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Investing in Out-of-State Real Estate

due dilligance finding properties investing Sep 18, 2020

Investing in Out-of-State Real Estate


Buying real estate rarely goes smoothly, and buying property out-of-state has even more potential challenges. If you are planning on renting property out-of-state, there are similar challenges involved.  However, either is entirely manageable if the potential trouble areas are planned for and addressed.  Many people rent and own property out-of-state, and you can too. 


Also, whether you decide to buy a property or rent it, let’s just call it what it is: Controlling the Property.  Whether you rent or own, you are “controlling” the property in order to run a Short-Term Rental Business out of it and you must be able to “control” the use of that property within the eyes of the law.


Reasons for Buying Out-of-State Real Estate


There are several reasons why you might consider owning or renting a property in another state. Maybe local real estate prices are simply too high to qualify for a loan on a second home or investment property. Perhaps another area of the country is experiencing a real estate boom. Maybe you have a desire to own a vacation home or run a short-term rental business in a more “touristy” area.


Potential Challenges


  1. Lack of knowledge about the area and the local economic situation. Everyone knows what areas of their hometown are doing well and which areas are struggling. Successful real estate investors usually know more about the area of town in which they invest than the realtors do.
  • You won't have this type of day-to-day knowledge and will have to rely on others for their advice and opinions. Ensure you're getting your advice from a worthy source. 


  1. You don't know the laws, regulations, property taxes, and other details. Real estate laws and practices vary from state to state and even from city to city. Even more challenging, what is written in the codes and ordinances might not be the actual practice. You're going to have to find a way to gain this knowledge, especially if you want to run a short-term rental out of the property. #1 IS IT LEGAL?

  2. You need an out-of-state team. You're likely to need a reliable cleaning crew, a handyman who can be available 24/7, a real estate agent who understands vacation rentals, and more. Your team will have a huge impact on the level of success you experience. Build your team before you buy anything. 

  3. If you are buying, everything is going to cost a little bit more than if you were buying a main residence. For a non-occupant owner, interest rates, down payment, and insurance are all higher. The banks simply don't have as much faith in a property owner that doesn't live in the property.  These costs, however, are easily written off on your taxes, so don’t stress.



Things You Must Do


  1. Hire your team, which may, at first, include a Co-Host or an excellent property manager. If you’re going to rent out your property, keep in mind that an investment rental property is only as good as the people that keep it running. It’s important to find people that you can trust even when you aren't there.
  • A co-host or property management team will make decisions about repairs, filling vacancies, manage cleaning crews, and handling any other problems.


  1. See the property before you buy or rent it. While very experienced investors frequently don't, it’s still a good idea to see the property before you invest in it. Until you have a team you can trust, you don't really know what you're getting until you see it yourself. Then, you can train a team to look for specific things (like a maid’s closet) you like to have in your properties.       


  2. Visit the area. If at all possible, get out to the area and arm yourself with a local map. Spend a couple of days driving around, getting the lay of the land, and asking a lot of questions. Meet a couple of real estate agents and landowners. Get to know the area and get to know what it has to offer potential guests.       


  3. Join the local real estate investors club. Even if you’re buying a vacation home, these are the people that know the area, trends, and relevant people. One good friend in the local club is invaluable. Join and make a friend.


Owning property out-of-state can be a wonderful investment from either a financial or enjoyment standpoint.


As with anything else, if you understand the potential challenges beforehand and prepare for them, you're likelihood of success is much greater. Be sure to get your team in place and know as much about the area as you possibly can. Good luck!


Now go and grow! 



Michelle R Russell

© The Prosperity Process, LLC  

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