Real Estate Investing Basics

Out-of-State Investing: The Good and the Bad

Expertise: Real Estate Investing Basics
17 Articles Written
Map with pins, shallow DoF

The decision to invest out of state should not be taken lightly—you need to do your research, practice due diligence, and weigh the pros and cons to ultimately decide whether it’s right for you. The right out-of-state investing strategy can prove to be highly lucrative and allow you to scale your investing, but there are also many factors you should consider before diving in headfirst.

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Out-of-state investing can be costly, time-consuming, and nerve-wracking. It’s important to keep these and other factors below in mind as you explore this strategy, and ultimately make the decision that’s right for you.

Related: Why Today Is the Best Time to Invest in Real Estate

The Challenges of Out-of-State Investing

Investing Out of State Can Be Nerve-wracking

When investing out of state, you may be buying properties that you’ve never seen. You’ll have to rely on contractors you’ve never met, and pay for work that you’ve not personally inspected.

This can make anyone nervous—you need to be prepared to give up a level of control you’d usually have when investing locally.

U.S. maps with push pins marking three locations

It can take time to invest out of state

It takes time to establish any team, but can take even longer if you’re not on the ground. It also takes time to choose the right market, and really learn the ins and outs of that market.

You’ll need to dig around for information on the best rental areas, what kind of returns you can expect, where you should flip, and what areas you should stay away from. You won’t have a high level of familiarity with the area, which means you’ll need to put in more time to even begin investing out of state.

Investing out of state can be more expensive.

You no longer have the option of managing your own rental property or renovation. This means higher management and contractor fees. Fortunately, this doesn't necessarily have to be a bad thing.

Related: 12 Questions to Ask Before You Hire a General Contractor

The Good News: All of These Things Can Be Overcome

Just look around—there are plenty of people successfully investing out of state. With the right team in place and boots on the ground you can trust, investing out of state will open up a world of new opportunities for you to explore.

And with the right systems in place, you can greatly reduce your risk.

closeup of hand using calculator and taking notes with pen on a notepad

The Possibilities Are Limitless With Out-of-State Investing

You can live anywhere and invest anywhere. If you find a hot market somewhere, you can jump in and take advantage, regardless of your physical location or current situation.

You can pursue markets with less competition and scale more quickly. If you look hard enough, you’ll be able to find the right market and property for your budget, and can very likely also find the returns that you’re looking for that might not be available where you live.

Investing Out of State Provides Freedom

Once you’ve built your team and hire contractors, the large majority of your time will be spent receiving reports and paying the bills. You no longer actively manage the property or the renovation. Instead, you’re sitting back, watching it get done, and getting paid.

Once you remove yourself from the management role, you will have much more bandwidth and freedom to pursue other things, or more investment projects.

Out-of-State Investing Allows You to Diversify Your Portfolio

Having properties in multiple cities and multiple states can help protect you against a recession or a large employer going out of business in any one area. Also, fluctuating markets or new restrictions will not affect you as much if your portfolio is spread across multiple cities and states.

Just like anything worth pursuing, you have to put in the work, but with the right mindset and a solid understanding of the pros and cons, out-of-state investing may be worth considering.

Have you thought about investing out of state?

Join the conversation in the comments below!

Erin Helle is an Army veteran turned entrepreneur specializing in flipping houses, turnkey renovation products, and real estate investor coaching...
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    Barry H. Investor from Scottsdale, AZ
    Replied 2 months ago
    ERIN - super nice recap on the fears and benefits of O-O-S real estate investing. I am in AZ but all my assets are in Kansas City MO where I operate as a small fully remodeled Turn Key, Tenant-occupied Seller with Seller-Financing offered to Investors for 20%+ annual returns. Your advice RE learning the market by TAKING TIME and that it can be MORE EXPENSIVE are important points. I have a rule with O-O-S'ers wanting to buy my Turn Key properties because they want to start chasing yield NOW. I tell them I will NOT sell to them until they have visited the actual market (in my case, Kansas City) to understand why my properties perform so well. I realize I may lose a sale, but it is better than a Buyer from CA, AZ or British Columbia or Israel having never been there to see fully remodeled houses really do only cost $65K to $70K and tenants pay $1000/Mo in rent, but they are 100 year old houses that require regular maintenance. If you do not have a good relationship with a handyman/contractor, the Cap Ex costs can kill your margins. Again - really great recap and thanks for the article !!
    Erin Helle Investor from Monterey, CA
    Replied 2 months ago
    You're right about those costs! Thanks for sharing!
    Kris Patel Investor from Arroyo Grande, California
    Replied 2 months ago
    Have NNN Drug Store in Wisconsin. They pick site, pay rent for 25 yrs, cannot beat that. No problem, nothing to manage!!
    Erin Helle Investor from Monterey, CA
    Replied 2 months ago
    This is awesome!
    Alex Olson Real Estate Agent from kansas City, MO area
    Replied 2 months ago
    This is a really great article. I think it is hard to represent out of state investor expectations but also a fun challenge. I help out of state investors get into the KC market and knowing all of the pockets is key. You have to be honest about certain areas and certain returns or you can get your investor in a bad place. So keep going!
    Erin Helle Investor from Monterey, CA
    Replied 2 months ago
    That's a great point! I think asking the right questions and knowing exactly what the investor is looking for is so important. Good luck!
    Sandy Gabin Rental Property Investor from Lawrence, Ma
    Replied 2 months ago
    Thank you for the article. It gives us the feeling that what we do is because we can invest out of state. And yes! It takes a lot of my time to research properties and how much it would leave for our pockets!
    Erin Helle Investor from Monterey, CA
    Replied about 2 months ago
    Nailing down a market and researching it thoroughly is a great place to start before you actually start looking at properties.
    Yosef Katz New to Real Estate from Brooklyn NY
    Replied 2 months ago
    Awsome post, very to the point
    Erin Helle Investor from Monterey, CA
    Replied about 2 months ago
    Thanks! :)
    Mike Mosee Investor from Eagle Point, OR
    Replied 2 months ago
    We started out of state investing, (live in unfriendly landlord state Oregon) & have never looked back
    Erin Helle Investor from Monterey, CA
    Replied about 2 months ago
    Absolutely! Great to see others excelling at this! :)
    Lane Kawaoka Rental Property Investor from Honolulu, HAWAII (HI)
    Replied 2 months ago
    I bought 11 turnkey rentals between 2012-2015. I finally sold them because they were not scaleable for accredited investors. I had 1-2 evictions a year on the B minus class rentals and 1/3rd of them had repair costs of 10-20k. :(
    Erin Helle Investor from Monterey, CA
    Replied about 2 months ago
    Really?! Where were they? Did you have a property manager finding tenants? I currently own 27 doors and have only ever had to evict one tenant.
    Elena Shrode
    Replied about 2 months ago
    Positives definitely outweigh the negatives for out of state investing if you’re living in a market that doesn’t typically produce good cash flow. Great article!
    Erin Helle Investor from Monterey, CA
    Replied about 2 months ago
    Exactly! :)
    Account Closed from Scottsdale, AZ
    Replied about 2 months ago
    My entire business is run off of out of state investments! I use direct mail and primarily flip/wholesale land. This was a great read thank you.
    Erin Helle Investor from Monterey, CA
    Replied about 2 months ago
    So great to hear!