6 Things to Know Before Investing in Real Estate Outside of Your Market
Investing in cash-flow real estate is an excellent way to build wealth. However, many investors find themselves in a situation for one reason or another where they cannot purchase cash-flowing real estate in their local market. If you find yourself in this situation, your only option may be to purchase property in another market, and this can present several challenges. Purchasing real estate outside of your local area can be done successfully, and if you pay attention to the things below, you will increase your chances of success dramatically.
Find the Right Location
When it comes to real estate, you have probably heard of the first three rules: Location, Location, Location! The location of the property is probably one of the most important factors you can choose. When considering cash-flow investment properties, you should be looking for working class neighborhoods that have well cared for homes. These are the best locations to invest in because these neighborhoods have a higher demand for rentals, and they are more reasonably priced creating potential for higher returns.
Find the Right Closing On A House Problems Property
When purchasing rental property, you need to make sure you are purchasing properties that will give you the best chance for success. You should be looking for “bread and butter” rental properties which can be defined as properties that meet the following criteria:
Sized at 800 to 1200 square feet
3 or more Bedrooms
Has a basement
Has a garage How To Sell Your Home Decor
Homes that meet these criteria are called bread and butter properties because they meet the demand of most prospective tenants. By purchasing properties like these, you will have the largest pool of prospective tenants to rent to, and thus your rents will be higher and your vacancy rates will be lower.
Find the Right Tenants
Your tenants are one of the biggest keys to making a real estate investment property successful. If you select the right tenants, you will reap the returns you expect. However, if you select the wrong tenants, your investment can become a liability very quickly. The key to finding the right tenant comes down to conducting the proper tenant screening. This includes:
Proof of income
If you make these checks you will get a very good idea about the prospective tenant and you will be able to make an informed decision whether to rent to them or not.
Get the Right Protection
An old joke with real estate investors is that the definition of a tenant is “a plaintiff”. Of course it is not true that you will get sued by every tenant, however, the point is that there is a high likelihood that you could get sued while investing in real estate. Therefore you need to protect your liability, and there are several strategies that you can and should implement to protect your liability. These strategies normally include how you setup your entity structure and the insurance you have for your properties. Before making any decisions about your entity structure or insurance you really should discuss them with a real estate attorney.
Set Your Business up Right
To make the most out of your investment you need to have your business structure and taxation setup properly. There are many opportunities for tax planning while investing in real estate, and making the proper plans can save you a lot in taxes. Everybody’s situation may be slightly different, and therefore you should discuss your real estate investment goals with a CPA experienced in working with real estate investors.
Find the Right People
To invest in property outside of your area, one of the most critical things to do is to find the right people to invest with. At a minimum, you will need a real estate agent, a property manager, a general contractor, a CPA, and an attorney. Finding all of these professionals in the market you are looking to invest in can be a very difficult task, however there is an alternative. Rather than try to find all of these professionals yourself, you can decide to work with a company that specializes in putting together turnkey investment properties. The advantage to doing this is that you will be working with a company that has already established all of these contacts, and they will have a very good idea about the real estate market they work out of.
Michigan Turnkey is an example of one such company that provides turnkey rental properties for investors around the globe. They use a system that incorporates all of the elements discussed above to find the right location, the right property, and the right tenants. Additionally, they can help you get your business structure set up to provide you wit the proper liability protection and maximize your tax benefits. Working with a company like Michigan Turnkey can eliminate many of the hurdles you will face as a remote investor and will increase your chances of success dramatically.