Real estate investing is a great way to make additional income, or it can even become your sole source of income. Either way, when deciding to manage your property from out of state, there are a few things you should consider ensuring this investment is worth your time and money.
Let Return on Investment Be Your Guiding Light
Find the rental properties that offer the highest return on investment. Auction.com states that by having rental properties in other states, you will have the freedom to invest in more affordable areas than where you currently reside. This may also allow you certain tax breaks as well. Do market research to find the areas that will make you the most money. Dig deeper and look neighborhood by neighborhood to find the best locations. You can even choose to hire a realtor to help you invest in the best locations possible.
Investopedia reminds owners to not just tour the property. It is vital to get an inspection to be sure your investment is wisely spent. An inspection will ensure you budget for any renovations that have to happen before you can rent your property. This will ensure you have the funds to hire the appropriate team to help you run your properties with ease.
Do You Want to Go it Alone or Use a Property Management Company?
This decision is a big one so we will break down both options so you can decide what works best for your situation.
Managing the Property by Yourself
If you are living out of state, you are not going to be able to manage the property completely on your own. Especially when there is an emergency. So even if you are choosing not to use a property management company, you will still need to have professionals working on your side.
Selecting Your Team
Having a great heating/air conditioning repair person, electrician, plumber, and general handyman will be essential if you want to manage the property yourself. Do your research and look for strong referrals. Find the best of the best. Once you find one high-quality professional, ask them for recommendations in the other areas. They often have a network of people that they will highly recommend.
Once you have this team in place, be clear and upfront about how you want to use their specialties. Provide your tenants with their contact information along with a list of when they should call them. You can work out contracts with these individuals ahead of time. This way, if they need to handle an emergency, they can do so without your permission, ensuring the work is done swiftly and effectively, especially in an emergency.
Using the Expertise of a Property Management Company
Do your research! Read reviews and get referrals for companies in the areas where you have rental properties. Spend the time upfront finding the right company to work with. These individuals are the face of your property and how your tenants will judge your property. When interviewing these companies, have a list of meaningful questions that highlight what is most important to you. For instance, you can ask:
- What are your management fees?
- What services do you offer?
- How much experience do you have managing properties and how many current units are under your care?
- How do they determine rents and how much do they think your property will rent for?
- What are their policies around vetting tenants? How do they handle evictions?
- Do they have any current renters who are looking to rent space?
Most companies will take between 6-10% of your rental income. Many reputable companies will be on the higher end; however, this cost is well worth it in the end. These companies often manage a lot of properties so may even save you money in maintenance and repair costs as they can purchase items in bulk.
Systems Make Managing a Breeze
As with anything else in life, systems make your experiences smooth and organized. This will translate to how your tenants see you as well.
Managing the Tenants
You will want to create systems for finding the right tenants, keeping them, and what to do when turnover occurs, whether amicably or via eviction. Think through the things that matter to you and either put them into action or make sure the management company you hire is in alignment with your values.
If working on your own, you will need to think through things such as background checks, evictions, and how to make tenants’ living experiences so wonderful that they never want to leave. Take the time to build this trust with your tenants! It will save you time and money in the long run. Make sure you take the time to build relationships with your tenants. If you take care of them, they will take care of your property!
How to Manage the Property Itself
You will need a system to tackle regular maintenance and repairs. Be clear about whether you will handle all these pieces or if you are expecting your tenant to do the work and be reimbursed. Many property management companies will take care of all these needs for you.
How to Manage the Finances and Business Aspect of Rental Property Investments
Your system should include how you are going to collect rent payments. In today’s technological world, there are so many ways to do this that you will be able to select the way that works best for you and your tenants. Keep your record-keeping neat and organized, which will save you a ton of time come tax season.
Research Local Laws
Realty Times reminds landlords to check local laws before managing properties from out of state to make sure they are following all local and state guidelines.
Find What Works Best for You
Owning rental property out of state can be a great way to make additional income or start a career. Ensure you have what you need to be successful by creating the systems that work best for you!
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