The emergence of turnkey property management companies has diversified real estate investment opportunities. In the past, it was far simpler and safer to stay local, but with the instant communications and the expertise local professionals provide, taking on out of state properties is easier than ever. In fact, there are many benefits of investing in out of state properties.
Turnkey property management firms specialize in helping local and remote investors make the most of their properties. Since they’re local, they have an on-site presence, understand local market conditions, and take care of the day-to-day details.
Whether you’re a first-time buyer or have other investment properties, an out-of-state property can be attractive investments because:
The price of housing varies across the United States and if you live in one where values run higher than the norm, out-of-state investing might provide a good opportunity to grow your money. Unless you have a specific place in mind, start your research by going to websites like Realtor.org and Bankrate.com to find the most recent median home prices by state and metro area.
These sites use reputable data and report them quarterly. Realtor.org also provides basic information about job growth and the construction sector to help you evaluate the strength of select local housing markets.
One of the best reasons to invest in out of state properties is to spread out your risk. Having all your investments in one market makes you vulnerable to local downturns that could reduce your cash flow or your return on investment (this is also true if most of your money is invested in the stock market). Balancing your portfolio with properties in another location can buffer you financially.
Although there are no guarantees, the rate of appreciation may be better than what you could get locally. The Census Bureau reports median values of homes for each of its decennial census periods and makes intermittent estimates of value every few years.
You can also find data on local rental rates from the Census Bureau and turnkey property management companies. These local experts will likely have recent data on home sales and appreciation rates, as well.
It’s important to look at those rates and what influences them to see how reflective the rates are relative to what’s going on in local markets. (Better yet, let an experienced turnkey property management company do the legwork for you. A good company will already be very familiar with the local market and can help point you in the right direction.) Rental rates and housing appreciation are normally driven by the balance between the supply of housing and the demand that’s driven by new job and household formation. Exceptions to this rule include locations that have strong appeal for vacation and second homeowners, and retirement areas.
Investing in real estate in places you like or have to visit periodically makes financial sense as long as the local economy and housing market health merits it. You may be able to write-off some or all of your travel expenses associated with the trip, from travel costs to lodging and meals. Check with a tax expert to learn more about the extent of write-offs for travel expenses as a real estate investor.
While it might seem like a lot of work to navigate buying and managing a property from a distance, there are many benefits to consider that can absolutely make it worth the effort. With the right property management team in place, it can even be a simple and easy process so you don’t have to spend precious time and energy worrying about the details.