Is Out Of State Real Estate Investing For You?
As a real estate investor, you understand that location is everything. Some areas lend themselves to better returns on investment than others, and your success as a real estate investor hinges on finding those areas. If your hometown isn’t conducive to real estate investing, you have two options: either wait the market out and hold off investing until the market shifts or consider investing in out of state real estate. The prospect of investing in properties that are hours away from you can seem daunting to some investors. That’s understandable since it will make it much harder for you to personally oversee your investment. Consider some of these factors to decide whether or not out of state real estate investing is right for you.
Do You Want to Be Active or Passive?
Many investors choose real estate investing because of the opportunity for passive income it provides. Active real estate investors are those who like to be involved in the remodeling or property management aspects of the property they’ve invested in. While there is certainly nothing wrong with taking that approach, out of state investing doesn’t lend itself to active investing. Instead, passive real estate investors generally handle out of state investing better since they are fine with letting contractors, property management companies and other professionals handle the work while they simply sit back and collect their returns. If passive real estate investing sounds good for you, you may be interested in out of state investing.
Consider Similar Areas
Just because you’re looking into an out of state real estate investment doesn’t mean that you have to go into the investment blindly. Researching the area that you’re considering can provide some insight, but there’s also other ways that you can become more informed on your potential investment. Consider investing in an area that is at least somewhat similar to the area that you live in. When you do your research, don’t just look at market trends and recently sold properties. Instead, take a look at age demographics of the area, climate data and other external factors. If you find an area that is similar to your own, you will have a good reference point when looking at out of state properties.
Consider All Your Options
Out of state investing doesn’t have to include buying a residential or commercial property and trying to find a buyer or a tenant for it. In fact, if you’re willing to be a truly passive investor, you can put up some money and then let someone else do all of the work. For instance, REITs are essentially mutual funds where the only thing that the members invest in is real estate. As an investor, you simply put the amount of money that you’re comfortable investing into the REIT and then the REIT handles finding properties, investing, marketing and managing them. There is nothing for you to do other than collect your dividends.
You can also look into real estate syndicates and real estate crowdfunding options. Much like a REIT, both of these options involve multiple investors coming together to pool their money in order to buy an investment property. In a real estate syndicate, the sponsor, or the individual who oversees the investment, is responsible for overseeing the property. Things work pretty similarly in a crowdfunding investment where the person or group who orchestrates the funding is responsible for finding someone to handle the marketing and daily management of the property. This ensures that you can simply invest money and collect a percentage of the profits based on the size of your investment.
Out of state real estate investing can take on various forms. Yes, you can find a property in another state, contact a real estate agent and let them represent you in purchasing a property that you may have never seen. You can also choose to combine your money with other investors and let an established investment firm handle choosing the property and managing it while you get to relax and enjoy the benefits of passive investing. If passive real estate investing seems like a good option for you than out of state real estate investing is a wonderful opportunity. Taking geographic limitations off of your investing means you have access to an almost infinite amount of investment properties.