Venturing into long-distance rental real estate investing by securing properties beyond your home state can unlock financial opportunities that far surpass what your local market may be capable of producing. Even so, many investors stick to their hometown, not fully grasping that the benefits of investing across state lines are well worth stepping out of their comfort zones.
Although you may have some reservations yourself, the fact that you’re here means you’re thinking outside the box and striving for a better method of investing. With all that said, it’s time to dive into the details, and we’ll start with the basics by addressing the following question:
What is long-distance rental real estate investing? Long-distance or out-of-state investing is a strategy in which investors purchase properties outside their home state or city. This approach allows investors to tap into markets with higher returns, lower property prices, desirable vacancy rates, and better economic growth trends that their state of residence may be unable to provide.
The Ins and Outs of Long-Distance Rental Real Estate Investing
Imagine owning an investment property in an area that yields a high ROI consistently, year after year. Well, you don’t have to imagine it; you can make it a reality if you invest long-distance.
The truth is that this is the norm for savvy investors. I don’t invest in the area I live in, and I don’t have any investors in my inner circle that do either. Why is this the case? Well, there are more lucrative markets out there, so it just wouldn’t make financial sense to invest money into markets that don’t make the cut.
Now, if investing long-distance makes more financial sense, then why are so many people sticking to their hometown when purchasing a rental property? We’re going to find out in the next section and then move on to the benefits of investing from afar, and how you can easily make it all happen.
Investing Out of State – What’s Stopping You?
The most common reason I hear from investors for only investing locally is fear – they have a handful of things they’re uncertain about, which keeps them contained in their city and state. So, what are they worried about?
Afraid the Tenant Won’t Pay Their Rent
Some investors focus on how a tenant may not pay their rent, and with them being 2,000 miles away, it would be difficult to deal with. I’m here to tell you that it really doesn’t matter where the tenant is living; there are certain safeguards you can put in place that can easily handle a possible non-paying tenant, like a local property manager.
Too Far Away to Confirm if it’s a Good Investment
I’ve heard investors mention they wouldn’t feel comfortable pouring money into something they can’t see or touch – because if they can’t see it, they can’t confirm it’s a good investment. This can’t be further from the truth, though.
In most cases, the bank will vet the property and the location before loaning the money. If it looks like a bad investment, they’ll hesitate to move forward. In addition to this, you can simply visit a location and meet with the team if you’re working with a real estate investment company.
If the Rental Property is Too Far I Can’t Keep an Eye On It
Another fear is that if the property is across state lines, they won’t be able to check up on it. Believe me, this is not something you would want to get into the habit of doing, and it’s not necessary. If you’re serious about building wealth, you’ll eventually have multiple properties, and driving around town checking on all of them wouldn’t make sense; you have better things to do. A property manager could easily check on a property for you.
The bottom line is that you’ll need to overcome any fears and just take the plunge to build wealth and become financially independent. Why? Because there may be several undesirable factors that make your hometown a less than profitable location to invest in. But if you’re not convinced yet, then dive into the advantages of out-of-state investing to see what you’re missing out on.
Benefits of Long-Distance Rental Real Estate Investing
When scouting for the ideal spot to purchase a rental property, it’s essential to analyze various markets, or work with an investment company that has already done the research for you. Your goal should be to pinpoint those regions that promise the greatest profit potential. With that in mind, let’s go over how you can benefit financially from buying a rental property in the best locations, whether in another state or even out of the country.
1. Landlord-Friendly States Protect Your ROI
Purchasing property in states with laws that favor landlords could lead to a higher ROI. These areas grant landlords stronger protection when it comes to rental disputes, including evictions. You’ll want the state on your side because evictions could end up causing you to rack up high legal costs, as well as have a loss of rental income during a drawn-out court process.
To avoid financial setbacks, it would be more strategic to invest in states that favor the landlord’s rights, like Texas, rather than in places like California where tenant protection laws could chip away at your profits.
You’ll want to see the video below to learn more about investing in landlord-friendly states:
2. Areas that Sport Low Vacancy Rates Keep Cash Flow Steady
When looking for a good location, it’s essential to research the market well to avoid high vacancy areas. Why is this so important? Well, if a neighborhood has the potential to have higher than average vacancy rates, this can cost an investor thousands.
