Having been in business for nearly 50 years, and with investment properties all around the country, we’ve worked with many owners and investors who live in areas far from their investment properties.
Owners of rental property know that property management is hard work. You may enjoy it and find it rewarding, but it presents unique challenges. This is especially true when you are doing it from a distance. Here are a few tips if you are a property owner, or are considering becoming one, and are managing a rental property out of state.
Know the Area Where You Own
You might become the owner of an out-of-state rental property a number of ways. The property could be inherited, you may have moved, or you may have chosen to purchase property out of state. In any case, owning that property means you operate in a different market and in different conditions from where you are located.
You should know that market well to be sure you are getting the greatest return possible on your investment. Deep local knowledge will enable you to set realistic financial expectations for the property and position it correctly in the market. For example, knowing about the health of the market, and when rents are rising and when they are falling, will help you maintain a steady occupancy level.
Repositioning your property can also be a very sound investment, but the ROI is dependent on the timing. Now is a good time to reposition if you have a property in Atlanta, but in Denver, you will probably do just as well without repositioning your property. Working with a real estate investment management firm is a good way for you to gain access to expert knowledge about local markets.
You should also be aware of potential risk factors (the crime rate, environmental issues, etc.) and, if you are buying or thinking of buying, it is a good idea to find out in advance what kind of tax bill you can expect for the property. The local landlord association can provide a wealth of information of this type.
Start Small, Reproduce Your Successes, Know Your Limits
If you are working alone, without the aid of an investment firm or property management company, it is generally recommended not to make your first investment an out-of-state property. Like all work, property management is a set of skills that can be expanded and improved upon. Out-of-state management can be thought of as a subset of general property management skills. Consider honing those skills close by the first time, and then on a small asset out of state before expanding in that direction.
You may find that one sector of the market suits you best or that you have particular success with it. Just keep in mind that long-distance management is more complicated than doing it locally and don’t overextend yourself.
Keep in Mind that Management Is Local By Nature
There are concerns that all apartment complex managers face—building codes, fire safety, legal liability, smoking, etc. But the way these are regulated will also be local. Conformity to local laws and ordinances is critical. You have to know the local standards and see to it that they are followed.
A lot of things need to get done at your out-of-state property. Maintenance is required both on a regular basis (cleaning in public areas, for example) and on-call (plumbing emergencies). Knowing a good plumber who will respond quickly near your property could save you thousands of dollars. You may need a dishwasher repairman and a painter and plasterer shortly after the plumber, and the next emergency call could require the immediate presence of a completely different lineup of service specialists.
New tenants must be selected from time to time as well. Thoroughly screening tenants is a critical aspect of risk prevention. For the out-of-state property owner, this is especially true, since the problems they have (or cause) will be more complex for you to solve.
Consider Professional Help
One of the main things we would advise an out-of-state property owner seeking to simplify their life is to consider hiring a property management company to take over responsibility for the day-to-day operation of the property. A management company will charge for its services, of course, but effective management saves money by filling vacancies faster than you could and proactively working to prevent situations that lead to expensive outlays. You have less to do that way and greater peace of mind.
The experience and reputation of property management companies can be easily investigated. Here again, screening is critical, as poor service from a management company can have a snowball effect on conditions at your property.
Some companies do both property management and investment management. There are a number of benefits of working with these companies. Besides taking care of property management concerns, a company like this can provide you with an exit strategy from the asset at the appropriate time and offer a range of new investment options that would be hard to match by a single individual.
Professional investment managers are likely to have a better understanding of the market than the average property owner. They can also offer services to make investing easier, such as handling due diligence or accommodating 1031 exchanges.
CWS Capital Partners can help with every aspect of property investment, from acquiring a property to managing it and eventually exiting from it to pursue new opportunities. We believe that directly managing properties creates greater capacity for us to help our clients identify and acquire the best investment opportunities and achieve strong returns. Contact us today to get started with your real estate investment strategy.
The information provided here is for your general informational purposes only. It should not be considered a recommendation or personalized advisory advice. CWS has made this third party information available from authors it believes are knowledgeable and reliable resources. However, its accuracy or completeness cannot be guaranteed and sentiment may change due to legal or economic conditions.
All investments involve risk including the possible loss of principal. You should familiarize yourself with all risks associated with any investment product before investing.
Advisory services are provided by CWS Capital Partners LLC, a registered investment advisor.
Securities offered by CWS Capital Partners LLC are through an affiliated entity, CWS Investments. CWS Investments is a registered Broker Dealer, member FINRA, SIPC.