But if you are already investing in out-of-state real estate, I understand why you would think otherwise. Nonetheless, I still think investing in out-of-state real estate is not a good decision and these are the reasons.
You won’t get the best team
Even though you are the one who will be investing, there are dozens of other people whom you need in your venture.
For instance, you might need a local investment partner to get a big deal, a reliable property manager to take care of the property, a good real estate agent who will help you with the deal, a contractor who will plan and oversee the renovation, construction, maintenance work, an accountant who will manage your accounts for the out-of-state ventures, an attorney who will handle the legal work, an eviction attorney, a maintenance personnel, and a few others.
It is not easy to build up a good team with the mentioned post-holders above. Even if you find a few good ones, the other ones may turn out to be lazy and you won’t even realize it the person you hired for your work is playing PUBG on his phone instead of looking into the matter at hand.
When you are investing in your own town, you can just go and check the progress and how your team is doing. But this is not possible when you invest far from home. You can’t go driving hours to solve small problems and then return again. This is just too much work and seems unnecessary.
Difficult to get better deals
Let me explain it with my example.
Well, I have moved herein my are a almost more than a decade ago and I’ve started real estate investments soon after I moved here. You can say that I know my way around here.
Whenever a new opportunity to invest is created in my area, I know about it almost immediately. Also, there is no way someone out of the town will get the deal with better terms before I get the chance to seal the deal.
This will happen when you look for opportunities far from your area. The local investors won’t give you the opportunities to get the “too good to be true”deals and you’ll only end up with the deals that you may find the term unreasonable. That’s why it’s better to look for investment opportunities in your own area where you have higher chances of sealing good deals.
New area, new laws
Every state has different laws for real estate. When you target a state or an area, you need to build your legal structure on the basis of the state laws.
Imagine you spend 5-10 years to set up your legal structure completely as you dealt with several assets over the years, only to shift to another legal structure that you’ll have set up as you keep making deals.
This is too much work for some “not so great” deals, even for veteran investors who have been in the market for several decades.
However, you still can invest on out of state properties but make sure you have a great team and you’re doing it on a grand scale so that shifting from one legal structure to another seems justifiable.