose is a question of how hands-on you’d like to be, and how much you’re willing to spend.
You’ll be states away, so how will you handle the daily ins and outs of a rental property? If you do want to do so yourself, you’ll need to take some time to secure local services that you can call when problems arise. This means handymen, electricians, plumbers, and other services that will be on hand for tenants when necessary. You’ll find better prices with smaller stores, so steer clear of the national chains if possible. During one of your visits, introduce yourself to these service providers and form a relationship. This will lessen your chances of being taken advantage of, and you’ll have trusted contacts you won’t need to worry about. As far as collecting rent goes, you can set up online payments for your tenants, or rely on your tenants to deposit into the local bank of your choice. Placing tenants should also be of top concern. If you’re doing it on your own, use a company that offers highly detailed credit reports for landlords, fly out for the showings, or use a trusted realtor to place a tenant. If you find that all of these responsibilities prove too much when working from far away, use property management services to save yourself the stress.