How To Invest In Real Estate Out-Of-State

Hello investors. My name is Joe Torre. I'm an investment counselor with RealWealth, a real estate investment firm. Today we're going to do a quick video on how to buy real estate out of state. This is a question that comes up a lot. Here is a scenario, you live in a place that's great to live, but not a great place to invest. It might be a highly expensive place like Manhattan where the prices are too high and the rents are too low relative to purchase price, so we have negative cash flow of $1,000 a month, or it might be maybe you live in some rural area out in the country and there's just no opportunities for investment.

That means you have to invest out of state, but that's scary because you're going to be investing in a property that's 1,000 miles away or 3,000 miles away, and you're not going to be there to look after it. That's the problem that we're going to solve today. The goal here is to live where you want but invest where it makes sense. What you'll need, a couple of things. First thing is a good market. I'll go through these quickly. Job and population growth, fairly good sized metro population, say, 500,000 or more, a diverse economy, favorable landlord-tenant laws, and positive cash flow.

Job and population growth are very important because if the population is growing and jobs are moving into the area, that means demand for housing is going to go up. That means rents will go up and property values will go up over time. The reason you want a good-sized metro population is because, one, you need good property management. Preferably, you want to identify two good property management companies in a given area so if the first one you hire doesn't work out, you have a backup.

If you're in a small town or small city of 50,000 people, you're not going to have that many options when it comes to property management. There might only be one in town. Also, if a local factory closes down or something in a small metro of 50,000, that could really devastate the local economy. A larger economy or metro area with 500,000 people or so or greater is a safer bet.

The next thing you want is a diverse economy. An economy where you have lots of different industries represented is more resilient in bad times. A good example is Atlanta. If you look at the top 10 employers in Atlanta, no 2 are in the same industry. Coca-Cola is there, UPS is there. Home Depot is headquartered there. The Center for Disease Control is there. Delta Airlines is there. If one part of the economy is not doing well, then other parts of the economy can take up the slack.

The economies that have problems are places like Detroit, which is all about automobiles, or Las Vegas, which has one industry, tourism. When there's a recession single industry cities tend to suffer more. Your tenants will lose their jobs, not be able to pay rent. Creates a bunch of problems. A diverse economy is a good thing to look for. The next thing is landlord-tenant laws that either favor the landlord or at least are neutral.

There are some states where it's almost impossible to evict a tenant who's not paying rent. A street-smart tenant who knows how to game the system will just live in your house for free for six months until you get rid of them. Other states, if they're not out in 14 days, the sheriff's deputy shows up and evicts them. You want to be in a place where the landlord-tenant laws favor you the landlord.

Then finally, you want positive cash flow. You don't want to have to have negative 500 a month or 300 a month. That'll just eat away at your savings. If you lose your job at some point, which you will, because real estate is a long-term investment, at some point during the time you own it, you're going to lose your job, having a negative cash flow is going to hurt you.

In addition to a good market, you also need good property providers. That could be new home builders, or it could be a turnkey provider. These are people who buy an existing home, say, built in the '80s, and then they renovate it. They put in new kitchens, new baths, new carpet, new paint, fix it up so it's nice and rentable. Either of those two are good options. Also, multi-families like duplexes and fourplexes, but all of these must cash flow. There are some markets where you can buy a brand new house but it's going to be negative cash flow, and that's going to introduce a lot of risk.

This one is the most important thing, property management. You'll need good property management. When investors do fail, the number one cause of their failure is property management. Either they're incompetent or sometimes they're just outright crooks. They'll say you need a new water heater and charge you $400. You don't need a new water heater. How do you know? You're 1,000 miles away. They'll just rip you off. You have to have a good property management and preferably several in the same market.

Read more at realwealth.com.

Видео How To Invest In Real Estate Out-Of-State канала RealWealth