For several reasons, some investors decide to invest out of the state they actually live in.
Many who do so choose to go that route because their hometown area is too expensive. They’d rather invest in a place where the numbers make sense and produce the return and cash flow they are looking for.
While out-of-state investing can be exciting, it can also be very scary at the same time. To set yourself up for success with this strategy, you need to have a lot in place.
Here’s my two cents when it comes to buying out of state.
Must Haves for Investing in Out-of-State Rentals
1. Establish Your Search Criteria
What are you looking for? Define your goals and your search criteria. Are you looking for a small multifamily? Are you looking for a single family home? What rent and purchase price are you aiming for? How much money can you bring to the table? Are you going to do real estate syndication or a small partnership? Determine price, deal size, and geography—pinpoint one to three markets at most—before jumping in.
2. Focus on Management
Don’t expect to self-manage from states away. Unless you have phenomenal systems in place, management needs to be done by a third party that’s in the area. This is a fact for big deals, small deals, all deals. The best laid plan for a rental property will get thrown out the window if there’s poor management.
3. Assemble a Team
Each state has different laws, landlord rules, and so on. First and foremost, you need a good lawyer in the state (and sometimes in the county or town) you want to be in. You also need boots on the ground, meaning someone who has equity alongside you or is financially benefiting from the deal somehow. This person needs to be able to go out and look at property for you, so you don’t have to fly into town every time you come across a deal that looks interesting. Also, look for a local broker or real estate agent, local maintenance team, and as many others in the market as possible that you can leverage as a team.
4. Find Funding
If it’s a smaller deal and you find a local community bank that’s willing to fund the property for you, that’s probably the cheapest money that you’re going to come across. However, some small banks don’t want to work with anyone who isn’t actually residing in that area. In this case, you might have to look to a national lender.
Tackle all of these things before you go and start looking at properties. The path to success is having a lot of this in place going in.
The market is moving so fast right now, if you find a good deal, it’s not going to stick around for a couple of days before it’s under contract. Ensure your deals are successful by taking these steps first.
Watch my video above, where I go into greater detail about each of these concepts.
What other advice would you offer investors interested in finding deals out of state?
Let’s discuss in the comments.