How to Manage an Out-of-State Property
There are (more than) a few reasons that you might be interested in owning and managing an out of state property. You could be:
Funding Your Vacation/Retirement Home
Renting out a property that you plan to eventually reside in, either permanently in the case of retirement or seasonally as a vacation home, is one strategy many investors use to pay down the mortgage before moving in. As part of a long-term investment plan, you may even find it both equitable and convenient to invest in a property near the college your children attend. Not only do you gain reliable tenants, but any trip to visit them at the property can also double as an inspection – making the trip at least partially tax deductible!
Investing in Affordable Areas
Investors from costly coastal markets are attracted to Southern states and suburban markets which have experienced an average 4% rent increase since 2010. This moderate rate, rather than a quick appreciation of housing value, benefits the investor looking for steady income from their real estate investment.
Diversifying Your Holdings
All housing markets are not equal. Rather than invest in one particular region, or your own market, you may choose to set your sights on a few different markets. Your eggs are not all in one basket, so to speak.
For whatever reason, you decide to manage an out-of-state property, know that the basic needs of becoming a landlord still apply. This is more taxing as a landlord who is not able to quickly be on-hand; however, that does not mean that you cannot manage effectively from a distance.
Communication is Key
The most important element of being out of town is to keep the pathways of communication open and clear. Email is a convenient way to have written documentation of all conversations, but remember to keep your cell on! You never know when an emergency will come about.
Get Your Automation On
You will need to find a way to collect rent that is convenient for both you and your tenant. There are many payment apps that are available. You may elect to have them deposit the funds right into your bank account!
Develop Your Vendor Network
A trusted vendor is worth their weight in gold when you’re not there to tend to maintenance issues yourself. A tenant won’t be happy to wait weeks to have leaky pipes fixed, and you won’t be pleased to travel hours for a simple task. Leaving work orders unresolved is not only bad for business, but it’s detrimental to the health of your investment property.
Inspect What You Expect
Like any other job, you must continually evaluate your renting situation. Your property needs to be inspected (with due notice) at least once a year. This prevents small problems from turning into larger ones. Leaking pipes can turn into foundation damage. Damage from a careless tenant could depreciate the overall value of your investment. There is no substitute for hands-on, eyes-on evaluation of a property.
Hire a Property Management Company
While none of the above necessities for managing out-of-state are impossible to do on your own, there are many complications inherent with taking on these tasks. By hiring a Property Management Company, you’re bringing in a local to do the business for you in their own geographical area.
A few benefits of hiring a local Property Management Company:
Scouting: You need help finding a property to invest in. Without knowing the local housing market and, importantly, the local neighborhoods they cover, it’s easy to find yourself invested in the wrong property in the wrong place at the wrong time.
Local Laws and Regulations: Although there are national Fair Housing Laws, there are local statutes that you may not be aware of that a local Property Manager will be able to help you navigate.
Tenant Management: When automation doesn’t work and you need to demand rent from a tenant or file eviction, a local presence is more able to enforce the lease contract that you and the tenant have agreed upon. A Property Management Company also provides leases that are Fair Housing compliant and legally binding. Furthermore, a Property Management Company handles any and all interaction between what would otherwise be you and the tenant.
Property Management: Of course, your property would also benefit from a Property Management Company! Property Managers not only find quality tenants, but also conduct inspections, have a network of vendors they work with, and can be at your property if any issues arise. They are your eyes, ears and hands on the scene! You can spend all the free time you’ll have relaxing and focusing on your investment strategies.
In short, hire a Property Management Company like Frontline Property Management, Inc. to protect your bottom line and improve your overhead.
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