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BlogArrowReal Estate Investing BasicsArrowThe Rise of Remote Real Estate Investing (and How to Get in on the Action)
Real Estate Investing Basics Jan 01, 2021

The Rise of Remote Real Estate Investing (and How to Get in on the Action)

Tom Schneider
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We all know that real estate is about location, location, location. But what a lot of investors don’t know is how easy it is to invest in rental property in a different city or state.

Remote real estate investing lets you overcome the limitations of your local marketplace by owning rental property in areas with more opportunities and higher returns. In this article, we’ll explain how remote real estate investing works, why the market is growing, and tips for remote real estate investing success.

What Is Remote Real Estate Investing?

Remote real estate investing is similar to today’s growing work-from-home trend. You no longer have to be in the office to work, so why do you have to buy real estate in the same city that you live in?

Thanks to remote real estate investing, the answer is that you don’t have to. Investing in real estate remotely gives you access to more profitable opportunities across the U.S., in housing markets where economic growth is robust and property prices are still affordable.

Here’s a quick overview of how it works:

  • Own rental property in another city or state from where you live without geographic limitations.
  • Hire a local property management team to handle details such as leasing, maintenance, and rent collection.
  • Monitor your local team and property performance via periodic video conferencing, emails, phone calls, and review of monthly financial statements.

Related: How To Find Real Estate Deals When Long-Distance Investing

Why Remote Real Estate Investing Is Growing

Over the last five years, the number of out-of-state real estate investors has increased by almost 8%—and for good reason. In many real estate markets today, housing prices are reaching all-time highs, property taxes are on the rise, and anti-landlord legislation like rent control laws has been enacted, all of which are helping to drive the growth of remote real estate investing.

Per data from Roofstock, many of the investors buying property elsewhere live in states like California, Washington, New York, Texas, Florida, and Illinois. And we see these customers buying in states like Missouri, Indiana, Mississippi, Texas, Tennessee, Alabama, and Georgia.

There seem to be several reasons remote investing is on the rise:

  • Investors can earn higher yields in other markets, especially those living in high-priced markets on the East and West Coasts.
  • High real estate prices in many local markets make it nearly impossible to begin investing in real estate without a large amount of capital.
  • Remote real estate investing makes it easy to diversify investment portfolios instead of putting all of your eggs in one basket—the same strategy as a stock portfolio.

You’re also seeing a plethora of tech tools simplifying remote investing:

  • Online listing platforms designed for the remote real estate investor
  • Drone photography, 3D pictures, virtual tours, and augmented reality
  • Digital transaction services to review, sign, and notarize documents online

Remote Real Estate Investing Pros and Cons

Although remote real estate investing is growing, buying rental property out of state isn’t necessarily right for every investor. Here are some of the top pros and cons of remote real estate investing to consider before you invest.

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

Pros of Investing Out of State

  • Overcome geographic limitations with a wider array of investment opportunities nationwide
  • Earn bigger potential returns by investing in out-of-state markets with affordable prices, higher yields, reduced competition, and lower property taxes
  • Diversify your investment portfolio to minimize risks from local economic downturns and natural disasters
  • Avoid unnecessary distractions such as emotional attachment to property and personal friendships with tenants
  • Passive income is at its best with hands-off investing, allowing you to focus on scaling up your property portfolio

Cons of Investing Out of State

  • Time needs to be spent up front analyzing markets in detail to avoid buying rental property in the wrong location
  • Risk of overlooking a needed repair or property defect if you’re not physically at the property
  • Challenge of finding a qualified property manager and leasing agent who will help your investments grow once your property is purchased
  • Passive hands-off investing and turning daily details over to others can be uncomfortable for micro-managers who insist on always being involved
  • Failing to realize there will always be a learning curve with new markets, your local real estate team, local economies, and landlord-tenant laws

How to Successfully Invest in Real Estate Remotely

Remote real estate investors can purchase newly-built homes, rehabs and foreclosures, flip houses, and even vacation rental property. However, one of the most tried and true methods to invest in real estate remotely is by purchasing single-family rental property. That’s because the market is so large and the anticipated future demand is so strong:

  • Single-family rentals are a $3 trillion market
  • 16 million single-family rentals currently in the U.S.
  • Over 13 million new rental households forecast over the next 10 years

No matter where or what you invest in, there are several things to keep in mind before you buy real estate remotely to make sure your business starts right and keeps growing strong.

