By Property Management Systems
PORTLAND, Ore. – Over the last 2 years we’ve has the “perfect storm” for investors thanks to low mortgage interest rates and affordable properties but the question is should you buy a Rental In Portland even if you live out of the area? The answer to this question is yes and in this article we will weigh the pros and cons of owning a rental property here even if you live in another state.
Pros of Buying Long-Distance Real Estate
- The ability to buy in more affordable markets.Property values in second- and third-tier markets don’t command the premium of real estate in primary markets and there’s lower competition. That said, depending on the market, rents can still be very strong. Buying in one of these markets is a way to get your foot in the door, realize positive cash flow and build equity.
- Real estate as a long-term strategy.Some investors decide to buy real estate in an area that they don’t currently live in, but think they might want to someday. For instance, I’d consider buying a home closer to my parents if there’s a chance I’ll want to live closer to them someday. Many investors use a similar mindset when considering real estate in vacation and retirement markets, like the Carolinas and Florida. These houses can be rented now and held in case an investor wants to live there someday, too.
- Tax benefits.Say what you want about Trump, but when the New York Times released a copy of his 1995 tax returns it shed light on a stark reality: real estate investors are able to use the tax code to their advantage. The ability to write off interest paid on a mortgage and depreciation makes buying investment property highly attractive. The provision Trump took advantage of is no different than the loopholes that everyday investors use, too.
Cons of Buying Long-Distance Real Estate
- Less familiarity with the market.Let’s face it: I know the Boston-area real estate market better than I know any other market. I feel highly confident in how much local taxes cost, how much I can get for rent, the types of tenants I can get, etc. But in a different market? I’m not so sure. I can do some research, but it’s not the same as having lived and breathed a real estate market for decades. That can make some investors uneasy.
- Limited network of service providers.If I were to buy a property in Boston, I’d know exactly who to call for my mortgage, to do my home inspection, etc. My network of service providers is much smaller in a different market. This is true even after purchasing an investment property. If something goes wrong, I might be turning to the whitepages for a plumber or electrician—and crossing my fingers that they’re well-qualified!
- Day-to-day reliance on others.Being a long-distance landlord means that much of the day-to-day activity is out of your control. You can’t just stop by and check out the house on your way home from work. If you have friends or family in the area, you might ask them to help you find tenants, to collect rent, or to stop by in the event repairs are needed. But most professional real estate investors know that the most reliable way to manage property from a distance is to hire a property management company. This is an additional monthly expense that prospective buyers should keep in mind as they run their numbers.
The decision to buy long-distance real estate isn’t an easy one. But if that’s a route you decide to go, here are a number of things to keep in mind:
- Don’t jump into a new market blindly. Do your research early on and study market comps. You’ll want to be sure you aren’t overpaying for the property, and the rents the seller is getting now can be supported over time.
- Get a strong grasp on the condition of the property.The inspection will help you understand the true condition of the property and shed light on repairs that might be needed. Buying a fixer-upper in an unfamiliar market could pose problems if you don’t have a wide network of service providers. It’s much different than buying a property locally when you have the advantage of popping in to check on it every so often.
- Find great tenants.Anyone who owns long-distance real estate knows that good tenants are worth their weight in gold. Nitpicky tenants, or those who don’t pay their rent on time, can make managing the property more difficult. Sometimes it’s worth taking less in rent from all-star tenants if you’re managing the property from a distance.
- Automate rental payments and lease renewals.There are all sorts of property management software out there that make it easier for landlords to collect rent remotely, to manage maintenance requests, to renew leases, etc. Find the software that meets your needs.
- Schedule routine maintenance.If you own a long-distance rental property, you’ll want to find someone in the area who can mow the lawn, trim the hedges, replace your HVAC filters, plow snow, etc. This could be a friend, family member or trusty handyman, but honestly we’d recommend…
- Hire a property manager.Yes, it’s an additional monthly expense. But having a property manager will relieve you from day-to-day responsibilities and give you peace of mind when owning real estate from a distance.
- When possible, check on your property yourself.Try to make it a habit of visiting your long-distance rental property every year or so. Even with a rock-star property manager, you can’t forget that this is a big investment. Another set of eyes never hurts.
Supervising rental property from a distance can be difficult, but it’s doable. And it typically gets easier with time, particularly if you buy multiple properties in the same long-distance market. As long as you’re prepared for emergencies, long-distance real estate can be a wonderful addition to your investment portfolio.
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