Are you a real estate investor who lives in one state but is looking to own property in another? Investing in an out-of-state rental property helps investors:
However, it’s important to understand the unique complexities and challenges of investing in rental property out of state. Regardless of experience, unencountered challenges, like distance, can introduce new complexities in market trends, regulations, taxes, and logistics.
Below, we’ll discuss what you need to succeed in investing out of state, certain alternatives to direct investing, and the latest tools for remote success:
- Yield higher ROIs
- Achieve portfolio growth and diversification
- Generate avenues to more affordable and profitable markets
However, it’s important to understand the unique complexities and challenges of investing in rental property out of state. Regardless of experience, unencountered challenges, like distance, can introduce new complexities in market trends, regulations, taxes, and logistics.
Below, we’ll discuss what you need to succeed in investing out of state, certain alternatives to direct investing, and the latest tools for remote success:
Owning Property in Another State
While the benefits of branching out to markets beyond state lines are compelling, success demands a keen understanding of market research, local laws, and regulations.
Markets with diverse job opportunities and strong economic leadership offer stability and growth. Furthermore, investing in out-of-state areas with all four positions will help you succeed in the local rental market while minimizing risks such as vacancies, delinquencies, and low demand.
Market Research
Not all markets are created equal. When looking for the best areas for rental properties in 2024 in or outside of your state, it’s important to identify areas with:- A bustling job market
- Residential growth
- Housing affordability
- Low unemployment rates
Markets with diverse job opportunities and strong economic leadership offer stability and growth. Furthermore, investing in out-of-state areas with all four positions will help you succeed in the local rental market while minimizing risks such as vacancies, delinquencies, and low demand.
Local Laws & Regulations
Navigating the evolving regulatory challenges in the residential rental property market is difficult enough. Venturing into new territories and owning property in another state means new taxes, zoning rules, and regulations.
Ensure you are knowledgeable about local and state:
Overlooked zoning laws or confusing tax rules can quickly derail a profitable investment and have you operating outside of legality. For example, rental income tax laws vary state-by-state. While you may invest in property in states that don’t tax rental income, you are still required to pay taxes on rental income if you live in a state that does.
Understanding these laws is essential for managing your property legally and successfully, and is why it is a good idea to…
Ensure you are knowledgeable about local and state:
- Landlord and tenant laws
- Property taxes
- Insurance costs
- Other miscellaneous expenses
Overlooked zoning laws or confusing tax rules can quickly derail a profitable investment and have you operating outside of legality. For example, rental income tax laws vary state-by-state. While you may invest in property in states that don’t tax rental income, you are still required to pay taxes on rental income if you live in a state that does.
Understanding these laws is essential for managing your property legally and successfully, and is why it is a good idea to…
Build a Local Network
If you live in one state and are looking to own property in another, a local team is an essential resource every investor needs to bridge the physical gaps and challenges for your business. Building a local network of industry professionals, such as real estate agents, contractors, and home inspectors, provides local expertise and support for you and your business.
By teaming up with local real estate professionals, you gain access to:
By teaming up with local real estate professionals, you gain access to:
- More opportunities
- The latest market insights and trends
- Thorough in-person evaluations of potential investment properties
- Knowledge and experience working with local leaders and committees
Investing Out-Of-State Alternatives
While owning property in another state has its benefits, it may not be right for you. If so, there are two alternatives to direct out-of-state investing:
Real Estate Investment Trusts, or REITs are like mutual funds for real estate investors. They allow investors to earn income from a rental without owning or managing the property directly. However, it’s important to know that dividends from REITs are often taxed as ordinary income, which decreases your ROI on the property significantly.
Real Estate Syndications are a group of investors who pool capital to purchase large real estate properties–like apartment and townhome complexes. Investors receive all the benefits of investing out of state, without any of the landlord hassles. However, you are splitting the profits with multiple parties and some syndications only work with accredited investors–making it difficult to find your way into the group.
Real Estate Investment Trusts, or REITs are like mutual funds for real estate investors. They allow investors to earn income from a rental without owning or managing the property directly. However, it’s important to know that dividends from REITs are often taxed as ordinary income, which decreases your ROI on the property significantly.
