“The best investment on Earth is earth.”
This quote stresses the significance and the profitability of real estate investments. Real estate has been one of the oldest yet most credible and trusted troughs for investors to grow their fortune - it keeps up with inflation and it multiplies in value. Investing in real estate has been practiced for generations. Real estate investments offer low-risk leverage compared to the stock market. However, long-distance investing raises several benefits and concerns.
Potential landlords consider long-distance real estate investment for many reasons. For example, your hometown may be highly saturated overpriced market. You may want to benefit from low real estate prices that offer better rent on investment, improving your cash flow. Modern-planned communities in other states or countries could offer faster appreciation.
You are probably thinking, long-distance relationships don't always work! How would investing work? We are with you on this. Investing and managing properties remotely can often be a challenging quest, but is certainly doable and has the potential to render exceptionally worthy results. If you are wondering whether this is the right option for you, let's look at the pros and cons.
Pros of investing in long distance real estate##
Opportunity to benefit from affordable yet profitable investment##
For landlords who live in expensive locations like New York or San Francisco, long-distance real estate allows you to find better deals elsewhere. Moreover, other states and countries may have lower property taxes.
Diversification from local economy##
Different towns offer different economic opportunities. While some areas may have more jobs centered around coal-mining, others may be centered around health care, or technology, or car manufacturing. Hey, you may even get oil by just drilling a hole in some places. Diversifying the location helps to reduce the impact of economic ups and downs in one industry impacting the local real estate.
Afford better neighborhoods##
An old house in a location with great schools, low crime rate, and desirable amenities may cost a whopping 2.5 million dollars in San Jose, California. However, you may be able to get a comparable home and location for a few hundred thousand dollars in the mid-west. This attracts long-term tenants who want their kids in great schools. Conversely, a few hundred thousand dollars gets you a less desirable neighborhood in San Jose. Location evolves slowly, if at all. Use Trulia and other local law enforcement data for the heat crime map.
Freedom to own a foreign home for various purposes##
While a long-distance investment helps with cash flow and pays for its mortgage, the property can also be used by the landlord between tenants. It can be a great place to vacation, or accommodate kids attending college, etc. With the advent of online lodging marketplaces such as AirBnB and VRBO, the property can generate additional revenue.
Opening options for your_ _retirement or relocation##
Investing in long-distance real estate opens up opportunities to relocate there for work or retirement. If you spend summers in Alaska, Florida is certainly inviting in winters! Until it is time to retire, the rent helps to pay off mortgage, cover your living expenses, or may even add to your retirement savings!
[Read about how to invest in real estate for financial freedom] (/blog/16-steps-in-30s-for-financial-freedom-in-40s)
Cons of investing in long distance real estate##
Less familiarity with the market and its prevalent trends##
Different locations will have drastically different dynamics from those prevalent in your local real estate market. In some cities, neighborhood changes by the street - this impacts the price of the house, the rent, and the tenants you get. Although most of these challenges can be addressed by hiring proficient and trustworthy realtors to educate you, it still requires effort on your part to make the right decision. Likewise, you need trustworthy property managers - finding such individuals or companies requires work and research on your part.
Who's going to fix it?##
Owning a property in an unfamiliar location brings the challenge of finding contractors and repair services. You cannot be there to supervise the contractor's work and you've to take their word for it. While the contractor may send photos, it's not the same as inspecting it in person. A good property manager will have the right connections to help you with this. HomeKasa makes it easy to find service providers, schedule and manage work, and pay them - all from one place.
I thought I could trust you - Trusting others a little too much!##
Handling a property from far often seems impractical in the basic sense since the landlord cannot be a part of the regular property management process. Hence, the intervention of a property management agency or a trusted individual is essential to check on the tenants, look after the property, and ensure its upkeep. This is usually the biggest impediment to long-distance investing.
Don't forget to read Allen Steigman's success story. He lives in Parkland, Florida is is the top real estate agent in Atlanta, earning over $2 million on 2021!
Long-distance real estate investments offer a somewhat hands-off approach to growing wealth. It has the benefits of a higher return and / or better cash flow. While property managers are expensive, some of the costs can be offset by using HomeKasa. We make it easy to manage properties remotely - you can advertise your home for rent, screen tenants, collect rents, schedule repairs and maintenance with our cloud-based software. You can take advantage of our free software - get started now.