What is Remote Real Estate Investing?
Remote real estate investing is the purchase or investment in a property outside your local real estate market. This can mean buying a property several hours away or on the other side of the country.
Note: In most cases, remote real estate investing means that you will not manage your properties and will hire local professionals to do so.
Remote real estate investing is a popular strategy among investors in areas with high property values, where they cannot afford to enter their own market or where local rents do not provide a sufficient return on their investment.
How to Get Started with Remote Real Estate Investing?
The first step in remote real estate investing is to identify the market you will invest in. If you are investing outside your local real estate market, it is likely because you cannot afford to invest in your local market, are not getting a sufficient return, or simply wish to diversify your portfolio. Therefore, it is important to focus on markets that meet your needs.
Ideally, a hot market should have a growing population, high demand for rental units, low crime rates, and a thriving economy, according to Martin Orivis, founder of Rent to Own Labs.
The second step is to determine the type of properties you will buy. Are you planning to buy and rent single-family homes or multi-unit properties to long-term tenants? Do you hope to find a place you can rent out for short periods on Airbnb or other home-sharing services? Or are you planning to flip the property in a short time? Before choosing the right property, it’s essential to know your specific goals.
The third step is to get familiar with the local market. When investing in an area outside your local real estate market, it’s crucial to do your homework. You likely do not know the market well. Local professionals such as real estate agents and property managers can help you learn more about the market.
The fourth step is to build a team of local professionals. Regardless of whether you are investing in rental property for the long term or flipping property in a short time, you will need local professionals who can do the work on your behalf. Your team should include a contractor, real estate agent, property manager, attorney, and others, depending on your needs.
The fifth step is to crunch the numbers. Ultimately, the goal of real estate investing – or any type of investment – is to achieve a financial return. Make sure to calculate the numbers before purchasing to ensure you will receive a sufficient return on your investment.
Benefits of Remote Real Estate Investing
Perhaps the biggest benefit of remote real estate investing is that it allows you to access more financially accessible real estate markets.
For investors living in areas with high property values, investing in lower-priced markets enables them to purchase more units or larger properties. For example, in the expensive Washington D.C. area, many real estate investors are looking towards urban areas near Richmond (Virginia) or Baltimore (Maryland). Similarly, in states like California and New York, property prices may be so high that some investors cannot enter the market.
Diversification is another benefit of remote real estate investing. When it comes to the stock market, investors are advised to diversify their portfolios so that if one company or industry performs poorly, their entire portfolio is not at risk. The same applies to real estate.
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For example, suppose you have rental properties in Wisconsin, Texas, and Maryland. If the rental market in Wisconsin worsens, you have investments in other areas to help balance your losses.
Tips for New Real Estate Investors
Understand local laws and taxes: Each state has unique real estate laws, so if you’re going to invest in properties in another state, it’s important to do your homework. You may need to read landlord-tenant laws and land use regulations to ensure you comply. It’s also important to understand your tax responsibilities as a real estate investor. Investing outside of your home state may require you to file additional tax returns, and each state has different property tax laws.
See the property in person: Some may argue that with the right team, it’s unnecessary to see the property in person. While it’s true that not all remote investors do this, visiting the property in person can give you a better idea of the area in which the property is located, while ongoing visits ensure that the property remains in the condition you expect.
Assemble a team you trust: When it comes to investing in real estate remotely, having the right team is crucial. These individuals will serve as your on-the-ground interface to handle immediate emergencies and ensure the property remains in good condition. They will take care of tasks you can’t do because you’re not present in the area. Finally, as they may know the area better than you, they bring a certain level of expertise that will benefit you and your remote investment.
One of the most important things you can do as a remote real estate investor is to assemble a local team you can rely on to handle most aspects of your business. A real estate agent/broker, property management company, local lenders, contractors, etc. Don’t hesitate to ask for referrals from other investors and local contacts, and check online reviews using Yelp, Google, Angie’s List, etc. Look for professionals who are highly responsive and prefer working with investors.
Where should you invest in real estate remotely?
Look for markets where you can afford the property and those with growing populations, a thriving economy, and high demand for rental units to ensure the best return on your investment.
How to get into commercial real estate investing?
Investing in commercial real estate means investing in non-residential properties, including office buildings, retail spaces, warehouses, and more. Commercial real estate investing requires different financing than residential mortgage financing, so before diving into this area, talk to a lender to find out if you’re eligible for commercial real estate financing.
What are the drawbacks associated with direct real estate investing?
Real estate investing is often a time-consuming process that requires personal involvement. If you invest in properties to rent them out to tenants, it’s common to take on the role of property manager. Although remote real estate investing is typically less stressful since you outsource the work, it still requires a financial investment to pay for the property management team and maintain the property. Another drawback is that if the property remains vacant for any period, you could lose a significant amount of money.
Source: https://www.thebalancemoney.com/your-guide-to-long-distance-real-estate-investing-5195709
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