Real Estate Syndications are a group of investors who pool capital to purchase large real estate properties–like apartment and townhome complexes. Investors receive all the benefits of investing out of state, without any of the landlord hassles. However, you are splitting the profits with multiple parties and some syndications only work with accredited investors–making it difficult to find your way into the group.
Tools to Success: Owning a Rental Property in Another State
Now that you understand the steps to buying a rental property out of state, you’ll need the right tools to succeed. Below are some of the best resources for investing out of state:
Online Resources
The internet provides a treasure trove of insights for real estate investors, regardless of what stage of your investment strategy you are in. This includes researching, networking, or marketing.
Research
Websites like Zillow and Realtor.com provide marketplace insights for local properties. These and other websites can give you a broad understanding of available properties in other states from the comfort of your home. Additionally, many realtor sites provide CMA and CSA reports to help investors estimate and analyze a property’s ROI potential before investing.Networking
Whether you are looking to build your investment dream team, have keen insights into local markets, or simply trying to find more education or support when investing out of state, the internet has become the go-to source for real estate investor networking. By leveraging popular social media platforms like Facebook, Instagram, and YouTube, you can connect with industry professionals and attend remote investor meet-ups to gain knowledge, collaborate, or share ideas about owning rental property in another state.Marketing
Many social media platforms have also become essential rental marketing tools. Investors can leverage social platforms to promote properties and reach target consumers using:- Short videos
- Images
- Digital tours
- Testimonials
- Hashtags
- Ad marketing
High-quality social content that informs or entertains audiences allows you to entice consumers from a digital setting–eliminating many distance barriers.
Innovative Tools to Leverage
Rental investors often wonder, “Should I hire a property manager?”
Owning a rental property in another state can make self-management difficult, but not impossible. For the do-it-yourself investors, the latest innovative tools in real estate have made out-of-state investing and remote property management more achievable than ever.
If you live in one state but own a rental property in another, look to incorporate the following tools into your remote investment and management business plan:
Owning a rental property in another state can make self-management difficult, but not impossible. For the do-it-yourself investors, the latest innovative tools in real estate have made out-of-state investing and remote property management more achievable than ever.
If you live in one state but own a rental property in another, look to incorporate the following tools into your remote investment and management business plan:
PropTech
PropTech, or property technology, is an umbrella terminology for a wide range of digital tools that enable investors to leverage:
Each aspect of PropTech technology is designed to streamline the remote real estate and property management process by providing you and your customers with a digital experience option.
- Property search and listing platforms
- Virtual tours and 3D modeling
- Property management software
- Smart home technology
- Digital transaction tools
Each aspect of PropTech technology is designed to streamline the remote real estate and property management process by providing you and your customers with a digital experience option.
Analytics Tools
Today, out-of-state investing success is made easier with analytics tools that allow you to digitally tap into any market’s most valuable insights, including:
- Marketing trends
- Property performance
- Demographic analysis
- Investment opportunities
Artificial Intelligence (AI) & Machine Learning (ML)
AI and ML technology streamline each aspect of the rental investment process. And, when integrated into any PropTech or analytic tool, these technologies improve your business and customer experience.Finding Success in Out-Of-State Markets with CIVIC
If you live in one state and want to own rental property in another, adequate funding is essential. CIVIC has the capital, knowledge, and flexibility to make investing out of state easy and profitable. We provide reliable and cost-effective loan options to investors across 44 states and the District of Columbia.
Our Single Rental loan and Rental Portfolio loan options provide:
Want to partner with the market’s simplest and most reliable out-of-state rental property capital provider? Fill out this form to schedule a FREE consultation today!
Our Single Rental loan and Rental Portfolio loan options provide:
- Competitive 30-year term loan options
- Maximum rental flexibility
- SFR, warrantable condos, townhomes, PUD, and 2-4 units eligibility
- DSCR blanket loan with no W2s, paystubs, or tax returns required
Want to partner with the market’s simplest and most reliable out-of-state rental property capital provider? Fill out this form to schedule a FREE consultation today!
