Many real estate investors are curious about exploring other markets but are nervous about taking the plunge. The idea of maintaining a property so far from home can sound complicated to some, but if you're only investing in the city you live in, there's a world of opportunity you aren't taking part in.
Purchasing far away properties may seem risky, and it can be. However, if you do your homework and proceed with caution, it's worth it! As a matter-of-fact, there are certain advantages to buying property out of state that you just can't get when you stay local.
3 Reasons to Invest in Out-of-State Property
- Find your retirement home and pay it off. Many investors purchase a home in a town where they'd like to retire. Then, you can rent it out, whether for vacations or for long-term residences. If you plan right, by the time you're ready to retire, your mortgage may be completely paid off.
- Take advantage of the best markets. If you live in a town where real estate prices are high, you may be limited in what you can afford. If you're willing to look for property out-of-state, you'll open a whole new world of investment. Plus, other states or cities may have lower tax rates that can save you money in the long run.
- Take advantage of tax deductions. If your child goes to college out-of-state, consider purchasing a small house near campus. Instead of throwing money away on the cost of a dorm room, you can make an investment. Allow your child to share the house with a few friends, collect rent from the students or their parents, and pay the mortgage.
Before you invest in property that's far away from home, be sure to thoroughly research the areas you're considering.
It's also a good idea to look at distressed properties, like foreclosures or short sales. These are often deeply discounted, and even though you may need to make improvements before the homes are inhabitable, you will still end up with some start-up equity. This will help offset the expense of buying property in a different state, which tends to accrue costs that investing close to home does not.
You need to act quickly, however. You'd be surprised how fast modestly priced, desirable homes sell. But don't panic and buy property unseen. Instead, line up tours with a number of properties in one day so that you can make sure to see a range of places.