Owning and managing a rental property is one of the most common ways to invest in real estate. After all, owning a home has benefits like tax breaks, earning rent, and hedging inflation. However, no rule stays your property has to be a stone's throw away from where you live.
If you're a long-distance landlord or considering becoming one, you should know investing outside the market you're familiar with can be challenging. Still, with the right tips, it can be an opportunity to expand your portfolio and earn more.
Here are 5 ways to manage an out-of-state rental property:
5 Ways to Manage an Out-of-State Rental Property
1. Invest in the Best Property
Before plunging headfirst into long-distance property ownership, it's essential to perform due diligence. Since real estate can vary from state to state, you might need to hire a local agent. These professionals can be excellent guides, especially in a foreign market. Monitor the local market where you plan to invest, observing trends and comparing property analysis before you decide. You shouldn't rush this phase, as investing in the right property would undoubtedly relieve stress.
2. Find the Right Help
Besides finding the right property, you also need the right people. Despite real estate being a way to earn passive income, you still need to be physically present to resolve some issues. However, showing up when required can be tricky if you live far away. Thus, the best solution is to find reliable professionals that can step in for you.
You can complete a list of local electricians, plumbers, and other contractors that can respond to requests as needed. Of course, local property managers often have such lists and can take care of such things. Professional Property Management Group of Northern Virginia can guide you to maximize the profits of an out-of-state rental.
3. Perform Routine Inspections
Another excellent management tip for an out-of-state property is to perform routine inspections. Unfortunately, landlords often need to pay more attention to this task since they are only sometimes up-to-date on the house's condition. But, ironically, that's what makes these inspections more critical.
Conducting a thorough check at regular intervals would ensure your house stays in top shape. In addition, it would be easier to spot minor problems before they expand and keep your tenants happy.
4. Keep Your Paperwork in Order
Staying organized is another excellent tip to help you manage your property. If you don't have someone looking after your property, losing track of certain income and expenses
can be easier.
Thus, create an organizational system that helps you before it becomes overwhelming. Track and document vital records like tenant screening reports, rent receipts, repair fees, mortgage payments, and utility bills.
5. Make Visiting a Priority
Even with the best hands on the ground, you should prioritize visiting your property. Of course, traveling would incur additional expenses, but nothing beats being able to weigh on decisions after a physical assessment. Thankfully travel costs are tax-deductible, making it more affordable.
You could even network with the neighbors if your property is in a gated community. Community members can even check in for you when you form an understanding. Follow this link to find out what you need to know if you're buying a home in HOA.
3 Questions to Ask Before Investing Long Distance
- Why am I Investing?
Before tying your money down in something as capital-intensive as real estate, it's essential to know your motivation. So start by asking yourself, 'why am I investing?' Is it because you want to leverage a 'once-in-a-lifetime-opportunity,' or because after hours of research, you see the potential for success?
- What Do My Finances Look Like?
While investing out-of-state can be cheaper, long-distance landlords need to know that it can also be more costly. After all, there's more to consider other than your downpayment, mortgage repayments, and closing costs. You'll also need to factor in extra help like a real estate agent, a local lawyer, and a property manager. Thus, if you can take on those additional expenses, you might need to put your expansion plan on hold.
- How Will I Manage My Property
Finally, you should ask yourself how you intend to manage your property. For example, would you run it remotely, or call an expert? How often do you plan to schedule maintenance, and what payment method would you use for rent collection? An outline of how you plan to manage your property can make it easier when the time comes.
Benefits of Being an Out-of-State Landlord
- Access to Better Investments
One of the most significant benefits of investing in out-of-state property is that you don't have to limit yourself. Instead, you can tap into lucrative investments elsewhere and earn more where the grass is greener.
- Cheaper Properties
Another benefit of expanding your options is that you can enter the real estate market with smaller funds. For example, if you've been planning to get into the rental property industry for a while, but finance seems to be a barrier, you can bypass that hurdle. Instead, scour for more affordable locations in other states and start earning rent.
- Diversifying Your Portfolio
Expert investors usually advise that you diversify your portfolio for the best results. But, as the saying goes, don't put all your eggs in one basket. Since local real estate markets can differ widely, this advice still holds water. For example, property across the country could flourish if one of your investments suffers from a state-wide flood or snowstorm.
That concludes our article. We hope you've gained a thing or two with these 5 ways to manage an out-of-state rental property. While being a long-distance landlord can be challenging, you shouldn't shy away. You'll enjoy higher returns and a diversified portfolio if you ask the right questions. Your investments can flourish with the right people, an organized system, and routine inspections.