Managing Out of State Rentals
A great way for you, as a real estate investor, to build wealth and earn a passive income is through the ownership of cash-flowing rental properties. Passive income is the profit earned by investors after the mortgage and expenses have been paid through the rent that is provided by the tenants living in the property. One of the ways to grow your portfolio and increase your cash flow is by investing in out-of-state rental properties. There may be some initial hesitation because there is a risk to going out-of-state but in this post we will explore three steps you can take that will provide you with the confidence needed to expand your rental property portfolio out-of-state and into new markets.
1) Hire a property manager
Hiring a property manager allows for you to have someone located locally that would be able to manage the property or properties for you. A property manager helps you collect rent and performs any maintenance requests that arise from the tenants living in the property. Before hiring a property manager, be sure to do your research for that area and narrow your list to two or three final choices. Once you have that final list, reach out to the property manager and ask for references from current or former clients who can help you make your final decision.
2) Build a reliable real estate team
In addition to hiring a property manager, research the area and build a network of contacts with vast knowledge of the local market who can help you mitigate some of the risk associated with out-of-state rentals. These people can be trusted industry professionals such as appraisers, inspectors, and real estate agents. Having them as a part of your real estate team can help you find properties that fit your criteria (i.e. budget and location) as well as perform onsite inspections to confirm the condition of the property. Having a trusted team of industry professionals can provide you with the confidence you need to grow your rental portfolio with out-of-state properties.
3) Thoroughly screen tenants
Another key factor towards owning a successful rental property is the quality of the tenants. A bad tenant can ruin even the best property so it is extremely important to screen tenants before allowing them to rent your property. Conversely, having excellent tenants can alleviate some of the stress with owning rentals, especially properties that are out-of-state, and can be dependable to pay rent on time and take care of the property as if they owned it. Check out our blog post on screening tenants to see some of the steps you can take and what to look for when taking rental applications.
As stated earlier, owning rental properties is one of the best ways for real estate investors to build wealth and gain multiple streams of passive income. Owning a rental property out-of-state may seem like a bigger risk than owning an in-state rental but these three tips can be applied to help you make smart decisions that lead to smart investments. At Lima One Capital, we provide a suite of industry-leading rental products that are designed to help investors grow their rental portfolio with the speed and efficiency needed to close deals quickly. To learn more about Lima One Capital’s suite of Rental products click here.
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