Property Management, Tenant Selection, Real Estate News & Tips

The Pros and Cons of Investing in Real Estate Out of State

By on August 7, 2014 in Education with 0 Comments

US map(1)I have a friend who has been trying to convince me and my husband to purchase real estate in Las Vegas, NV since the big housing bubble burst.  I enjoy investing in real estate and the potential to get a great deal in an area that has been hit hard, and would have the highest return on investment is enticing but I’m still a little hesitant.

I would definitely not be interested in purchasing a fixer upper in another state. I am more inclined to look at newer condos that include landscaping and general exterior grounds keeping although those HOA dues can really eat into your profit.

I have listed five possible complications or stumbling blocks that I have thought of that have turned me off of investing in property out of state thus far.  I would love to hear more potential issues or your thoughts or experiences on investing out of state.

1. State Specific Laws

Laws vary state to state and new laws are being passed constantly which can create a big headache to try to keep up. Tax levy’s to increase property taxes can be passed and in a state where you are not a resident you have no right to vote. I just learned from a comment on my AR blog the other day that in Florida there are different rules you have to follow when tenant screening.  Distance is a big barrier and when you don’t follow local news or routinely check for new laws in the state(s) you own property in you can end up unintentionally on the wrong end of the law.

2. Property Management

Hiring a property manager that you trust would be extremely high on my priority list.  You need a property manager who can collect rent for you or maybe you use property management software that provide aoutomatic ACH payments like I do and then that wouldn’t be an issue. The property manager would have to have connections to trustworthy contractors to do repairs and maintenance.  Handling the day to day issues is a big deal so having someone to do it that shares your ethics and values is important

3. Potential To Have To Travel

If you find yourself in a situation where your property manager is not as competent as you had hoped or some other issue where your physical presence is needed. Then you have to take time off from your regular job or activities and travel which can be very expensive and time consuming.  Not to mention the time you have to spend hunting for the right property to purchase.

4. Material Participation

Another consideration is whether or not you have materially participated in the management of the property. If you have not materially participated you may not be able to write off losses and mortgage interest on your taxes.

5. Realtor

Buying a property in a city or community you are not familiar with can wreak serious havoc.  You can tell quite a bit about a neighborhood just by taking a walk but what if there was something not so apparent going on. For instance, what if the neighborhood was occupied only by people of a certain religion, that could certainly limit your pool of applicants and renting the home could be difficult. I have a friend who purchased a home next to the transfer/garbage station, not something the realtor was going to point out but it seems like that is something he should have taken the time to notice! Having a trustworthy Realtor who is familiar with the city you are purchasing in would be crucial!

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About the Author

About the Author: Dulcey is both a private landlord and media contributor for Rentec Direct. Her passion is to bring up to date, useful information front-and-center for property managers and landlords. .


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