Pros and Cons of Out-of-State Real Estate Investing
The majority of real estate investors tend to keep their investments within close range to their homes. However, most of the major players know that investing in real estate that is outside their home state is a very tactful investing technique that they’ll play to their advantage. If this concept is new to you, read on to see what some of the most important pros and cons of investing in real estate out-of-state are.
PROS
#1 Affordability
If you’re thinking about trying to dabble in out-of-state real estate investing, then you must have a reason behind that. One of greatest attractions is that real estate investing outside of your home state may offer more affordable choices. For example, if you’re living in a large metropolitan city such as New York or San Fran, it might not be the most affordable place to purchase an investment property in. Hence, it isn’t a bad idea to look to other potential cities and states where the real estate market is more affordable and not so hard on your pockets!
#2 Diversifying Your Portfolio
If you are a well established real estate investor with a number of properties under your name in your own town/state, then getting into the real estate market of other states will allow you to increase the diversity and range of your portfolio. The major reason for having a diversified portfolio is that if the real estate market in one state collapses, you will still have the property in other states standing strong! Don’t put all your eggs in one basket!
CONS
#1 Unfamiliarity with the Real Estate Market and State Specific Laws
One of the biggest challenges that you are going to face when you encounter a new territory is that you simply won’t know the real estate market of a state outside of your own as well. Questions, such as “what is the best neighborhood” to “is it the buyer’s market or the seller’s market at the moment” to “what are the economic trends like” will be plaguing your mind – and something you will have a lot of difficulty trying to answer unless you were a local resident there yourself.
Therefore, if you wish to invest out of state, try opting for a location where you are somewhat familiar with. For example, where did you go to college? Where do you often go for trips to? Where do you have friends and family? On the other hand, if you want to try investing in a completely unknown place, it’s not impossible. Just be sure to do some good online research (which is something you should be doing if you’re buying in your own state as well).
In addition, every single state will have laws and regulations that are different from each other. This is important to bear in mind and you will need to ensure that you have people that you can ask (i.e. a real estate agent or a lawyer etc.) for all the more important aspects of the state specific laws regarding real estate purchasing/selling. One of the most important questions to ask is whether the state is landlord-friendly. Some states give extra protection to tenants even when they stop paying rent.
#2 Distance
If you are trying to invest in a real estate property that is far away from home, then you will have to face the inconvenience of needing to spend some time and money to travel to check out those properties. Even if it seems like a hassle, under no circumstances should you be trying to purchase a rental property that you have not checked out with your very own eyes! However, if you do want to save yourself some time and trouble, don’t hesitate to arrange for a real estate agent and a professional inspector to do some of the work for you. For example, if the inspector lists out too many issues with the property, perhaps you don’t want to take a look after all!