Buying and Managing a Rental Property from Out of State: Expert Strategies - Rentce (2023)

Whether you are looking for a vacation rental or a long-term rental property, it may be difficult to find the perfect property close to where you live. The good news is that there are many places to look! You might think that in order to buy and manage a rental property from out of state, you would need to travel back and forth on a regular basis. However, with today’s technology, this simply isn’t true! In this post, we will discuss some expert strategies for buying and managing rental properties from out of state.

How to determine where to buy

Finding deals that make sense financially is not easy especially in a hot market. If you decide to buy a property out of state, you will need to make sure that your research is thorough.

First, you should determine where to look for a rental property. Many people choose destinations with low costs of living and a high potential for rental income. Ideally, the place that you decide on has an available workforce so that when there are vacancies, they can be filled quickly. The area should be growing in population and it should not rely on a single industry.

I understand that buying a property from out of state may feel uncomfortable and even unnatural. After all, you’ve heard the saying”buy in your own back yard” many times from old-time investors. Are they wrong?

They are not wrong, this has been their experience but we live in a different world. I remember buying my first property at the auction sight unseen, it felt scary, especially not being able to walk the property. However, as I continue doing this, buying properties online became easier and the initial fear is gone.

You can start with Zillow and to determine the areas that have investment potential. Use our rental calculator to calculate the annual cash flow and the cash on cash return of a rental property or use the 1% rule (rent should equal 1% of the sales price.)

Once the area is determined it’s time to start looking! This is the time to pick up the phone and talk to several property managers. Ask them which locations are growing and where are the other investors buying.

Property managers have a better grasp of where the action is and they know the rental prices better than real estate agents.

Next, ask an agent or property manager to create a search in their local MLS that will automatically email you all new listings based on your criteria, as soon as they hit the market.

Should you visit the property before buying it?

Buying out of state should be based on logic and not gut feeling about the property. Visiting the rental in person will tell you absolutely nothing more than you can learn by using a good property inspector and Google.

(Video) Your Step-by-Step Guide to Buying Out-of-State Investment Properties

What you should check before you buy:

  • Google Maps Street View – browse streets around the property, check for railroads, industrial businesses nearby and get a feel for the area.
  • Google Maps Satellite View – this gives you an aerial view of the property and neighboring properties
  • Crime Maps – there are many, just Google them. Crime maps are very important because you can double-check the information you are getting from agents and property managers. Also sometimes people’s perception of the area is wrong. That’s an opportunity for you.
  • Hire a very good property inspector, not one recommended by your real estate agent. A good property inspection report should tell you everything you need to know about the property’s condition. Most real estate contracts are contingent upon satisfactory inspection. Use the AS-IS contract because you can walk away from the deal if the inspection is not up to snuff or you can renegotiate the price.
  • Check the taxes. Every state and county has a different way they present this information but in general, if you go to the Tax Appraisal website, you can get the assessed value of the property and last year’s taxes. You can also see the past sales.
  • Find out what the HOA, CDD, or Condo dues are if any. These should be disclosed in the property listing but sometimes they are not accurate. The contract you are signing should have a HOA or Condo addendum with the fees and when they are paid.

There is no need to check title or liens unless you are buying at a foreclosure auction. When you close on the property the title company or the real estate attorney will do that for you.

Should you buy a Turn-Key property?

Even though I’ve heard of some people having success with Turn-Key properties, most of the time these properties are rehabbed cosmetically only and they are overpriced for what they are.

I know it sounds convenient to buy an already remodeled property with a tenant but most of the time it’s just lipstick on a pig situation.

How to rehab a property from a distance

Remodeling a property from out of state is not that difficult. You need to find contractors or handymen and you need someone who will visit the property after each job is done. Entry can be done by an electronic lockbox.

First, create a list of things that need to be done. You can use our Rehab Calculator to get an approximate price.

Next, find a contractor. Google has Verified Listings. I highly recommend those, Google has checked the contractor’s license information and the reviews are from actual clients.

