Even if you’re a novice real estate investor, one thing you likely know is that many real estate markets today are simply unaffordable for new investors. For example, the average home in San Francisco goes for $1.8 million, making the purchase of an investment property out of the question for many of today’s investors. Given the popularity of real estate as an investment tool today, though, there are other options, and many are looking toward long-distance real estate investing as the answer.
What Is Long-Distance Real Estate Investing?
There are a variety of strategies involved in long-distance real estate investing. It involves researching fast-growing markets, or markets with strong rental potential, purchasing properties, and then finding tenants to rent them. But you could also invest in flipping those properties as well. In fact, the simple truth is that long-distance real estate investment could actually fit any major real estate investment strategy you already have in place. It means a chance to hedge your bets; to diversify your real estate holdings so that, should one market where you’re already invested get bumpy, others may prove quite lucrative at any given time, thus maximizing your overall returns.
Is It Safe to Invest Thousands of Miles Away?
Decades ago, long-distance real estate investing was truly a risk. Markets hundreds or thousands of miles away from you were tough to break into because you just didn’t have any data about that market unless you had a fairly vast network feeding you information. Today, though, things have changed extensively. Through online research, you can learn more about the rent in any given area, the reputation of any given contractor or real estate agent, the price of lumber and other building materials should you need to renovate, and more. By reaching out to agents or even wholesalers, you can quickly get a video of both the interior and the exterior of the property you want to purchase. Thanks to online listings sites like Zillow and Trulia, you may have access to thousands of pictures even without the agent. Should you need the assistance of an agent, contractor, or someone else, you can vet potential options through those same websites, or independent third parties. The bottom line is that, while it’s still not easy to pursue long-distance real estate investing, it’s safer than ever, and it could mean taking advantage of some excellent options to add to your portfolio.
What to Consider
If you’re searching for the ideal long-distance real estate investment, there are a few things to consider. You’ll want to find the right emerging markets. You’ll want a choice with a diverse economy. Areas in which just one economic sector is experiencing growth can be problematic, should that sector begin to take a downturn. Additionally, look for markets that have good schools, low overall crime rates, and growing demand for rental units. When you find a market that looks interesting, start taking a closer look at the numbers. If you’ve never made a real estate investment before, the learning curve can be fairly sharp, but you’ll want to calculate key metrics like the cap rate, the gross yield, and the net cash flow of any given property. Naturally, you’ll also want to look at the overall return on your investment to be sure the market itself is worth it.
The final step in the process is to build a team of local experts that can help you be in more than one place at a time. Partnering not only with a real estate agent or team that specializes in investment properties, as well as contractors and property managers, will help you make the most of your investment.
Keep in mind that this isn’t an easy process. Many investors choose a market for the wrong reasons. For example, selecting an area that’s great for family vacations may not always be the right choice. Some investors also choose to depend on family members to be their eyes and ears in a given area, and that may not be the best choice if those family members aren’t experts in real estate. Instead, it may lead you to accept mediocre returns.
With the right strategy and research, however, long-distance real estate investing may prove the perfect way to diversify your portfolio. Buying an investment property is always a challenge, but at Roy & Company, we can help. Whether this is your first property or you’ve been doing this for decades, we’re your nationwide real estate investment property partner. To learn more about how we can help, contact us today.
