What to Consider Before Investing in Out-of-State Real Estate

Real estate investment is a big decision. You’re taking your money and putting it into a physical asset, limiting your accessibility to these funds for a period of time. Of course you’ll be collecting a return on investment and more than likely turning a substantial profit, but it is still an investment—meaning it will take some time to generate solid gains.

However, unlike investing in the stock market, when you invest in real estate you are able to actually see where your money is. You’re not staring at some piece of paper or a few numbers on a screen—you can see it, touch it, and even step inside of it when you invest in real estate.

While making the decision to invest in real estate may seem like a no-brainer, in comparison to other investment strategies, there is still a decision that needs to be made before you can go all in. Do you invest in your local area or do you place your money in an out of state market?

For those trying to decide between the two options, here are a few points to think about prior to purchasing a property.

Location, Location, Location

When it comes to real estate investing, the most important factor on the road to success is the property’s location. It doesn’t matter how nice of a house it is or how low the rental payments are, if the property is in an area without much demand or in a neighborhood nobody wants to live in, you’re likely to see a lot of downtime between clients.

As an investor, you may not want to live in areas with the highest rental demand. You may be comfortable in the house you’re living in, happy in the city in which you’re residing. You may have other obligations for being in the area you’re currently in…But that area may not be a good rental market. Investing out of state allows you to pick an area which is high in rental demand, appreciation values, and current ROI rates.

Affordability

Investing out of state is a way to secure a property for the lowest cost possible. If you limit your search to areas near you, you may struggle to find an affordable investment property. Being free to scour the nation for available properties will give you the chance to select a market which is more renter-friendly. This is especially true if you live in areas like San Francisco, LA, or New York City, where purchasing a rental property isn’t an affordable option.

Diversify

If you’re already involved in the real estate market and currently have a rental property portfolio, looking out of state will allow you to diversify. What does this mean? You can select properties that vary in location. Diversifying your locations will help protect you if the market in one particular location crashes—you’ll still have properties in other areas which still have a viable market.

While it may seem complicated to purchase property out of state, it’s actually not quite as hard as you would think. In fact, with today’s technology, and the help of an experienced property management team, you can manage multiple properties in multiple states easily from the comfort of your own home.