Some of the best deals that come your way may be hundreds of miles from where you live. Investing in out of state properties carries a certain degree of risk, but it may also yield great rewards. Like any other type of property you invest in, you need to perform a great deal of due diligence on every aspect of the deal. You don’t always need to physically see the property, but you had better know everything about it. If your local investing market has hit a lull, or the supply isn’t what it was, there is no reason not to look out of state to find your next deal.
There is some degree of inherent risk with every deal you get involved in, whether it is five miles away or five hundred. It is obviously easier to get information about the property and area the closer you are to it, but the internet has made due diligence easier than ever to mind. This means that you need to vet every opportunity that comes your way, regardless of the source. The first step in evaluating an out of state deal starts with looking at where the deal comes from.
Between investment clubs, networking groups and various real estate websites, there are more sources than ever to find deals. This is a blessing and a curse. On one hand, if you network with wholesalers and fellow investors, there can be more deals than ever before. On the other hand, you need to be on your toes to make sure you don’t fall victim to a scam. Most out of state deals may come from a friendly source with a deal that looks too good to be true. This alone doesn’t mean you are getting scammed, but it should put up a red flag that something may not be right. You can find almost anything about someone with a couple clicks of a mouse or a quick internet search. Look for some recent transactions that your source has closed and reach out to people they have worked with. You would never take someone’s word on a local deal; would you? You don’t want to be skeptical on every deal that comes your way, but you also need to protect yourself and know who you are working with.
Once you feel comfortable that you are working with someone you can trust, you can then begin looking at the property itself. Again, the internet has made obtaining information as easy as it can be. However, with out of state properties you need to know more than just the property. Pictures can often tell a story that may bend what a property really is. We have all seen pictures of a property online that make it look like a winner, but when you see if for yourself it is a completely different story. You should reach out to a local realtor or property manager to get an independent evaluation of the property. It is also not a bad idea to get in touch with a contractor, inspector or even appraiser as well. These people will need to get reimbursed for their time, but it could make all the difference between buying a profitable property and buying a lemon that you regret shortly after. By having a local team where the property is located, you can get an independent opinion on not only its value, but also the condition and the area.
The area of any property is almost as important as the property itself. Things often change in a neighborhood in just a few miles. What may seem like a good area can quickly change with a few turns. If you have a team in place, they will give you a real sense of the neighborhood that you are buying in. In addition to first-hand knowledge, you should look at local demographics, crime rates, changes in taxes, employment information and foreclosure data. You need to know what the demand will be on your property and whether or not you are in a safe environment. This means looking at all the information available and talking to as many local people as possible.
This may all seem like a lot of work for one purchase, but it is all done to make sure you are getting the best possible deal. A good deal can be had, whether it is on your street or the next state over. Many investors don’t feel comfortable investing in a property that they cannot easily drive to. In reality, if the property is run properly with a team you can trust, it doesn’t matter where it is located. How many times have you driven by your property in the last 30 or 60 days? The answer is probably not more than a few times. Investing out of state can build your portfolio faster than waiting for things to open up in your local area. Take your time building an out of state team and researching the property and the area. There are many opportunities in real estate. Investing out of state is perhaps one of the best.