Investing in real estate close to home is convenient. Still, there are many cases when long-distance real estate investing makes more sense. If you live in a high-value market where buying real estate is cost-prohibitive, for example, investing in a market with lower home prices could be your best option for building a property portfolio.
Wondering whether long-distance real estate investing might be a good fit for you? Let's look at a few of the benefits and keys to success.
The Benefits and Challenges of Long-Distance Real Estate Investing
Long-distance real estate investing provides several key benefits, including:
- Access to markets with greater returns
- Access to more affordable markets
- Diversification among multiple markets
But there are also some unique challenges to long-distance real estate investing, like:
- Not having an intimate understanding of the market
- Handling property management tasks from a distance
The good news is that these challenges can be mitigated through some careful research and planning.
5 Tips for Long-Distance Real Estate Investing
Here are a few tips for managing long-distance real estate investments successfully.
1. Choose Your Market Strategically
When you’re not limited to markets within driving distance, you can choose the market that provides the highest potential returns. This means choosing a market with:
- A growing population: Smaller cities in the sunbelt, for example, have been booming since the outbreak of the COVID-19 pandemic.
- Affordable real estate: In high-value markets like San Francisco, Hawaii, and New York City, the cost of buying property creates an excessive barrier to entry.
- High rental rates: The higher the rental rates are in comparison to the cost of ownership, the better your ROI.
- Employment opportunities: With the expansion of remote work in the past few years, having local employment opportunities might not be as important as it once was. However, it’s still a good indicator of a stable local economy.
- Reasonable property taxes: In states like Illinois and New Jersey, the high property taxes quickly eat into investor profits.
2. Educate Yourself on Local Laws
Landlord-tenant laws vary by state, and some states are more landlord-friendly than others. Housing laws dictated at the city level (like rent control measures) can impact your ability to maintain a profitable real estate portfolio.
As a long-distance real estate investor, you need to know the laws governing property rentals in your adopted market. Key questions include:
- What is the maximum deposit you can charge?
- Can you charge pet rent?
- Is there a limit on rate increases?
- How long does the eviction process typically take?
3. Establish a Trusted Team of Local Experts
Since you can’t physically visit your out-of-area properties every time an issue arises, you need a local team you can trust to handle certain tasks for you.
Your team should start with an exceptional real estate agent. Not only will your agent be the first professional you work with as you buy your new investment property, but they'll also be your guide to your new market. An agent is a source of valuable insights and local knowledge. A good agent also has a network of trustworthy contractors, property managers, real estate attorneys, and other professionals you might need as a long-distance investor.
4. Focus on Turn-Key Properties With Long-Term Tenants
Managing an investment property from a distance is one thing. Managing a renovation project from a distance is another thing entirely. In most cases, long-distance investors are better off purchasing turn-key properties that don’t require any renovation work. These properties allow you to start earning income immediately and minimize the risk of problems arising during a renovation.
Similarly, it’s typically easier and less expensive to focus on long-term rentals (as opposed to short-term vacation rentals). Long-term renters generally put less wear and tear on a property than vacationers. And with lower renter turnover, you reduce vacancy losses and minimize the time and expense required for processing turns.
5. Learn How To Find Deals From a Distance
Your real estate portfolio is only as good as the properties in it, and successful long-distance real estate investors know how to find deals remotely.
Smart tech solutions have made it easier than ever to find deals in any market from wherever you are. With PropStream, you can access nationwide property data from multiple sources (like county recordings, MLS listings, and private records) all on one convenient platform. You can even view comparable properties to determine property values and create targeted contact lists to help you find off-market properties that would be a good fit for your portfolio.
There are challenges to long-distance real estate investing. If you go into it well prepared, though, it can provide a big boost to your real estate portfolio.
