When looking for investment properties, it is pretty common for real estate investors, novice or experienced to explore within their own neighborhood or city. Is it due to a fear of wandering into the unfamiliar? Perhaps, yes. With over 50% of real estate investors staying within a 20 mile radius of their primary residence, it is not surprising that potential real estate investors like sticking to what is familiar to them in terms of understanding the ins and outs of the location they are already residing in. By going beyond the 20 mile mystical boundary, real estate investors will be opening a new world of opportunities when it comes to finding a suitable investment property with a more desirable return on investment.
Nearby Investment is Convenient
If you have lived in a neighborhood for a year or more, then it makes perfect sense why you become a local market expert. As a resident, you learn about the perks of the area, the demographics of your neighbors, nearby schools ratings, areas to avoid at night, nearby parks and so on. You accumulate a vast knowledge and familiarity over time, which means you understand the environment, better than any new comer. Local real estate investors also have it a little easier when it comes to property management since they will be able to visit their property within minutes.
What Your Neighborhood May Be Lacking
Although you may have lived in your neighborhood for most of your life, it may not be the best place for investing in property. As a potential real estate investor, key demographics of a neighborhood need to be explored in detail such as the cost of living, crime rates, quality of life, employment opportunities, unemployment rates and the overall business and political environment. Is there population growth or are residents leaving town for various reasons? Who is the biggest employer in town? These are some of the questions that need to be considered further before investing in the neighborhood and this means going beyond your comfort zone to discover best investments nationwide.
Investing in Outside Markets
Now that you are ready about exploring other neighborhoods, start doing your own research for rental properties. Explore neighborhoods statewide that are within your budget or that you’ve heard offer desirable return on investment. Adequate research will lead you to key demographics, industry trends, population growth, projected growth, jobs and population forecasts that will prove useful in discovering worthy rental properties to invest in. In addition to new areas with cheaper sales prices, such areas may also have lower taxes and rental insurance premiums.
Lastly, when it comes to investing in out of state neighborhoods, you will need to understand the laws and regulations, property taxes and other legal issues for the area to gain a thorough understanding of local regulations.
Return on Investment
When researching neighborhoods, you need to make sure that the markets you are targeting have sound market fundamentals and a better return than most of the upcoming fareas. One of the most important reasons to invest outside your city limits is to ensure you make the best return on investment. What factors contribute to a property’s potential return on investment? Taxes, the purchase price, appreciation rates, housing regulations, rental conditions, occupancy rates and even interest rates. Once you settle on an Investment property, you should also explore back taxes, probate documents and liens that could be attached to a property that you want to avoid since the purchase price will definitely rise as a result of such issues.
Hire an Experienced Realtor
Once you’ve found the neighborhood you are interested in investing in, you will need to hire an experienced Realtor. For best advice you can consult “The Crown Group’s” experienced property managers. Once you select a realtor, visit the properties together and keep in mind that properties with good returns will most likely sell quickly, so you will need to move fast.
Property Management of an Out of State Investment
Once the property is purchased, it will be best to find and hire an experienced property management company to manage the property. They will handle issues that include managing repairs, payment of property taxes and creating vacancy advertisements. These challenges may seem overwhelming and not worth the hassle of investing out of state so it’s best to take it off your hands by hiring a property manager it will be worth handing over your investment property to a management company. Ask your realtor to recommend companies that provide property management services in the area.
An out of state investment property is a major commitment and not a simple task. But if you are aware of the challenges upfront, then you have a head start. Investing in an out of state property is appealing if you live in a neighborhood that might be expensive and you are looking to diversify your options. Whatever the reason, you need to make sure you understand the pros and cons of an out of state investment and prepare yourself for the challenges you will face along the way. Time and energy needed? Yes. Worth the effort? Definitely!
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