More real estate investors start by investing in local real estate, but what if buildings in the area are overpriced or there are good deals in another city or state?

Investing outside of your area requires a different mindset than buying property in your hometown. Here are some tips to help.

Study the new region. To get an idea of ​​the well-being of a region, examine the region’s statistics like crime, schools, population growth, median income, and municipality finances.

Population growth is essential, says Mathieu Rosinsky, director of Belmont Associates in Delray Beach, Florida. He’s been looking at population growth over the past 15 years to get a feel for trends. Some of the fastest growing areas are Boise, Idaho; Denver; North Carolina and parts of Florida and Texas.

When you look at population growth, look at the trend in per capita income growth, says Eduardo Gruener, co-founder and CEO of Momentum Real Estate Partners in Miami. The increase in income per capita means that an investor’s net operating income will likely increase as the income of residents increases.

Think about taxes. When looking at the income of residents, keep an eye on taxes. States with high income or property taxes (or both) reduce a real estate investor‘s profits, Rosinsky says. Changes to the federal tax code last year limit the amount people can deduct from income tax and property tax, he says. This makes investing in states like New York and California more expensive compared to a place like Texas, which has low taxes.

Follow the works. If you’re looking to invest outside of your region, look for regions that are experiencing strong job growth, says Los Angeles-based Kathy Fettke, co-CEO of Real Wealth Network and author of Retire Rich with Rentals. It will attract people and stir housing demand. However, she says investors should also consider affordability.

“San Francisco is seeing job and population growth, but it’s not affordable,” she says.

Look for a diverse employment base and watch for new business opening, says Gruener. Good signs include stories about innovative office complexes or companies moving their headquarters to an area.

“Look for the things that are going to happen,” he said.

When Gruener’s company bought property in Dallas, it limited its search to an area with good schools and a good employment base. Then they learned Toyota Motor Corp. (symbol: MT) were planning to open a large office complex near their property.

“We knew Toyota was going to open a new office complex, but they still had to buy the land and build,” he says. Ultimately, “they would move people over there. You always want to look for new opportunities and new jobs.”

Areas experiencing revitalization can be good places to invest, but buyers should be careful. Michael Foguth, founder of Foguth Financial Group in Brighton, Michigan, says investors who bought parts of Detroit five or 10 years ago have seen a return on their investment. However, not everyone did well, he says.

“If you bought from the wrong side of town, you wasted all your money,” he says. “But if you buy in a booming neighborhood, you quadruple your money.”

Parts of Detroit near sports stadiums and other parts of downtown where some companies have recently moved their headquarters or established a significant presence have allowed those areas to thrive, Foguth says. The properties that experience the biggest gains in value are new construction rather than renovated homes, he says.

Look to see where banks are more likely to lend money to investors, Rosinsky says. “It is always a telltale sign because several people are investing in the project or [area],” he says.

Get professional help. You will need help finding and managing property located outside of your area. Fettke says that if you’re using a real estate agent, make sure the person understands you’re looking for investment property, not a primary residence.

“The person helping you should be an investment real estate professional,” she says. “Ideally, they will own it themselves and a lot. “

You will also need a property management company, and ideally a local company. Foguth says remote homeowners can’t be involved the way they might be with local property. This is one of the most important considerations when it comes to daily operations.

“If something’s wrong, you can’t drive down the street to fix it,” he says.

Fettke says before buying a property find a management company to help you control the units.

“Before you close, manage this property by the property manager to see if he will take it,” she said. “They’ll be the first to tell you, ‘Oh no, I could never rent anything over there’ or ‘I won’t go there.’ The property manager is your best bet in finding what he’s ready. to manage.”

The property management company’s fees represent about 8 to 10 percent of the rents collected, she says. You can negotiate the costs, but Fettke says going below 8 percent makes it difficult for property managers to do their jobs.

“They have to hire people and have systems in place,” she says.

She learned the hard way that too much effort was needed to reduce property management costs.

“I had a very good employee who negotiated property management until 5 [percent]”Says Fettke.” It was great until it wasn’t because then the [property management company] couldn’t really do their job, and it didn’t turn out well. “


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