How to Buy Rental Properties Out of State

When most people decide to become a real estate investor, they typically start searching for properties in their hometown. I get it. It seems like the easiest way to begin. If you find yourself searching for homes on Zillow, or driving around your neighborhood, I’d advise you to stop as soon as possible.

Hear me out: The markets with the highest ROI are most likely not where you live. I know for me, the best properties are not close to home. Here in New Jersey, it’s expensive to acquire a home. And don’t even get me started on the property taxes…

That’s why I recommend investing across state lines. You might think that sounds scary. Most people think that being so far away from your rentals sounds like a pounding headache.

It can be, but it doesn’t have to be. If you put the right strategies in place, your real estate business will run seamlessly, and you’ll reach your ultimate goal: passive income! Here are seven steps you need to take in order to invest out of state.

1 ) Know that you can’t do it alone. You need to have a team in place; otherwise you’ll be pulling your hair out. You can either use a turnkey provider, and if you’re interested we’d love to help you with that. Otherwise, get busy assembling a team. You’ll need to surround yourself with reliable people you can trust—a contractor, property manager, insurance company, and a title company.

2) Fall in love with ROI, not real estate. I’ve said it before, and I’ll say it again: all properties are the same! They’re just four walls and a roof. It doesn’t matter what your property looks like. What matters is that you’re receiving cash flow every month. Find the right deal, not the cutest house.

3) Choose a legal entity. Personally, I use LLCs at the discretion of my accountant and lawyer. You should also consult your accountants and lawyers. Once you figure out which business structure is most beneficial, and in which state you need it, it’s very simple to set up. Find the department of state website in your property’s state, and click on the “Start a New Business” tab. In my experience, it’s very easy and costs about $100.

4)  Use a property management team. This is critical. If you’re thinking, “I can collect a rent check myself,” please reconsider. There are endless benefits to working with a property management team. They’re experienced and on site. They know the market, how to price appropriately, how to screen tenants, etc. Here’s how to find the right team for the job.  

5) Do your research! Take a look at the market, the neighborhood, and read up on the process of real estate investing! If you need a few suggestions, here are five of my favorite real estate books. However, there is such a thing as doing too much research! Don’t get so caught up in the learning phase that you never take action. There has to be a balance. Figure out the basics, and then learn as you go.

6) Get an inspection. Your property needs to be up to codes. Additionally, this is not ALL about the money. Part of your motivation should be to provide a safe and stable home for your tenants. For more about appraisals and how to handle them, check out this video series.  

7) Now, relax! If you’ve got these pieces in place, everything will work out. If you make mistakes along the way, don’t allow it to derail your progress. Stay motivated, focused, and start collecting those rent checks! 

In my experience, the best way to build a profitable and robust portfolio is to invest in the best rental markets in the US where ROI is high, and risk is low. That may not be where you live. Check out this 7-step guide to buying rental property out of state!