For many new real estate investors, their first thoughts about getting into the market start at home. After all, they have a strong idea of the good neighborhoods, where to find opportunities, and can manage everything out of their homes. However, in certain cases, long-distance real estate investing could provide a better overall return.

Technology and online listings for foreclosure auctions have made long-distance real estate investing possible in the 21st Century. If you’ve never looked into long-distance real estate options, now might be the best time to consider it.

The History of Long-Distance Investing

Before the internet age, long-distance real estate investing was considered a high-risk activity. Investors would have to travel to auctions or tour bank-owned homes and secure financing from a lender well ahead of time. From there, the buyer would have to hire property managers and contractors to complete any repairs before allowing tenants to move in.

The act of long-distance real estate investing became even more tumultuous during the “Great Recession” of 2008. With many mortgages failing, lenders were becoming much more conservative on which loans to fund. Before investors could even think about buying a rental property far from home, they would have to present a business case to the bank.

Once the economy improved and technology made it easier to find foreclosure sales, long-distance real estate investing became feasible and practical for investors. Digital tools made it easier for owners to tour properties virtually, find property managers to ensure day-to-day operations move smoothly, collaborate with their partners on finding qualified tenants, and maintain the property with the right contractors.

How Things Have Changed

Arguably, the best thing to happen to long-distance real estate investing is the rapid rise and development of the internet.

Instead of being relegated to obscure sellers focused on investment properties, technology-driven companies can now list their options online with current pictures and information. This allows investors to make educated decisions about the current state of a property, how much work would need to be done to make a property habitable, and if it would be an appropriate addition to their portfolio.

The internet has also made it easier for homeowners to complete due diligence research on long-distance real estate options. With more and more public records from county clerks, records, and land assessors’ offices going digital, investors can look up titles to ensure there are no liens on the property they need to know about.

Digital records can also help potential buyers understand the sales and price history of any given property, allowing them to project how much their investment could grow over time.

Why You Should Consider Long-Distance Real Estate Investing

There are many different advantages to long-distance real estate investing to consider. First and foremost, investing in a market outside of your home region could give you access to a lower property tax rate. As a result, you might be able to lower your investment home payments and take advantage of a higher rate of return for your investment property.

In addition, searching for long-distance real estate options can give you access to markets with higher rental demand. This can result in increased exposure to a larger qualified tenant pool that features more people who are more likely to stay in properties longer. The longer your property is occupied, the more passive income it will drive over time.

The third reason to consider investing in long-distance real estate is convenience. By outsourcing day-to-day operations to a local property manager, investment property owners may turn a physical asset into a turnkey money-making opportunity, which could drive optimal returns with a lower commitment cost than managing the property on their own.

The Most Common Mistakes People Make

Although there are a lot of positives that come with long-distance real estate investing, it’s easy for first-time buyers to fall into a number of pitfalls. Before looking at investment properties far from home, there are several situations everyone should stop and consider.

One of the biggest issues that come with long-distance real estate investing is how buyers choose markets. While new investors may select a place to invest because it’s a favorite vacation spot, or they have family ties there, not doing the research on job growth or population changes can result in a poor purchase. Before deciding on buying an investment property, new real estate investors should look at hard data about an area, including population growth and job opportunities in the area.

Another mistake in long-distance real estate investing is failing to optimize the return on investment (ROI). Instead of doing their own independent research, long-distance investors may instead turn to a property management company or other partners to set the rent price.

In other situations, a home may already have tenants with an established rent, leading buyers to overpay for a property. Every investor should start their search by doing market research and calculating their potential ROI to make sure their purchase makes fiscal sense.

What to Consider When Investing in Out-of-State Properties

So, you are thinking about long-distance real estate investing, and you’re ready to start researching properties. Before you make your first bid, it’s important to think carefully about which options will fit best into your portfolio.

Your first step should always be researching the area to determine long-term returns. The best markets for long-distance real estate investing share a combination of positive indicators, including a growing population, high job demand, and a diverse economy. If the area you are looking in is depressed in any of these categories, it may not be a good buy.

Second, always project the potential ROI before getting into long-distance real estate investing. Calculating cap rate, cash-on-cash return, and potential cash flow can help you make smart decisions about where to invest, and which properties would be a good fit for your portfolio goals.


If you don’t know an area well, or aren’t sure where to start, partnering with local experts can help you optimize your investment. By working with local real estate agents or property managers, you can take some of the guesswork out of long-distance real estate investing and help drive a better return on investment.

Conclusion

While long-distance real estate investing may feel intimidating at first, the right research can help you find the best opportunities, no matter where they lie. With the combination of technology and local expertise, it’s possible to create long-lasting passive income from almost anywhere in the United States!

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