Investing out-of-state can be a nerve-wracking experience for the uninitiated. We’re worried enough about buying properties that we can see and visit – what about the real estate from afar?
It’s true, there are some hurdles to overcome where out-of-state investing is concerned. Don’t let these obstacles – or these unfounded myths – stop you from making the most of your financial future.
5 Myths about Out-of-State Real Estate Investment
Myth #1: You must be nearby to deal with emergencies!
If you’re the landlord, sure – you should probably be nearby in order to deal with resident emergencies and problems. But you’re not a landlord. You’re an owner. You only have to be nearby if your investment strategy involves landlording. (Which, by the way, is not the most effective strategy.)
As the owner, you don’t have to be on-site to deal with every problem. You don’t even have to be onsite to deal with major problems.
The key here is your team. If you’re investing out-of-state, you need a property management team. A great team means that you know about these problems, but you are not burdened with the physical fix or the decision-making. It doesn’t matter who fixes that busted dishwasher. It only matters that it gets done.
You might feel the need to micromanage your investments – and granted, they’re a big deal! You want to know that things are going right. Owners need to play to their strengths, though.
Stay in your lane.
Your lane is not fixing toilets and answering 3 am resident calls. Your lane is strategizing, scaling, and making the money moves that build long-term wealth.
Myth #2: Investing out-of-state is just too risky.
Most investments are as risky as you allow them to be. While some things are inherently high-risk, real estate is not. There’s this idea floating around that investing out-of-area is too risky. You don’t see the property in person. You don’t know the area. You don’t have any contacts. Again, this myth goes back to the idea that you have to be nearby to babysit your investment properties.
You don’t.
Your level of risk in out-of-state investing all comes down to your due diligence. If you’re buying totally sight unseen, looking for the cheapest deal out there, yeah. You’re going to run into trouble. When you have the right partners – turnkey companies and property managers that have a track record of success and excellence – that risk pretty much disappears. Part of your job as an owner is to find the right partners. It’s not really even about finding properties yourself. Get people who know the area, people who have experience, and people who value excellence above all.
Myth #3: You are guaranteed to get scammed.
We’ve all heard the horror stories. We won’t pretend that scams don’t happen. They do. And unfortunately, real estate investors are often the ones paying the price. When you invest out-of-state, though, being scammed is not a foregone conclusion. If it was, you wouldn’t see anyone doing it!
Again, you can solve this issue with due diligence. If it makes you feel better to go see a property in person first, do it.
Communicate with your team as they help you acquire properties. Be engaged and proactive in reducing your risk. Work with people who don’t cut corners, people who know exactly what they’re doing. Investigate. Ask questions. Gather information. Request information. The more you know, the more you can manage your risk effectively.
Myth #4: Outsourced property management is too expensive.
Hiring a property manager or property management team can be expensive. Will it take a bite out of your profit margins? Sure. The thought here is that what matters most to the real estate investor is that final cash net gain at the end of every month. While you absolutely want to maximize cash flow, you don’t do it by cutting corners.
A single investor cannot effectively scale their portfolio while trying to manage properties on their own. You have a limit to your time, energy, and experience. For real estate investors, scaling your portfolio is essential to building real wealth in this business. Hiring a property management firm expands your capacity!
Not only that, but great property management improves resident retention. When your residents have their concerns addressed promptly and effectively by people who respect them, they’re much more likely to stick around for years to come. As a real estate investor, that kind of stability and consistency is added value you can’t get anywhere else.
Even though property management might be costly, the benefits far outweigh the hit to your cash flow.
Myth #5: You can’t effectively invest in an area you don’t know.
A big source of investor anxiety comes from the unknown. You likely feel more comfortable investing right where you are. It’s an area you know, from the local laws and the neighborhoods to places to avoid and places up-and-coming. There’s a level of comfort in that. That doesn’t mean, though, that it’s the best place to invest. Regardless of your local knowledge and connections, your local market might not suit your investing needs.
One of the biggest benefits of out-of-state investing is market access. Other markets may have more stable, diverse economies. They might be more affordable than your local market. Demand might be higher. The laws might be more favorable.
Don’t discount distant markets just because you’re unfamiliar with them. You can more effectively diversify your portfolio by utilizing multiple markets. Not only can conditions be more favorable, but diversification mitigates the risks that come with sticking to a single investment market.
Invest out-of-state with the best of the best. Join thousands of buy-and-hold investors at REI Nation!