If you are using a property management company, ask them to give you quotes because they have relationships with vendors. Don’t automatically use their vendors for remodeling because they may be more expensive or they may not have the manpower for a big job.

Who should inspect the property after each job is done? You can ask a property manager to do it and email you photos.

(Video) 4 Expert Tips On Managing Your Investment Property Renovation

You can also hire an inspector to visit the property after the job is done.

Should you hire a property management company?

If you like to control every single detail, hiring a property manager is not for you. A good property manager will alleviate the stress from managing tenants and repairs and prevent the all too common landlord burnout.

Making money through rentals is a long-term game, if you can’t stick to it, you will sell at the exact wrong time and instead of making money, you may lose some.

If you decide to hire a property manager, do a lot of research, and don’t hire the cheapest one, you will regret it at some point.

Can you manage a rental property without a property manager?

With proper organization, you can manage your rental from a distance.

A tenancy has several stages. The most critical one is finding a tenant. It’s possible to find a tenant without being present or even showing the property in person.

Finding a tenant

Start by installing an electronic lockbox on the property. If you have more than one property I recommend getting a Rently lockbox. You can read more about it here.

Most of the corporate rental companies like Invitation Homes use electronic lockboxes exclusively. The properties rent faster because they are available to show at a short notice. Rently also does some prescreening, they ask for ID and a valid credit card before releasing the temporary code for the lock. A stripped-down version of Rently is Codebox. Or you can use a simple electronic lockbox and ask for a picture of the ID before giving out the code.

(Video) Calculating Returns On a Rental Property (ROI with Excel Template)

If you are uncomfortable with self-showing lockboxes and technology, you can hire a property manager to find you a tenant. It costs one month’s rent on average. The best thing to do is to screen the tenant yourself and only use the property manager or real estate agent for the showing.

Screening the tenant can be done with SmartMove, a tenant screening service by Transunion (free to landlords), or with Zillow Manager. Zillow charges $9 per week for advertising and the screening is also free to landlords.

I like the SmartMove screening tool because it gives you recommendations, which is very helpful when you are a brand new landlord.

Lease Signing and Walk-Through

For the lease signing you can use, Docusign or other similar services and the deposit can be done by Zelle or another cash app. The money hits your account instantly.

The walk-through and initial inspection can be completed by specialized companies that produce comprehensive property condition reports so you really don’t have to be there.

Rent Payment

If you have only a couple of properties use Zelle or Venmo, I like both because you don’t have to wait for the rent. If you are out of state, I would not accept personal checks or money orders. Ask for electronic payments only.

What if you have to deliver an eviction notice or any other notice.

Using a process server costs around $70 and it’s much more effective than you serving the notice. Also, many of the notices can be sent by certified mail.

(Video) How to Buy an Investment Property: Tips from Experts

Repairs and maintenance

To maintain your rental well, schedule regular maintenance. Determine the tasks that need to be done on regular basis and hire people to do them. A good handyman can do most tasks, except maybe HVAC maintenance.

Find at least two vendors for the most common tasks: HVAC, Plumbing, and Handyman for everything else. Do it before you need them.

You can also buy a Home Warranty and give the tenants the contact information. The tenants can call the Warranty Company directly without you being involved.

Hiring a warranty company has its cons and pros. They are sometimes slow to repair which can create a problem with your tenants.

Moving Out

The final phase of a tenancy is the moving out and the final inspection. For the final inspection, you can use a company that specializes in Rental Property Reports (see our guide.)

As you can see none of the tasks listed above require physical presence and most of the services are very affordable.

The benefit of investing out-of-state for you as an investor is that you can buy where you can make money and not rely on what’s available in your backyard. You can do flips in the areas that allow you to make the most profit and reinvest the money in areas with high cash flow.

Technology has touched all of our lives, we either embrace it or we fall behind. I am curious to find out your thoughts on this. Why you wouldn’t consider out-of-state rentals?

(Video) How This Real Estate Investor Went From 1 to 37 Rental Property Units in Less Than 1.5 Years!


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