Alt tag: Keys to a new out-of-state property
Common Myths About Out-of-State Real Estate Investing
Investing in real estate has always been popular. Many people dream of owning enough properties to live off the “passive income.” However, investing in real estate out-of-state carries a lot of negative connotations and myths about how risky and demanding it is. The reality of the situation is that both those who over exaggerate the profitability of owning real estate and those who think it’s tremendously risky believe in unfounded stories. Such a way of thinking can lead to both missing out on opportunities and getting in trouble over lack of preparation, which makes them equally bad. To help prevent such situations from happening to you, we have concocted a list of common myths about out-of-state real estate investing!
You need a lot of money to do it
One of the most common myths about out-of-state real estate investing is that you need to be rich or very well off. People believe it is a luxury and a significant expense, which is not true at all. In fact, it is not any more troublesome or expensive than it would be to buy a house for yourself locally. If you are worried about the need to invest a lot into making the property appealing to renters, don’t be. They are people just like you and are simply looking for a suitable property to rent with decent conditions. Of course, it is common not to have enough money lying around to afford several properties outright. So, the key is starting small. Buy a single property first. With a good mortgage, it will be easily affordable. From there, use the rent to pay off the mortgage and slowly save up for more investments!
Caption: If you draw up a reasonable budget, you might even be able to avoid a mortgage!
Alt tag: A budget plan
Risks outweigh potential gains
Many people believe in the myth that the risks of investing in real estate are too great. The price of property can fluctuate and leave you with a significant loss, they claim. Or they insist that you will not be able to guarantee renters, and your property might become just another burden and expense.
First, we do have to acknowledge that, yes, buying property does carry some risk. However, such risks are negligent and are, in fact, scarce worst-case scenarios. Better yet, there are ways to mitigate the risks. The way to do it is simple: buy property in a location you might feel tempted to move into. For instance, say you live in Florida but would love to experience a bit of winter, you may decide that Ohio is a good place for your investment. You can even move to the new place and rent out your current property instead! If you feel drawn to organize an interstate move, make sure you hire movers for such an endeavor. Leaving Florida to settle in Ohio will be a lot easier with good help. And failing to find renters for your new property might motivate you to relocate and try your luck with renting your Florida home!
Tenants will damage your property
This is the most ridiculous of the common myths about out-of-state real estate investing. Just imagine yourself in their position. Would you want to live in a run-down home? Everyone wants to live in a nice, comfortable environment. So, the tenants would be inconveniencing themselves a lot more than they would be inconveniencing you. The notable exception would be if you were planning to rent property to college or high school students living away from home. They might cause damage to your property, but only because they don’t know how to properly look after it. There is a delicate balance to be struck when pandering to students. But you do not need to! You can focus on families or working professionals who know how to take care of a house.
Caption: You can specify you are renting only to families or working professionals in your notice or flyers!
Alt tag: A ‘for rent’ sign
You need to always be on hand to deal with issues
Some people believe that being a landlord means you have to be available 24/7 in case of issues or emergencies. Such situations are infrequent, really. As we have mentioned before, most people are very motivated to look after their living space. Even if a problem does occur, tenants often solve it on their own. Things can get tricky only if a truly major crisis happens, like plumbing issues or an appliance breaking down. However, you can easily solve this by planning ahead. Scout out the plumbers, handyman, and stores in the area ahead of time. You can even contact them and explain your situation. This way, you can make arrangements and, if something does happen, a solution is a phone call away.
Caption: Forming a long-term working relationship with the local businesses can also earn you discounts.
Alt tag: A handyman at work
You need to do all the repairs yourself to turn a profit
A common myth but somewhat ridiculous. Do you do all the repairs and work in your own home? Of course not; that is what professionals are for. Besides, even if you pay for professional workers, such issues are not frequent enough to hurt your profit margins. Requiring professional help once a year is not that costly. Not to mention that is a grossly negative outlook and unlikely to happen! Major work or repairs are not so common to present a problem.
Buying a fixer-upper is always and immediately profitable
Many people dream of buying a hidden gem, uncovering its brilliance, and making tons of money renting it out or reselling it. Unfortunately, the reality is not so rosy. The chances are that after making essential repairs to get everything back in order, you would be barely breaking even. And that is not accounting for the fact that you need to make the property appealing enough to resell it or rent it for a high price. A lot of people even go overboard and do projects that do not add to a house’s value, further compounding their losses.
It is purely passive income
Another of the common myths about out-of-state real estate investing is that being a landlord is entirely passive income. Particularly with the growing popularity of real estate investment among millennials. The truth of the matter is, you will have to get involved at least occasionally. We have already discussed how you can mitigate the costs and your involvement, but they are still inevitable once in a while. So, if you want to just lay back and relax without worrying about further investment or work, stocks might be a better option.
Final Word
There is a lot to be said about the common myths about out-of-state real estate investing. We hope that our list of them makes you a bit more aware and prepared for wading into the world of property investment. However, as long as you use your judgment, properly prepare, and do not allow myths to drive your expectations, we are sure you will be successful!
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Read our list of common myths about out-of-state real estate investing and learn about the actual situation regarding owning property.
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