What can bring about undesirable vacancy rates? A variety of factors, such as crime seeping into the area, issues with job growth and declining wages, and school districts on the decline. When you have drawn out vacancies, you’re the one that will pay the mortgage and you can lose out on months of rental income. With that said, when you invest out-of-state to secure a profitable location, you should seek out low vacancy rate neighborhoods to keep your rental income flowing in like clockwork!
3. Locations with Job Diversity and a Booming Economy Ensure Consistent Rental Demand
Successful long-distance rental real estate investing includes buying in cities with job diversity. This is the case because investing in a location that only has one main employer would be risky. For example, if a major employer that provides most of the jobs in a community, were to close their doors, the workers would be displaced and forced to look for work in other cities. This would result in individuals relocating to be closer to their new jobs.
A scenario such as this could lead to an increase in unoccupied properties, resulting in a high vacancy rate in the area. In contrast, if you seek out a location that has a wide variety of employers, Fortune 500 companies, colleges, hospitals, and the like, then when a company shuts down, there are several others to pick up the slack. Families wouldn’t need to move out of the area if there were other employment options, and this keeps the demand for rentals from declining.
Along with this, when you have a thriving economy that includes a variety of employers, a low employment rate and increasing wages, then it’s a prime location for setting a profitable rental rate. When the area is thriving and in good shape, charging a higher rate is justified.
To get an idea of a location that has exceptional job diversity and a booming economy, you’ll want to head over to our article titled – What Makes Rental Real Estate in Texas Profitable?
4. A Reliable Property Management Company in the Area Protects Your Profit Margin
Years back, I once invested in an area that only had one property management company, and they sent my rental income by paper checks because they just weren’t up to speed digitally. Other than that, they ended up doing a fantastic job managing my rental, but what if they didn’t? I mention this because hiring a good property management company may seem like a small part of the process, but in reality, it’s huge when you’re investing from across the country.
Having a professional property manager on your side can be a game-changer for landlords who don’t live near their rental properties. Think of them as your behind-the-scenes superheroes – they’ve got everything under control, from making sure tenants pay on time to handling the day-to-day upkeep of your investment.
If you can’t be there in person, a skillful property manager is worth their weight in gold. They take those 2 am emergency repair calls, make sure your tenants are happy, and keep your property maintained. Take a moment to read our latest article on this subject – Financial Advantages of Using a Property Management Company.
Additional Advantages of Owning Rental Properties in Locations that Offer the Best Markets
Check out a few more benefits that are worth leaving your own backyard to invest in lucrative, secure locations:
- Rentals in neighborhoods that are appreciating increase your net worth.
- Cities with sought-after school districts keep tenants in place.
- States that have a surging population create a high demand for rentals.
- There are profitable housing markets that sport lower property prices, which lowers your investment costs.
- Investing in states with lower property taxes can make a huge difference when it comes to your profit margin.
- Cities with recession-proof qualities will keep your ROI in place. For a few examples of these qualities, dive into our article that details one city that came out on top after the pandemic – Lubbock Recognized as Recession-Proof City.
Best Way to Invest in Rental Properties in Another State
The easiest, most efficient, and cost-effective way to become successful at long-distance rental real estate investing, is to utilize a full-service investment company such as Morris Invest. Why is this the case? Because we make it simple for you to become an out-of-state real estate investor by taking care of every aspect of the process – this even includes building the property for you, along with including built-in financing.
On top of this, we place a tenant in your rental, typically before or at closing, and we’ll assign an experienced property manager who resides in the area.
Most importantly, we build in cities that meet all the essential requirements for a profitable and recession-proof location – from landlord-friendly states, to areas that have a high demand for rentals, a thriving economy, and everything in between. We have what you need to easily start investing long-distance, which includes an exceptional team, as well as cash flowing single-family and multi-family new construction properties.
Invest in Rental Real Estate Remotely and Watch Your Profits Grow
If you’re ready to expand your horizons and start investing long-distance, or even if you’re not quite ready yet, schedule a free 30-minute call with our team. We can answer all your questions and discuss how the process of buying an out-of-state rental property works.
For those interested in learning more about what we can offer, head over to our Morris Invest & SDIRA Program Overview page. I also recommend downloading our free Freedom Number Cheat Sheet that can help you determine how many rental properties you would need to become financially independent.
One last thing; grab a cup of coffee and enjoy the video below that covers long-distance out-of-state investing in detail:
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