Mar 10, 2023
Build the Right Team for Your Out-of-State Investing Success
Buying and owning a rental property within your locality can be challenging. Buying one in a different state only multiplies the challenges. However, out-of-state real estate investment is a great way to diversify rental income and spread your risks. It's also a great start to estate investing and can help you maximize your ROI.
Adequate preparations are critical to your out-of-state investing success, and you need an effective team. Here are five key team members you need to ensure out-of-state real estate investments pay off.
Realtor
Never buy sight unseen is a cardinal rule in out-of-state investing. Online information can be dated, incomplete, or purposely misleading. Working with a reliable and knowledgeable local real estate agent increases your chances of success.
A local realtor has deep insights into the local market and can advise you accordingly. They can help you pick prime properties in good neighborhoods and avoid problematic ones. A local realtor can ensure you don't purchase a nuisance property that could saddle you with tedious and expensive repairs.
A local realtor can help you conduct proper due diligence and root out potential problems such as liens and deed issues. They will ensure you don't commit to buying a problem property that can tie you for years in court.
Property Manager
Keeping your tenants happy and comfortable is a full-time job. It takes skills and experience, and you're better off hiring a property manager to handle the role. A competent manager will oversee the day-to-day running of the property, cater to the tenants' needs, and keep the property in great shape. They will liaise with local contractors to handle routine maintenance and quickly handle any repair needs.
Hiring a professional property manager can be highly rewarding. They will ensure a high occupancy rate, lower tenant turnover, and timely rent collection. A credible property manager gives you peace of mind and provides a smooth out-of-state investing experience.
Financing
You need a reliable source of financing when investing in out-of-state real estate. Sometimes, you need multiple lenders to realize your investment goals. Typically, you may need a banker to front you the money to purchase and rehabilitate the new property. Later, you may need to refinance the property at better rates through long-term financing. If buying a fixer-upper, you may need to explore different financing options. Traditional lenders aren't always keen on financing properties that need repair work.
Insurance Agent
Rental property insurance is a necessity when investing in rental property. While you're not legally required to take out landlord insurance, most lenders will insist on coverage. Rental property coverage provides financial protection against property damage and other liabilities. It can also protect your income if the property is rendered uninhabitable by a covered problem. Having a trusty insurance agent can help you navigate the complex insurance world. They can help you pick the best insurance coverage for your rental property.
Accountant
Out-of-state real estate investing comes with its own share of tax consequences. You should know the tax implications to avoid running into tax and legal problems that can disrupt your cash flow. Hiring a skilled accountant can help prevent common issues like double taxation. They can help ensure proper tax reporting and help you take the tax credit for state income paid in that state if needed.
An accountant can also help you set up an LLC to protect your personal asset while ensuring state and federal tax compliance. Ideally, it's best to work with a local CPA if you plan on handling complex deals or using tricky tax scenarios. You need an accountant who is familiar with the applicable tax laws, regulations, and other real estate practices.
Enjoy a Seamless Out-of-State Investment Experience
Having the right team is crucial for your success in out-of-state investing. A professional team can shield you from potentially ruinous pitfalls while helping you maximize your income and ROI.