Is it worth investing in out-of-state rentals, or does being a long-distance landlord come with too much hassle, making it better to buy local? This latest video from Rentec Direct answers this question, drawing on insights from experts and investors who have explored the pros and cons of both options. Learn when it makes sense to invest out-of-state, and which investors should prioritize finding local deals instead.
Finding the right deal is vital to successful real estate investing, and few things impact real estate ROI more than location. Whether you’re new to real estate investing or are a seasoned professional, wondering whether investing in local real estate or out-of-state options is a common question.
While there are many factors to consider with any real estate investment opportunity, becoming a landlord to an out-of-state rental property has its own unique obstacles and benefits. In this video, Rentec Direct’s Brentnie and Kaycee discuss the tradeoffs between investing locally versus out of state, when a property manager becomes essential, and why building local experience first can set new real estate investors up for long-term success.
Local vs. Out-of-State Investing – Video Transcript
Brentnie:
This is Brentnie and Kaycee from Rentec Direct, and we are here to talk about landlord questions today. Someone is asking, is it better to buy in my own city or invest out of state? I see tons of “best places to invest” lists out there. But is it really a good idea to invest out of state if you’re new to investing? I can’t tell if the margins are worth the extra hassle or if I should just keep an eye out for a good deal in my area.
Kaycee:
So this is so interesting, because I feel like I could have written this question. I own rental properties, but they’re all local to me (within an hour’s drive) because that’s what I’m familiar with. That feels safe; that feels very easy to do because I can always go check on a property really simply. But I’ve also seen those lists of like, should I invest out of state? This is a market where properties are so affordable, and rents are so high. So that seems so tempting.
And my first advice to anyone saying, I’m ready to invest, what do I do? Is I think having the experience of investing locally and knowing exactly what it takes to be a landlord, and as much as you can do that at first to kind of immerse yourself in the job duties of a landlord— because then I also think you appreciate property managers a little bit more because you understand like what it takes to do all those different things and paying them your 10% of rental income doesn’t feel quite as like, ‘Why am I doing this again? What are they even doing?’ So I like that experience for first-time landlords. Like invest, do it yourself. And so obviously that works best in-state.
But I think there are some real benefits, and kind of best tips for if you’re going do that out-of-state real estate investing, especially now with so many opportunities to connect and engage digitally with local investing groups, meeting with property managers in an out-of-state area, still kind of being passive about it, but feeling connected to your property through all the digital tools of videos and chats and emails and software. I think you can be really successful with it. And I think that there’s ways to mitigate your risk for those out-of-state investors because you have access to all this stuff. What have you heard people talking about with these out-of-state investment opportunities, Brentnie?
Brentnie:
Yeah, I think it’s really interesting because as much as I hate to say “it depends” to a question like this, I do think it really depends, because the answer to this can really vary depending on where you live. If you’re looking at investing locally and you live in a place that has a little bit more barriers to entry when it comes to certain laws and regulations and a little bit more extra leg work to be able to keep up with the current laws and to keep up with the current rental market, then you might be tempted to invest out of state where there’s maybe a cheaper barrier to entry to invest in the first place. There’s a little bit more flexibility with certain landlord-tenant laws. And I think that that’s a lot of the allure that you see when you’re seeing these conversations.
Learn more: Landlord-Friendly States and Tenant-Friendly States
Kaycee:
Yeah, I think knowing your laws is really important, and that’s where I think if you are doing your out-of-state investing, like working with a property manager, like that is their job, that is their responsibility to hold a property management license, is to understand the laws that they’re helping their clients follow with managing rental properties. So that’s going to be vital is to kind of have an understanding of it yourself and really trust your property manager that they are being compliant with those local laws. Because, like in Oregon, a new rental property law can go into effect. Like it can be voted on at a session and then a month later it’s in effect and you have to suddenly change your lease and be really agile with it. And so a lot of property managers know that because they’re following along, they’re taking their continuing education classes, but a landlord might be a little bit slower to adopt that if they’re doing self-management. So working with a property manager, I think, can be really, really helpful.
The other thing I wanted to say about out-of-state investing is I think it does give you an opportunity to be more passive with your investing. Like you can find a property online, buy it, and then just instantly move it into a property manager, or maybe there’s a property for sale that already comes with property management, and it’s just completely an asset ownership change. And so you’re really kind of not thinking about it, like, this can just keep running. I think that’s okay. I think of playing with stock markets that you might be more passive about it where things are going to go up, and they’re going to be down. You’re really just focusing on that long-term goal. So when I think of it that way, I actually think it could be pretty interesting. It just matters on how involved you wanna be. And that’s why I think maybe trying a local investment makes sense at first, and then you can gain a little bit more confidence with how rental management works and what your expectations of your property manager can be.
Brentnie:
Yeah, I totally think that makes sense. I agree about having a property manager. We have given advice in the past to anyone who wants to be a long-distance landlord, and that’s kind of the thing that shows up continually. There are ways to navigate around that. If you really, really don’t want to hire a property manager, you really want to self-manage, but you’re going to be visiting a lot. You’re going to need to have a really great realtor in the area to find a good property in the first place.
You’re going to need to either hire an on-site manager that you’re kind of overseeing, or potentially have a trusted friend or family member who’s available to do those on-site inspections, showings, all of that in-person work if you really want to manage your own property at a distance.
And I think that if you’re kind of new to investing and you really wanna be able to be hands-on, that the reality is that investing in your local area is going to make that ten times easier.
Kaycee:
Definitely. I like that advice of really having a hands-on person that you trust to be able to help, even if you have a property manager, someone that you can be like, “Hey, the property manager said that there’s this huge issue at my property. Can you just go over and check it out?” And I’m thinking of a maintenance issue and kind of verifying the severity of the damage or what you think needs to be done.
I think that can be a really valuable asset if you are doing any out-of-state investing and you’re trying to be more of that hands-on landlord. So, good thinking.
