Everything You Need to Know About How to Invest In Out of State Real Estate the Right Way
It is not as hard as it may seem to invest in out of state rental properties or real estate. Out of state rental property investing may seem complicated, scary, and hard to do. Actually, how to invest in out of state rental property is really just a step by step process.
When you follow the steps, you will build a business that will run itself and own investment properties that make you money every month.
How to Invest In Out Of State Rental Property
- Locate the best area of the county to invest (use the online sites in the list below…)
- Look for low home prices with high rent prices (don’t worry, I’ll show you how below)
- Run the numbers on the properties (make sure you are making money every month)
- Contact Realtors to find you properties (look for realtors who already work with investors and know how to find cash-flowing properties)
- Contact Property Managers to manage your properties (hire the best one that you can trust)
- Visit the area (only if you really need to. I don’t go to the new areas I invest now because I am comfortable trusting the people who I hire)
- Buy the property (honestly, there are a few steps in this but read more below)
- Have your Property Manager rent the property to a good tenant (background check!!!)
- Lease the property to a good tenant
- Make money every month!
This is it in a nutshell. There are many steps in the middle but you get the picture. Keep reading below and see how I do it every time.
Listen to the Podcast on how to invest in out of state rental property real estate properties
The best places to buy rental property I have found are in the middle of America.
The mid-west and south east, are great places for out of state real estate investing.
In these places you can get good properties for a low price and rent them out for a lot of money.
I personally buy properties that make me over $250 a month in passive income. The best places to buy rental properties are in the location that make you passive income each month.
Do you know how to find the best places to buy rental property? I do and can show you how to do it too. Finding a good place to invest in rental properties can be tricky if you don’t know what you are doing.
Today we are going talk about how to find a new area of the country to invest in and how to start a brand new business in another part of the country.
How I Started Out Of State Real Estate Investing in Rental Properties
When I first started investing, I was living in California.
In 2007, the housing prices were ridiculous, so I started looking in Ohio, Texas, and Illinois. I ended up starting buying my first property in Ohio.
There were a lot of things I learned about what to do and what not to do when looking for a new area of the country to invest.
Anyone Can Invest in Out Of State Real Estate
What is interesting is that many people think they need to invest in an area they live in. Basically staying within 5 miles from their own home.
There are even real estate gurus that teach you to not go beyond driving distance. This is a problem because not everyone lives in places that you can rent a property and make money each month.
Anyone can invest in real estate in other states. Especially with the technology that there is today.
Here are some great sites that will help you find the best places to buy rental property.
I personally use these companies to find properties.
Zillow.com is fantastic to find the best places to buy rental properties.
Watch this video I made showing you exactly how I do it.
Where Bought My First Out of State Investing Property
I started investing in Ohio and I didn’t know anything about real estate or rental properties, I just knew I needed to buy a property and start making passive income.
I bought my first property and then I was able to buy a second and a third and the business kept growing from there.
The key to a successful business is automation. Set up your business so you don’t need to be there. when I’ve gone on six-week vacations and I don’t need to manage my properties or my business, because I have other people running the business for me.
My property managers, contractors, realtors, inspectors, and other people who are doing the work for me, so I don’t have to work.
Since I have many people doing the work for me, my business runs itself. You need an automatic business, and if you keep listening to my podcast, or read my blog, you will learn how to do this.
How I Look For a New Out of State Area to Invest In
I spent $17,000 to buy my first rental property in Ohio. I had very little money and I was living in California. But, what I did was start out of state real estate investing to make passive income.
This is not an easy thing to do, because there is a lot of risk involved when you invest in another state. However, once you learn how to set up a business, it becomes really easy.
I actually invested in Texas, without ever traveling there. I bought a property sight unseen, fixed it up remotely while living in Fresno, and the property is doing really well for me. Below are the steps I followed.
Step 1: Go to zillow.com to Find Out of State Areas to Invest In
Pick a state, start zooming in, and set your criteria to the total dollar amount you want to spend and the size of home you would like to buy.
I recommend setting the criteria for three-bedroom, two-bath homes with two-car garages and 1,200 to 1,400 square feet.
Narrow down the properties and you will be able to zoom in to the cities you want to focus on. This allows you to see if an area will produce a property you can buy.
Step 2: Run the Numbers
Think about the property in terms of how much rent you can charge per month and how much it will cost to purchase.
A rule of thumb is that you want to be able to rent the property for one percent of the purchase price per month, in order to make cash flow.
