Maybe you live in an area where the numbers on rental properties don’t work. Or maybe you want to diversify your portfolio from just your local area. Either way let discuss some tips for buying out of state rentals.
Tips for Buying Out of State Rentals
Seek Opportunity Over Convenience
Bottom line is we feel more comfortable looking in an area we have atleast been to a couple times, say visiting a friend that lives out of state. It makes it a bit more convenient as you have another “reason” to go visit there and you know someone local that can help you out if needed (but that’s what property management is for).
The most convenient area doesn’t necessarily mean the best opportunity. Research all the areas you would consider investing in and find which is offering the best opportunity.
The simplest way to start is buy running the numbers for each area and seeing which offer the best cash flow opportunities. Be sure you are using a property calculator when doing this. Download mine HERE if you don’t have one (a video tutorial will be emailed on how to correctly run the numbers on a rental property).
After you have run the numbers you can dig into the next layer…
Gauge the Neighborhood
It doesn’t matter how good the numbers look if the properties are in an area not conducive to success. If there is low rental demand or high unemployment it may end up being difficult to keep properties occupied and vacant units is dollars out of our pockets.
Also, what is the level of crime. Is it somewhere people feel safe or may be hesitant to live?
However, once you do that research be sure to go visit the place to truly get a field. Data can get outdated pretty fast, especially in areas that are on the upswing.
Use the data to narrow down your search to a few specific areas and then go visit them. Yes, visit them. Google earth is awesome, but it does not replace actually being somewhere and getting a feel for it.
Find Great Property Management
If you are investing out of state then having property management is a no-brainer. Finding a solid property manager is the important part though.
There are several ways you can vet out managment to pinpoint the right one for you.
First – call atleast three property management companies that cover the area.
Ask questions such as:
- What are their fees and tenant placement charges?
- What is their tenant screening process?
- How long is the mgmt contract? (annual?)
- What method is used to payout rental income to you?
- How do they communicate with tenants? (are they available 24/7?)
- Do they have an online portal?
And so on and so forth…(I cover this topic and a lot more in the Investing in Rental Properties book).
Being Prepared is Half the Battle
Investing out of state may seem risky, but just like when investing locally you must do your research, analyze the opportunity and make decisions. The above items are a few key things that need to be done when investing out of state.
If you enjoy my rental property investing tips, then you will love the book:
I walk you step-by-step through finding, buying and renting out a property. The book is your personal mentor!