When you’re first starting out as a real estate investor, it’s easy to think that the only properties worth investing in are the ones located near you. After all, it can be difficult enough to keep track of one property—let alone multiple properties located in different states. However, there are actually quite a few advantages to investing in out-of-state real estate, especially if you’re just starting out.
There is more migration from high-tax states to low-tax or no-tax states
In this post-Covid world in which we now find ourselves, investors would be wise to look to where the people are going. From long-term rentals in the single-family home to the multi-family space, investing out of state is not only an option, but for some, it is a must. This is not to say that opportunities would not present themselves in one’s own state, but more often than not, out-of-state is where many will find those properties and opportunities to achieve solid returns on their money.
States like Texas, Florida, Tennessee, Nevada and other states in the Sunbelt are proving that low cost of living will equate to excellent markets for long-term rentals. With hedge funds buying up anything they can get their hands on right now in the single-family home market, it would be prudent to investigate those markets for investment opportunities.
Brian T. Boyd, author of Replace Your Income: A Lawyer’s Guide to Finding, Funding, and Managing Real Estate Investments, suggests the following tips: :
- You Can Get More Bang for Your Buck
One of the biggest advantages of investing in out-of-state real estate is that you can often get more property for your money. This is because prices tend to be lower in other parts of the country, especially if you’re comparing properties of similar size and quality. In addition, you may also find that there are more opportunities to negotiate on price when you’re dealing with out-of-state sellers.
2. You’ll Have More Options
Investing in out-of-state real estate also gives you more options when it comes to finding the right property. This is because you’re not limited to the properties that are available in your immediate area. Instead, you can search for properties all over the country until you find the perfect one for your needs.
3. You Can Diversify Your Portfolio
Another advantage of investing in out-of-state real estate is that it can help you diversify your portfolio. This is important because it will protect you from any potential problems that may arise with the local market. For example, if the market in your area takes a sudden downturn, having investments in other parts of the country will help offset any losses you may experience.
4. You Can Work with a Property Management Company
If you’re worried about being too far away from your investment property, working with a property management company can help put your mind at ease. A good property management company will take care of all the day-to-day tasks associated with owning an investment property, such as collecting rent and dealing with repairs and maintenance issues. This will allow you to focus on finding and analyzing new investment opportunities.
5. You May Be Able to Get Tax Breaks
Finally, it’s important to note that investing in out-of-state real estate may also give you access to certain tax breaks that wouldn’t be available if you were investing in a local property. For example, some states offer tax breaks for investors who are willing to rehab properties located in certain areas. Doing your research ahead of time can help you take advantage of these sorts of opportunities and save yourself some money in the process.
As a new real estate investor, it’s easy to think that the only properties worth investing in are the ones located near you. However, there are actually quite a few advantages to investing in out-of-state real estate, especially if you’re just starting out. From getting more bang for your buck to diversifying your portfolio, there are many reasons why investing in out-of-state real estate may be a smart move for new investors like yourself.
About Brian T. Boyd, Esq.
Brian T. Boyd helps clients with real estate and business matters, after earning a JD from Samford University’s Cumberland School of Law, and an LLM in Taxation from Georgetown University. His portfolio has grown to six-figures. His newest book is Replace Your Income: A Lawyer’s Guide to Finding, Funding, and Managing Real Estate Investments.