There will be times in your investing career when you need to look outside of your immediate area for a deal worth pursuing. Surprisingly, even though there are good deals in other areas, many investors will never give them a serious look. Instead of citing all the potential positives, they will look at the negatives and pass on good deals. Investing out of state is just like any other deal, except that you need to be more organized and have more contacts in place. If the property and numbers make sense, there is no reason not to jump when an opportunity presents itself. Here are four suggestions that make investing out of state that much easier:
1. Start with a plan: Your out of state investing goals should remain the same, regardless of location. You can entertain different ways to achieve your ultimate portfolio, but you need to have a clear vision of what it is you want to accomplish. The biggest obstacle in investing out of state is also the most obvious. Since you will not be able to drive to the property on a regular basis, you need a team of local contacts to take care of things in your absence. Before you make any phone calls or reach out to local contacts, you need to know what your end goals are. This will help guide you towards the properties that make the most sense for your business. A good rental property may not make a good rehab property. Before you consider any out of state investing, you need to have a clear vision of what you want out of the transaction.
2. Know everything about the area: The specific property is always important, but they area may be just as critical as an investor. Plenty can change from one area to the next, and certainly from state to state. When you are considering investing out of state, you need to know everything about where you are looking. This starts with minding your own due diligence. Find as much information as you can online about the demographics, tax rates, employment and property values. A property will always sound good in the listing or from the seller’s perspective, but this may not always be the case. Additionally, you need to know if there are any laws or restrictions specific to the state or the individual town. You may see attractive houses for sale near your child’s university, but it doesn’t mean you can rent to college students. Some areas have restrictions on who you can rent to and may require permits to rent to students. This is just one example of certain restrictions that an area may have. Before you seriously consider making an offer, you need to know everything about the area.
3. Develop local contacts: If you can’t physically be at the property, you need a solid team to act as your eyes and ears. This means you need to take the time to find everyone from a realtor to a contractor. Just like you would on a local property, you need to make sure you have a solid team in place before you submit an offer. You can start by finding the best realtor for your goals and one that really knows the area. They may be able to refer some people that you can reach out to. Even if you receive a referral, you still need to make some calls, ask for references and make sure you are comfortable. In smaller, vacation type areas, the amount of help may be limited. Wherever the area is, you should be prepared to spend a day to meet everyone and set ground rules and expectations. By getting everyone on the same page from the outset, you can save time moving forward. When investing out of state, you will only be as good as the team you surround yourself with.
4. Take advantage of technology: The use of technology has made the real estate business as easy as it has ever been. If you aren’t up to speed with any new advances, you should get caught up before you invest out of state. Between Skype, video property tours and electronic documentation, taking advantage of the technology available can completely change how you invest. Something as seemingly basic as a new smartphone will make the process that much easier. You don’t necessarily need to be a technological wizard, but you should have a good grasp on how these can help your business. A video tour of a new listing will give you a completely different perspective than what pictures and words can do. When looking for potential team members, you should see how well they are able to use technology. A contractor that can give you a day by day video update of everything they have done is valuable. Instead of wondering where you are, you can use technology to keep you up to speed – even if you are hundreds of miles away.
Truth be told, you will never know everything about a property or where an area is headed in your local market. Investing out of state may be uncomfortable to start, but once you get a deal or two under your belt, it is just like any other deal.