When you are buying property it can be a long and often taxing process. You need to perform thorough research, read up on applicable laws, and make sure that you are in compliance with said laws. The difficulty of the situation becomes even harder when the property is out-of-state.
So how should you go about it? What should you consider before you invest in an out-of-state rental property? In this article, the team from Gifford Properties & Management advises potential property owners on how to go about this endeavor.
Reasons to Buy
There are several reasons that could compel an investor to look for an out-of-state property. With communities congregated around urbanized areas, the demand for such locations has sky-rocketed.
An out-of-state property can often be more affordable to obtain. This is important for the new investor whose budget might be tight. However, you should not compromise on the fundamentals that make a property lucrative as an investment.
Property Laws and Regulations
While you might find similar properties to your local real estate, the regulations and local laws might differ drastically. And remember, if you find yourself on the wrong side of the law, you may end up paying hefty fines.
Understanding and being compliant with local laws and regulations is mandatory. You will have to spend significant time reading up on all relevant and applicable laws. To ensure that you’re always reading the most recent and accurate drafts of local legislation, contact the relevant authority’s offices.
Due to the sensitive nature of the laws and their impact on your investment, we recommend that you engage the services of a local property management professional.
Return on Investment, ROI
If you are looking for an investment property, one of the key metrics that should guide you is the return on investment. Is the market out-of-state performing better than the local property market?
For you to properly assess ROI, you will need information on the property sales, selling prices, maintenance/ management costs, turnover costs, and other relevant costs such as mortgage expenses and taxes. This information will allow you to calculate the ROI and compare it with other neighborhoods.
Management and Maintenance
Even when you find a cheaper market to invest in, you will still need to spend a considerable amount. Most new property owners would want to manage the properties themselves. And this is understandable given the hundreds of thousands of dollars spent to obtain the property.
However, self-management is quite demanding and if don’t incorrectly could be very costly. You will need to sacrifice a significant amount of your time, money, and resources to see to the needs of your property and your tenants. The long-term success of your investment in real estate is directly linked with the quality of management.
Should you find yourself overwhelmed with the management of your property, get in touch with a reliable property management company. They’ll be able to offer comprehensive services covering advertising, tenant screening, rent collection, and maintenance. Look for a company with the experience and local knowledge to offer you sound and professional advice.
Hire a Local Property Inspector and Contractor
A property inspector is a professional who is trained in detecting and analyzing property defects. Since you won’t be able to personally visit and assess the property regularly, the professional’s analysis will go a long way to protect your out-of-state investment.
Your property must remain habitable at all times to ensure the tenant's safety. By working with a local inspector and contractor you’ll be able to rest easy knowing that your investment is well-maintained and legally compliant. What’s more, with someone on the ground to assess issues quickly, you’ll have an easier time retaining tenants.
Local Housing Market Conditions
You might have some experience investing in real estate, however, you have to consider the local market conditions that make a particular area unique. Before purchasing an out-of-state property, you need to determine what kinds of tenants you want to rent to and what your investment goals are.
For instance, if you’re looking at properties in a ‘touristy’ town, choosing to invest in a short-term rental would be wise. By understanding the local area and market conditions you’ll be able to make wiser investment decisions.
Pre-Approval for a Mortgage
The purchase of the new property is not the only financial obligation that you have. You still need to pay for your other financial needs. Getting a mortgage could be the best solution for you helping you balance your obligations.
You will need to research the various mortgage lenders in the area, the offered interest rates, and the terms available. Make sure that you have a sizeable down payment to increase your equity share and also give you some bargaining power.
Investing in an out-of-state property will allow you to diversify your income and also give you another stable source of rental income. Check on the ROI, the local property regulations, and the management of the property, and hire the services of a property inspector.
If you are looking at Florida as a potential investment option, get in touch with the leading property management company in the area.
At Gifford Properties & Management, it’s our mission to give our clients professional and sound advice. We have a reputable team of property managers ready to help you oversee the day-to-day management of your properties. Get in touch with us today and you will receive a quote for our property management services!