Advice For Investing Out of State
One of the great debates among investors is whether or not toinvest out of state. Each side can give pretty compelling arguments for and against. Like most everything in investing and business, it comes down to personal preference and risk tolerance. Some investors would never invest in a property they could not make a short drive to while others will look solely on the numbers and returns. Those investors feel that the investment is the same whether the property is 800 miles away or 8 minutes. There are compelling sides to each argument and cases to be made for either way of doing business.
If you are considering investing out of state or out of your local area, you will be largely reliant on others. Obviously, this takes a degree of trust that not every investor is comfortable with. You will need to spend time building a team of local realtors, contractors, attorneys and project managers. The strength of this team will be as important as the quality of your property. You can find a great property, but if your tenantshave to wait days to repair the toilet, you can expect the rent to come in slower, if at all.
The main reason why you would even entertain investing out of your area is because you feel the returns are worth the risk. It is because of these returns that you will spend the time doing the work to find a team and the property. Once you have everyone is place the reality is that investing in another state is really no different than investing in the next town over. If you have a property manager that handles issues that come up, it doesn’t make much of a difference where those problems occur. Your business can run on autopilot while you reap the benefits of a higher return and let your team take care of the property.
The flip-side to this is that it is not that easy to surround yourself with quality people you can trust. Finding a property manager is not the same as finding someone to fix your door handle on a local property. You have to fully vet these people. Because of the distance, this will have to be done either over the phone or online. The out of state detractors will also tell you that comparable properties may be right under your nose if you just look. Why invest out of area if you don’t have to?
It is true that a good investor can find deals anywhere if you know where to look. That being said, there are times when a good out of state deal falls on your lap that may be too good to pass up. Before you quickly dismiss the property based only on location, do your homework and figure out if you are comfortable with it. There are plenty of opinions on the topic, but the best answer is usually found after doing your own homework and determine if it is right for you.
By Than Merrill