Introduction
When investing in rental property out of state, properly evaluating its location becomes critical yet challenging. Here are some tips for researching a property’s neighborhood and location when you can’t visit in person. While staying close to home seems to be a better choice, you may have solid reasons for deciding to invest out of state. If so, make sure you do your research, particularly when choosing the location:
- Speak to local real estate agents about crime rates, school ratings, development plans, and general livability. Ask for their unfiltered opinion on the property’s street and neighborhood.
- Study migration patterns – areas attracting new residents or businesses may be better investments.
- Look at commute times to job centers. Short, convenient commutes translate to good tenant demand.
- Consult online resources like the National Sex Offender registry, crime maps, and sites with neighborhood demographics and statistics.
- Search for information on planned local transportation and developments which could positively or negatively impact property value.
- Cross-reference multiple data sources to get an accurate picture. Drive the neighborhood virtually with tools like Google Street View.
- Consider traveling to the area briefly before finalizing an investment, even for a few days, to tour homes and neighborhoods plus meet area property managers. Or enlist a friend or relative in the area to conduct an in-person site visit.
- Factor in not only the home itself, but amenities, schools, and the area’s market conditions and price trajectory. An incredible rehabbed house won’t overcome challenges with location.
With some diligent research into public data, honest input from locals, plus your own informed analysis, out of state investors can still make savvy decisions about a rental property’s long-term viability from afar. Make sure you fully do your homework by checking out What You Need to Know About Investing in Richmond Real Estate When You Live Out of State, including Research The Local Market, Understand the Local Laws and Regulations, Analyze the Return on Investment, and Work with a Professional Real Estate Buyer.
Signs of a Good Investment Location
When investing in an out-of-state rental property, it’s crucial to evaluate the location thoroughly before making a purchase, since you likely won’t be able to visit frequently. There are several key signs of a promising investment location to look for.
First, research the area’s development plans. Is the city or county investing in new infrastructure like roads, parks, and amenities? Are nearby neighborhoods expanding or adding attractions that could raise property values? Growing development is usually a positive indicator.
Additionally, examine school ratings and test scores for the neighborhood. Good schools tend to increase interest and demand, especially among families looking to rent. Combine this data with average property appreciation over the last 5-10 years.
Finally, determine commute times to major job centers and evaluate public transit access. The ability to conveniently travel to work is very influential for renters. Locations with easier commutes typically garner strong tenant interest.
Doing your due diligence on these key location factors—development plans, school performance, and commute analysis—can reveal the most promising areas for rental investment returns.
Hidden Cost Factors
When investing in an out-of-state property, it’s important to understand all the costs beyond just the purchase price. Three key expenses that are easy to overlook when buying from a distance are property taxes, homeowner association (HOA) fees, and insurance rates.
Property Taxes
Property tax rates and assessments can vary greatly by region and neighborhood. Make sure to research the property tax history for any area you are considering. Ask what the average effective tax rate is for both residential and rental properties. In some areas, out-of-state owners may pay higher property tax rates. Plan for possible increases as well.
HOA Fees
If the property is part of a homeowner association, there will likely be HOA fees to pay on a monthly or annual basis. These fees cover maintenance and improvements of shared amenities in the community. Make sure to find out what amenities are included and get a breakdown of how the fees are used. HOA fees can rise over time so it’s important to budget for potential increases.
Insurance Rates
Home insurance rates for rental properties are often higher, and can be more expensive for out-of-state owners. Make sure to get quotes from multiple insurance providers in the area. Ask how common natural disasters are as this significantly impacts premiums. Also keep in mind that lack of on-site management may increase your costs.
Understanding these key hidden fees will help you make a realistic assessment of the total costs and returns from an investment property. Consulting with a local real estate professional can provide greater insight as well. With the right information, you can determine if the location truly aligns with your investing goals. When you have questions, reach out to the We Buy Houses in Richmond, VA company.
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