When considering where to invest in real estate, investors take very different approaches. While some take over their city one property at a time, others open themselves up to investments anywhere across the US housing market. The best investment property for sale might be within driving distance or plane distance. Read on to find out everything you need to know about local vs. non-local real estate investing.
Should I Invest in Local Real Estate?
Finding an investment property for sale in your area could be highly rewarding if your local real estate market is in good shape. Here are some of the best reasons to invest close to home:
Reduced Costs
One of the biggest advantages of finding an investment property for sale nearby is that you’ll generally encounter lower costs. If you’re buying a rental property out of state, many financial institutions will view your real estate investment as high-risk. This means you may end up with a subpar mortgage agreement. The same is definitely true of insurance rates, which can become a major cost. By investing close to home, you can guarantee the best rates for your investment property.
Convenience
Finding an investment property for sale locally could be a great idea if you intend to manage the rental property yourself. Being nearby allows you to stay on top of your tenants’ needs and ensure that things can be taken care of efficiently. This also allows you to shave off property management costs, and therefore increase your return on investment.
Related: When Is Professional Property Management a Good Idea?
Professional Network
Investing in a housing market that you already know allows you to take full advantage of your network. After a number of years of investing, you’re sure to have created great connections with agents, property managers, local banks, local insurance companies, and others. Finding an investment property for sale near you, therefore, means you can utilize your local real estate network to make sure your investment goes smoothly. If you’ve invested in your market before, your connections can be very useful — not only when searching for an investment property for sale, but also when acquiring, inspecting, maintaining, and managing it.
Local Knowledge
A huge advantage of investing close to home is that you’ll probably know everything you need to know about your city. Your local knowledge could inspire you to make great real estate investments by choosing the right location and knowing the ins and outs of your city’s submarkets.
Nevertheless, this shouldn’t be a green light to invest where your heart takes you; if you plan on investing in a certain neighborhood, for example, make sure you have the numbers to back up your decisions. Running an investment property analysis and neighborhood analysis are definite must-dos, even if you think you know the real estate market well.
Use Mashvisor’s real estate investment tools to find the perfect location to buy an investment property- whether it’s close to home or out of state!
Should I Invest in Out of State Real Estate?
Investing far from home is an idea that scares a lot of property investors. Many feel that out of state real estate investing is very risky and keeps them from managing it properly. However, there are plenty of fantastic reasons for finding investment properties in other cities or states.
Better Return on Investment
While it may be easy to invest nearby, investing far away can be a lot more profitable. That’s because not all housing markets are created equally, and some offer significantly higher returns — and much better real estate deals. For example, you may live in the Chicago real estate market but Mashvisor’s data shows that the Nashville real estate market can be more profitable (for traditional rental properties). By finding an investment property for sale in another market, you’re no longer at the mercy of your local market’s conditions. You’ll have the ability to find the best markets in the US, and go directly for those which offer very high returns. If you expand your view, you have the chance to go after the best places to invest in real estate.
Related: What Is a Good Return on Investment for Rental Properties?
Better Insurance Rates and Lower Taxes
The taxes which must be paid on real estate can vary dramatically across the US. Selecting an investment property for sale in a market with lower property taxes can, therefore, be a huge advantage. The lower taxes mean lower costs overall, which can have a substantial impact on your return on investment. The same is true of insurance rates, which can vary dramatically depending on where you decide to invest. Savvy real estate investors will be cautious of these ongoing costs, as they can make or break an investment in the long run. Your investment property search should take into account factors such as the added cost which will arise in different areas.
Better Regulations
Laws that govern real estate investing can vary dramatically. By choosing a region with more relaxed regulations regarding rental income properties, you can save yourself quite a bit of headache — and legal fees. This is most true if you intend to invest in an Airbnb rental property. This property type is very highly regulated in a lot of areas, which can make it much less profitable.
You Can Make Passive Income
One of the biggest advantages of securing a rental property for sale away from home is that you can make passive income. Once you’ve found an out of state rental property the offers a very high return on investment, all you have to do is hire the right property manager and wait for your income to start flowing! This model of long distance real estate investing gives you a lot more freedom with your time since you won’t be caught up in the day-to-day operations of your property. More time on your hands means more time that you can spend finding your next real estate investment.
Related: How to Actually Make Passive Rental Income
Better Real Estate Appreciation Rates
Finding an investment property for sale outside of your city allows you to look at the real estate markets with the best appreciation rates. If your area is not booming economically, investing far from home can be a smart idea, as your income property will build significantly more value as years pass by. That means you can use your long distance investment as a source of passive income for years, and then resell at a substantial profit once appreciation kicks in.
Bottom Line
Depending on your investing style, you’re sure to find the best real estate investments locally or further away. Knowing how to find investment property for sale is crucial, regardless of whether you’re investing locally or nationally. Running a real estate market analysis shouldn’t be overlooked in either case and having the right tools for the job can make your investment a success.