For example, if you are going to buy a $100,000 house, you need to make sure the rent is going to be at least $1,000 per month, if not $1,200 or $1,400.
You should be able to get a good return by following this one percent rule.
With anything less than one percent, you are going to lose money because of the mortgage, interest, property taxes, insurance, property management fees, and other expenses.
There is a video on that webpage that will walk you through how to use the calculator.
Step 3: Choose the Area and Find Broker for Out of State Real Estate Investing
Stick with your top two or three areas to narrow your search and look for real estate brokers in these areas.
Call and talk to them, to see if they are right for your team.
Don’t choose just any real estate broker. Make sure the realtor’s primary job and that they regularly work with investors.
Talk to brokers and ask them questions like what are the prices in this area, how much can I charge for rent, what are normal expenses, how much are property taxes, etc., so you can find out if they know what they are talking about or if you need to move on.
You will find that you will be able to get quite a few realtors who know how to work with investors and how to find cash flow properties.
They should be able to answer your questions on the spot. If they need to get back to you, look for someone else.
Step 4: Ask for Referrals
Once you find a few real estate brokers who are looking for properties for you, ask them for referrals to other professionals like:
- Property managers
- Plus others who can help you build your business and your team. Start calling these professionals and talking to them.
The most important professional will be your property manager. They are going to be your quarterback and the main person in your business that does all of the work. You want to work with someone who you are going to be comfortable with, because you will need to talk to them off and on.
Hire slow and fire fast. Take your time and interview three or four property managers. Hold second and third interviews so you can narrow down to the right property manager.
After you find your property manager, start interviewing other professionals for your team. Your property manager should also have a list of professionals you can interview.
Make sure the professionals you choose have good communication skills and you can work with them over the phone. The last thing you want is for the property manager to take four or five days to get back to you.
Make sure they get back to you within 24 hours.
Imagine this situation… You are trying to find a property manager. You are the customer and they want your business.
If they are not returning your calls within an hour or two, or it is taking days to hear from them, imagine how they will treat you after they have your business.
They should be putting their best foot forward.
Do as much as you can remotely, through phone or Skype, before you even think of visiting an area. I am comfortable purchasing a property before ever seeing the area, because of my risk tolerance.
Step 5: Visit the Area for Out of State Rental Property Investing
Before I got comfortable buying properties remotely, I would fly out and visit the area. There was a time I was looking to buy a property in Illinois.
I flew out and spent a day with the property manager, but I didn’t get a good feeling from it and decided to look elsewhere.
I asked the property manager for client references and he said no! If a property manager can’t give you references, I would keep looking.
Make sure you have everything ready, you are about ready to send the money, and this is the last three or four days before the contract is in, then fly out.
You don’t have any skin in the game until you have a property under contract and you’ve put earnest money down, like a deposit.
You will know you are investing in a good area after you talk to realtors, property managers, and contractors and you won’t be concerned.
You will already have information and knowledge about the area.
Fly out and hit the ground running.
Day 1 of Out of State Real Estate Investing
On the first day, meet with two or three property managers face-to-face, have them show you their properties, and walk you through their processes. Then meet with your realtors and your contractors.
Have these meetings lined up ahead of time. While you are doing that, drive around the area and see how people are living and playing.
Day 2 of Out of State Real Estate Investing
On the second day, do the same thing, get those meetings done, and then fly out that night.
By following this schedule, I only stay one night and I can determine if I am going to make a good return.
It isn’t really about seeing the area, it is more about meeting the people you will be working with. If the people are not good, move on.
If you don’t have a good team, it doesn’t matter how good the area is.
Day 3 of Out of State Real Estate Investing
You should not have much need for a third day when you are out of state real estate investing. Those first two days should have been packed with loads for you to see and do.
You should have already had a good working knowledge of the city, areas, and where you should invest.
Step 6: Go Through With The Out of State Rental Property Investing Deal
You don’t need to actually be there in person to sign documents. I’ve bought dozens of properties without physically being in the escrow office.
If you are buying a property with cash, the escrow office just needs to email you the closing documents and payment information.
After you verify everything, you will sign the documents, have them notarized, and mail them back with a check or process the wire transfer.
If you are getting a mortgage, a notary will be sent to you with the documents that need to be signed. You will need to sign them right in front of the notary and they will send them back to the lender.
You do not need to be in the area to buy a property!
Everything can be done quickly and easily electronically.
These are the steps that I usually take when buying properties in different areas. It is not as hard as you might think — it is actually pretty simple.
You need to be able to trust your team and tolerate risk.
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