Is Out-Of-State Real Estate Investing Right for You?

Have you made up your mind to start investing in real estate, but you’re torn in deciding where to invest?

Are you considering making a local investment but wondering if an out-of-state investment might be better?

This is one of the first choices you’ll have to make when investing in real estate: the simple question of where you should invest your hard-earned dollars. While there are definite benefits to investing in your area, there are also some potentially profit-limiting downsides.

Is Out-Of-State Real Estate Investing Right for You? 1

That’s not to say investing in outside areas has no pros and cons. Let’s look at both and see why out-of-state real estate investing might be a profitable option you have not yet explored.

Investing Locally

This is the most obvious choice for many real estate investors, but is it right for you?

If you choose to buy a property local to you, you’ll rest easier about your investment since you know the market. First, you know your competition. You might know the names of professionals you can trust, and you’ll have an intimate understanding of the cost of living for that area and how to make things more affordable.

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Second, if you like to be hands-on, it will be much easier for you since you’re right there. If you want to see the property, it’s just a short drive away. If you want to talk to the property manager face-to-face, just put it on your calendar for the end of the day.

Drawbacks to Local Investments

On the other hand, investing solely locally can narrow your options. Not every market has an inventory of good investment opportunities to avail yourself of if you invest out-of-state. The local list of available properties may or may not be big enough or well-suited for investment opportunities.

You also run into the problem of whether your local market is the one you want. The recession greatly impacted housing markets throughout the country, and some areas have recovered at different paces than others. You might find yourself out-priced in your current market, but even if you aren’t, you might not be able to see a favorable future where you’re at.

Investing Out-of-State

If you decide to invest out-of-state, you can greatly increase your options. You can choose any location or market and invest in properties there. Whether you want to invest in Florida vacation homes and coastal villas or homes in the suburbs of Detroit, the sky’s the limit. You can make your investment fit your price point and interests.

By investing out-of-state, you can put your money to work in markets with high ROI. You choose which calls you’re interested in and which are rising stars in the real estate investment scene, ignoring your market’s changes.

Investing out-of-state also allows you to scale based on your needs. For many would-be investors, their local market is priced too extravagantly to make real estate investment prudent. The cost of living in a different state, just a few borders east or west, might be considerably lower. That means you can snatch up excellent properties at a much lower cost than you might in your market.

Even better, you can snag those investment deals on excellent properties that would go for three to four times as much, if not more, in your local market. Your purchasing power becomes much stronger in other markets because everything’s relative.

Challenges of Out-of-State Investments

There are still some challenges to these remote investments. First, you must learn who you can trust and maintain peace of mind by having easy local access to your investment. You also have to trust that the property you’re investing in is what it’s advertised as.

The property is also more difficult to visit if you like to be hands-on. You might have to fly out to see the property, which some people enjoy but others are seriously bothered by. If you are an investor who prefers the more passive turn-key approach, this is an excellent opportunity.

Finally, the market won’t be what you’re used to. Nothing will be the same as being there and immersing yourself in the market, but you can learn and study. You have to rely on someone else to know the nuances of the market.

Doing Out-of-State Right

There is a solution to all the challenges of real estate investing outside your state. When you find a reputable, proven company to handle your turn-key real estate transaction, you have someone you can count on to know the market you’re investing in. Here are the main reasons you should find a partner to work with you on your out-of-state investments.

They can keep a more educated eye on the market since they know all of that area’s nuances.
They’ll serve as your presence near your investment, keeping everything on track so you don’t have to make numerous trips to the property.
If the turn-key real estate investment firm is reputable, they want you to succeed. This means they’ll do anything they can to ensure you follow.
The question becomes, whom can you trust? You want to partner with a reputable, knowledgeable, and engaged firm in your market. Referrals from other investors are key, so be on the lookout for like-minded people who have been there and done that.

It would help if you also investigated what the turn-key operation offers you and their profit fee or cut. Ideally, you’ll want a partner to help you throughout your investment lifecycle, from acquiring the property to managing it.

Getting Started

We’ve reviewed the benefits and drawbacks of out-of-state investing, so now the decision is yours. Do you still want to invest locally, or have you realized that the time is ripe to diversify your portfolio and invest in out-of-state properties? The benefits of out-of-state real estate investment are huge, and the drawbacks can easily be mitigated by partnering with someone in the area in which you’re investing.