Real estate can be a powerful wealth-building tool. However, many investors limit themselves by only looking locally. Investing out of state opens up a world of opportunity—if you do it right. Remote real estate investments can offer better returns, lower entry costs, and diversified risk. But without the right strategy, the results can quickly turn costly.
Before diving into new markets, understand the basics, plan with purpose, and rely on proven methods. Here’s how to invest out of state the smart way.
Why Consider Investing Out of State?
Your local market may be overpriced or yield low returns. In contrast, other cities offer better cash flow or strong appreciation. Out-of-state rental properties often allow investors to enter at lower costs and with better long-term gains.
For example, someone in Los Angeles might find Detroit or Kansas City far more affordable. This doesn’t mean these cities are risk-free. But smart research makes all the difference.
Start With Market Research
A savvy investor never enters a deal without careful consideration. Begin by researching different markets using data-driven platforms. Look at:
- Average property prices
- Rental demand
- Population growth
- Job market trends
- Landlord-tenant laws
Use tools like Roofstock, Zillow, and Mashvisor to compare locations. Avoid places with declining populations or poor economic outlooks. Seek areas with steady growth and strong job markets.
Build a Local Team You Can Trust
Since you won’t be there physically, a reliable local team is crucial. Your team should include:
- A real estate agent familiar with investors
- A trustworthy property manager
- Local contractors and handymen
- A real estate attorney, if needed
These professionals serve as your eyes and ears on the ground. Choose people with proven experience in remote real estate investing. Interview multiple professionals and always check references.
Understand the Financials Before You Buy
Crunch the numbers on every property before making an offer. Use investment calculators to measure:
- Cash flow
- Return on investment (ROI)
- Cap rate
- Vacancy rate
- Maintenance estimates
If the numbers don’t work, walk away. Emotional buying is a recipe for disaster. Smart real estate investing requires discipline and logic.
Visit Before You Commit
Technology makes remote investing easier, but nothing replaces seeing the property in person. Make one visit before closing, especially if it’s your first time buying there.
Check the neighborhood, speak to locals, and drive by similar properties. If a visit isn’t possible, hire a trusted inspector and ask for a detailed video walkthrough.
Use Turnkey or BRRRR Depending on Your Goals
There are two common strategies for investing out of state:
1. Turnkey Properties
These are fully renovated homes with tenants in place. They offer instant rental income and minimal hassle. Perfect for hands-off investors.
2. BRRRR Method (Buy, Rehab, Rent, Refinance, Repeat)
This method builds equity fast but needs more oversight. It’s best for experienced investors with strong teams.
Select options based on your comfort level, available resources, and long-term objectives.
Property Management Is Non-Negotiable
A solid property manager handles everything from tenant screening to emergency repairs. They keep your investment running smoothly. Make sure they:
- Are licensed (if required)
- Have solid reviews and referrals
- Provide transparent reporting
- Understand your property type
Don’t go cheap here. The wrong manager can cost more than they save.
Financing Your Out-of-State Property
Obtaining a loan for an out-of-state property is similar to securing a loan for a local purchase. However, some lenders may require higher credit scores or down payments.
Common options include:
- Conventional loans
- DSCR (Debt Service Coverage Ratio) loans
- Portfolio loans
- Private lending
Work with a lender who is familiar with out-of-state real estate investments. They’ll guide you through the specific requirements of each market.
Know the Legal and Tax Implications
Each state has its own landlord laws and tax codes. Learn the rules in your target market. You may need to:
- Register your LLC in that state
- File taxes in multiple states
- Comply with specific eviction timelines
Consult with a real estate attorney and a CPA before making a purchase. They’ll help you stay legal and maximize your tax savings.
Common Mistakes to Avoid
Many first-time investors repeat the same avoidable errors. Watch out for these:
Overestimating rental income: Always base numbers on local comps, not guesses.
Skipping the inspection: Even if it’s a “deal,” get a licensed inspector.
Ignoring local laws: Failing to comply with local regulations can result in fines.
Hiring the wrong team: Vet your manager, agent, and contractors well.
Underestimating expenses: Plan for maintenance, vacancies, and repairs.
Smart investing means preparing for what could go wrong—before it does.
Track Performance and Stay Engaged
Even with a great team, don’t go hands-off completely. Review monthly statements. Ask for regular updates from your manager. Watch your investment like a business.
Use software like Stessa or AppFolio to stay organized. If something doesn’t look right, ask questions. Being involved protects your income and your assets.
Scale at the Right Pace
Once your first out-of-state property succeeds, it’s tempting to buy more quickly. But smart investors grow with intention. Analyze each new deal as if it’s your first.
Keep these principles in mind:
- Never compromise on location
- Stick to your numbers
- Only work with people you trust
- Don’t buy just because you can
Scaling too fast can break your business. Grow with purpose, not ego.
Success Comes From Strategy
Starting to invest out of state may seem intimidating at first. But with the right approach, it can transform your financial future. Focus on research, build a reliable team, and stay actively involved. Smart systems and careful planning lead to long-term success.
Remote real estate investing is no longer just for pros. You can do it, too—if you stay smart, cautious, and strategic every step of the way.