Tips for Remote Real Estate Investing Success

First and foremost, real estate is a people business. Investing in rental property is as much about who you know and what you know. So, make sure to reach out and network with other real estate investors in your chosen market. Once you’ve selected the best markets for remote real estate investing, build a team of trusted local real estate experts including agents, contractors, and lenders.

Related: Looking to Invest Out of State? Here’s How to Pick and Analyze a City

Next, a little bit about what you should know before you decide to invest. Spend time researching each market until you can spot good deals and avoid the bad ones. Read and understand the rental laws for each state and municipality you’re investing in to ensure you don’t accidentally break any landlord-tenant laws.

Once you select a rental property to remotely invest in, review documents for turnkey rental property, including the lease agreement, tenant rent roll, payment history, and application and credit reports on file. Always conduct thorough due diligence on the property—even if you're paying all cash—and don't hesitate to renegotiate the deal in good faith if need be.

Common Mistakes to Avoid When Investing Out of State

With so much competition in the market and prices on the rise, it’s tempting to move fast and make a deal. But buying the wrong property can cost you in more ways than one. Don’t buy in a market where the economy is weak and the population is declining. Look for cities where the cost of living and doing business is low and the quality of life is on the rise.

Another common mistake real estate investors make is hiring a real estate agent who doesn't specialize in rental property investments. There's a big difference between agents who work with normal mom-and-pop homebuyers and agents who understand real estate investing.

Related: Secrets of Successful Landlords: 8 Things Profitable Landlords Do Differently

A great property manager is another key part of your team. However, choosing the wrong management company can lead to high repair costs, increased tenant turnover, declining property value, and negative cash flow.

Last but not least, never become emotionally involved when you’re investing in rental property. Remember that real estate investing is a business and not a hobby.

The Bottom Line

Thanks to online listing platforms, detailed market data, neighborhood ratings, and property technology it’s not necessary for remote real estate investors to visit a property in person. However, always be sure to balance technology with personal interaction. Taking the time to talk to people, building a team, and leveraging the knowledge of local market experts will help ensure your remote real estate investments are profitable for years to come.

Considering investing remotely?

Tell us why, where, and what issues you’ve encountered. 

By Tom Schneider
Tom Schneider is a director at Roofstock and has served leadership roles in technology, operations, and investor education. Prior to Roofstock, Tom led product development at one of the first publicly traded single-family rental REITs. Tom’s team led software development to support acquisitions, construction, property management, and dispositions. From this experience, Tom honed his skills in agile software development, managing a global team, and getting things done.
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16 Replies
    Mark Rickert from Albuquerque, NM
    Replied 24 days ago
    Excellent Article!! Thank you.

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    Tyrone Medrano Investor from San Mateo, CA
    Replied 23 days ago
    Very interesting and informative article. Thank you for the advice.

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    Michael Ullman from San Francisco, CA
    Replied 23 days ago
    Great article, Tom! Thank you.

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    Elizabeth Downes
    Replied 23 days ago
    Excellent article. As owner of real estate and property management company in Central Florida who specialize in sourcing and managing properties for investors, I can tell you this article is spot on!

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    James Stayton from Monroe, Washington
    Replied 23 days ago
    This will be my 2nd income property and I know that I have been very lucky in tenants in the first one. Thank you for the article, while it kicked up more questions that answers for me, that is exactly what I need. Thanks,

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    Anthu Tam
    Replied 22 days ago
    Hi Tom, Great article! Can you pls share some tools or websites that help out of state investors in home searching?

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    KAY JOHN
    Replied 22 days ago
    Great article and at the perfect time. I'm working at home in DE and searching for my first remote property

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    Tom Diamond
    Replied 22 days ago
    Great article. My Brokerage in Cleveland, for example, we take every dollar given to us and buy something worth two. ( or that same formula after rehab) Then the net return is 25% on the income. We have met that goal for years.

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    Roc Fiedor
    Replied 22 days ago
    Great article. As a 25 year real estate veteran and serial investor, I cannot agree more about the careful vetting of the right real estate agent who is positioned with professionals on their team. For me, the secret sauce is New Construction. Buy early... sell after the developer exits. Magic!

