No matter where you live, you can buy a house out of state as an investment. Not everyone lives where real estate is reasonably priced, so here are some tips and tricks to give you options when your local arena is limited.
You may have heard me talk about finding your honey hole before, but what is most important to realize is that your honey hole really does not have to be right near where you live. While that may be ideal, sometimes it is not realistic. That is why I wanted to share these tips with you today. If your local real estate scene is already smokin’ hot and you need to find an area a bit more appropriate for investments, then get ready to have your mind blown.
How to Buy a House Out of State for Investment
While it may be hard to believe, it is not as hard as you might think to buy a house out of state for investing. In my years of experience, especially moving between two locations for a long-distance marriage, I have figured out an essential system that simplifies investing in a house out of state and develops passive income. Here are my 3 steps…
#1 Setup Automatic Payments for Tenants
WAY too many investors are still going out, face-to-face, collecting checks, late fees, looking at properties, fixing properties, etc. They are far too involved in the nitty-gritty pieces of investing. Seriously, you gotta quit that if you are ever going to invest long distance. You can never buy a house out of state and invest in it when you are used to keeping your hands engaged in every little detail.
You need to train your tenants, tenant-buyers, handy guy, vendors, etc. that you work from afar and that the finances will not be handled like they might be used to. If you get some work done by your handyman, you need to make it clear that you will not be paying them the moment the work is done, but that you are going to mail the check to them. In the same way, you need to train your tenants that they need to pay you through the automatic payment plan you have set up, and if the payment is not there by 5 pm on the 5th of the month, it’s LATE.
It is super important that you have a system in place to make sure that you are getting things done, that you are getting paid, and that you are able to pay the bills and payments that you need to make.
#2 Spend Some Time in the Area Where You Want to Invest (Your Honey Hole)
If you are looking at an out of state investment that will require a long drive, or even a short plane ride to get there, then I highly recommend that you go spend some time in the area where you want to invest.
You need to spend some time in your honey hole!
If it is some distance away from you, then I strongly recommend that over the next six months you allocate time and resources to spend one weekend a month to STAY in your honey hole.
Rent a hotel room, or better yet stay in a vacation rental for a short term. Find out what is going on the area: where do people want to live, where are the good schools, where are the jobs, where are things going on…. It’s AMAZING what you can learn about an area when you stay there for a period of time, especially if you can make 72 hours or so each time (48 if you’re under a time crunch). You will find out all the great details about that area. And, a lot of the time you will even begin to find the people who are looking to buy or rent houses.
This strategy is essential when you need to buy a house out of state and really cannot simply invest down the street. Yes, I know it means there is a bit of an investment upfront, but let’s be real. If you want to get into real estate investing, you need to have a little upfront cost, especially when your local situation is not ripe for your honey hole.
Check your motivation. Are you serious about this? If you are, a little upfront cost will not be enough to stop you from hitting your financial goals.
I have students who need to work their real estate investing business this way. They manage all kinds of creative strategies to connect and engage with long-distance renters, buyers, and properties in other states. This really is possible, if you are willing to do the work.
#3 Find an Accountant and an Attorney who Understand Investing Out of State
Every state and city has its own laws and procedures for investing. Things like evictions, late fees, etc. could all be different, and you have to follow the rules of the area where you are investing. When I buy a house out of state, I am depending on my attorney to know the laws and what is going on to make sure that I am staying within the rules of the law and don’t get into trouble.
You are also going to need an attorney to make sure that you are working with the state taxes properly. This affects your rent amounts, what you reserve for income taxes for whatever states you are investing within, etc. Like me, you will be so thankful to know that you have knowledgeable people looking over your shoulder to help make sure you stay legal and legitimate. Let’s be frank, you are going to pay your fair share of taxes. That’s just how it is, so better come to terms with that reality.
You gotta pay those taxes: you gotta pay the property taxes, income taxes, capital gain taxes…you gotta pay it all.
So, depending on how you have your business/corporation/LLC set up will determine the tax strategy that you will need to use. And you need an accountant to look at all that. I am not an attorney or an accountant, and I cannot give that kind of advice, so that is why you really need people like this on your TEAM who is going to understand how your business strategy without of state investing works.
Make sure you have an attorney who lives in the area of your honey hole and understands how to conduct real estate investments there. And, then get an accountant who really gets the intricacies of investing in another state, or somewhere besides where you live.
Don’t forget what YOUR job is: MAKE THE DEALS!
Your job is to find the deals, make the deals, and get the deals done. It is someone else’s job to make sure that all of the little legal details and financial pieces are all in place properly. That is why you need a team of qualified, knowledgeable people around you, especially when you want to buy a house out of state. Long-distance investing is no joke, but it is TOTALLY possible and doable.
Find out what you are good at, and then delegate to other people the pieces that are their strengths. THAT is how you will ROCK investing out of state.
Be sure to join our amazing and growing community of incredible ladies (and some gentlemen) who are doing the work to create financial freedom with real estate investing. Join the group on Facebook and follow along on Instagram for daily encouragement and motivation.
Now, it’s your turn. What’s stopping you from starting your real estate investing journey? Share below!