Should I be concerned with long distance rentals

Question

I have put off beginning my procuring rental properties until I retire from the military, as we plan to move out of state. Is it better to build your “empire” in the state or general area you live? Should I look at or be concerned with long distance opportunities? Thank you.

Kiera Underwood · Answer

@Jon Woosley I'm in a cash flowing market and see a couple hundred investors a year get started here because their markets don't make as much sense. It depends on your team. I'd read reviews and talk to people who have worked with said provider in the past. If many other people are happy and continuing to buy, that's a great sign.

Arturo Matamoros · Answer

@Jon Woosley Congrats on your move!! If this is your first venture into RE investing, I would suggest local investing so that you can learn from your mistakes and have the ability to be a "safety net" when something goes wrong. On the other end, I know many people who invest out of their own state and country and it's very possible to do... the caveat: have a good "team" of a property manager, realtor, lender like @Carl Fischer above and from those three, you can usually find a great GC. However, a great PM will have that resource available that you can utilize through their services. If you want to chat more in depth, DM me and we can set up a time to chat.

Best of luck on your new journey and thank you very much for your service!!

Carl Fischer · Answer

Hi @Jon Woosley. I would like to start off by saying thank you for your service. It is much appreciated. To quickly answer your question, I would say start with properties in your own state and local area if at all possible. Having one property doesn't give you very much clout with contractors such as AC, electrical, plumbing, property managers, and professionals such as title companies, attorneys, and CPAs, etc., so you will have to do some of the work and coordination yourself in meeting people. I personally have had properties in FL, NJ, NY, WI, NC, and TX and I would suggest not only having local properties in your area, but there is some diversity in safety in having properties spread out. You need to build quantity and your network in those areas.

The other thing I learned was to make sure these properties are in areas you would like to visit or spend time in. No matter how well you think you can set it up, you will have to go out to those areas at least once per year (and spend some time there). There are advantages and disadvantages to both ways, but starting out, keep it close to home. If you have more questions, I would be happy to connect.

Kyle J. · Answer

Lots of people successfully invest out of state. However, probably an equal amount of people have a tough time at it because they get taken advantage of by the people who are entrusted to do the hands-on management of the properties. There are certainly a lot of posts on here from people who document the struggles with that.

I think the key to being successful is finding local team members you can trust to handle the day-to-day management, and then you just manage them.

Nick Z. · Answer

Investing out of state is certainly riskier. You'll do most of your dealing/ operations via phone.  Which means you are trusting people to complete renovations, manage the property, etc...

It doesn't only depend on the level of risk you're willing to take but also on your ability to find reliable contacts.

Starting out in REI, I'd recommend investing locally. This way if anything goes awry you can get in a car and fix it.

Caroline C. · Answer

@Jon Woosley depends a lot on where you live. We were living in NYC when we started investing, and so out of state was necessary. We've had great out of state experiences, and bad ones. I'm sure the same could be said for investing locally. Certainly investing locally will make it easier to do your due diligence and meet and hire local partners, as well as network through a local REIA, a definite advantage when getting started. You should do your research though on out of state markets of interest to you, in case the deals are great. Also market diversification of a real estate portfolio is something to consider, especially if the market you might invest in is on the smaller side.

Darius Ogloza · Answer

You will find a lot of threads addressing this question on BP.  When most people think of investing out of area (crossing state lines or not) they think about logistics - finding contractors, agents, managers, repair personnel, etc.  Logistics do matter but more important to becoming successful than having a handle on logistics is market knowledge.  If you are interested in real estate, you presumably have some knowledge of the market in the general area where you live.  If you do not, you should not be thinking of investing.  Now, unless you plan to invest in an area with which you are familiar, you presumably have little or no market knowledge and will depend on third-hand information to make important investment decisions.  Fir every investment that you see as profitable to buy, there will be a seller (usually a wholesaler or turnkey with intimate local market knowledge) make the opposite bet that it is more profitable to sell than to keep the investment.  So, the question then is what makes you think you can win at this game under those circumstances?  It's not impossible but neither is winning the lotto.

Should I be concerned with long distance rentals

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