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    Paul Marthaler
    Replied 22 days ago
    I've invested out of state for 15 years and the # 1 thing I see are investors from high costs east coast/west coast markets applying their mentality to invest in the south/midwest because the pricing is so cheap that it's too good to be true.... and they see how their rentals perform in California/New York so certainly they will do likewise in Cincy , Indy or Toledo. I have many friends in California that buy in the midwest. They see a home for $60K or $80k and go into Costco mode and pick up 10 of them. Problems come up in that the rent on those units are very low and you're dealing w/ Class C / D tenants... much harder to control when you're 1000 miles away REGARDLESS of the property manager. Next, don't forget the cap expenses (HVAC, ROOF, FLOORING, repairs) are the same whether you have a $50K house or a $200K house... These homes are the last to rent and the first to crash in a downturn, so go in with both eyes open. Granted a lot of people have done well the past 4 years picking up low end homes that have appreciated artificially because of outside investors and low interest rates. The tenant that rent these places don't have the pay raises/income to justify rent for something that has now appreciated to $120K-$180K and is still a class C/D neighborhood in lousy schools. I'm sitting on the sidelines now and seeing where this goes. My markets are class A/B tenants in good performing suburban schools. That said, in major metropolitan areas such as Indy/ Charlotte, etc... to get that, you are in bidding wars and need to drop at least $250K for a vinyl village home that is 10-25 years old and will bring you about $1600-$1800/month rent. Also be very aware of the property tax rates ( don't forget as an investor you don't get the homestead exemption that most listings include in their proformas) and states such as Indiana will charge you double that of an owner occupied... or 3x owner occupied as in South Carolina. Bottom line, in today's market, if you're looking for entry level, you've missed the boat in many of the major markets.... Dallas, Austin, Indy, Charlotte, Atlanta..... capital has been chasing these markets 5+ years ago and is moving on to secondary and tertiary cities. Getting to the point where the stock market isn't looking so bad again.

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    Sunil Kiran
    Replied 22 days ago
    Great article. I was always skeptical about remote real estate investing and the insights here allayed some of my fears.

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    Jennifer Petrillo Investor from Asbury, NJ
    Replied 22 days ago
    Exactly what we pivoted to a few months ago after flipping four properties in our expensive New Jersey county in two years, then managing a long-distance flip in the Joshua Tree CA area (found a great GC who managed the whole rehab, used an online MLS listing broker to list, never even saw the place other than in pictures). Long term plan was to move into buy and hold small MF, looked at Iowa then Ohio, settled on a small mostly blue collar city (67K pop'n), hooked up with a wholesaler and picked up a duplex and two triplexes in this town in November 2020. 5 of 8 tenants in place, which was my preference so we would be collecting rent right away. Discovered lots of deferred maintenance so the first few months' rent is being put back into the apts to fix them up. The wholesaler, who is also a licensed realtor, held three open houses for the 3 vacancies and we filled them within a month. We had 50 inquiries on the three vacancies! The tenants are very nice people, paying rent on time, relieved that we are not kicking them out or raising the rent (not our plan). One of them has asked for a friend if we have any more apts to rent. I am using Turbo Tenant website to list apts and manage leases, etc. Now the wholesaler has two more duplexes that are vacant and need rehab but since we are comfortable managing long distance rehabs and placing tenants, we are trying to buy these as well. It mostly took just having the guts to go for it; yes, a lot can go wrong with long distance ownership but it can go wrong with local ownership or flipping as well. There are definitely tools that make this model possible. Having a good contractor that we can trust is the key!

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    Steve Roland
    Replied 22 days ago
    I bought an out of state property in Illinois 2 years ago. My advantage was a friend of mine that already owned a property in that city and had established good connections. It has been an OK investment, but only about 6% cash on cash after expenses. Very low priced commercial building so not very risky.

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    Myriam Mourani
    Replied 22 days ago
    Thank you for a great article! For me, the key to out-of-area investing is finding the right property manager-- even before buying the property. A bad property manager can make your life absolutely miserable.

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    Aileen Yu
    Replied 21 days ago
    Perfect timing! I was doing the math on house hacking in my area and wasn't looking great after year 3. This gives me a good start to look into another avenue. Thank you!

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    Serge Adzinets Investor from Austin, Texas
    Replied 20 days ago
    The irony is that the "good" rentals that cashflow aren't going to appreciate much.

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