Landlording An Out Of Town Property
By JD Esajian on May 10, 2019
You never know where you will find your next real estate rental opportunity. There are times when you are presented with a deal that may not fit exactly what you are looking for. The numbers may make sense, but the property isn’t in a market you have previously invested in. This doesn’t mean you shouldn’t pursue it, but you do need to consider how you manage it.
The strength of any rental property is strong management. This is the case whether the property is five minutes away or five states over. Most rentals will not be in the perfect location and will cause you to change your strategy. Never turn away a deal simply because it is farther away than you would like. You can make it work, but there are some things that will be different. Here are five tips on landlording an out of market property.
- Build A Solid Team: With a rental property that is local to you, it is easy to hop in your car and handle issues as they happen. With a rental property even a half hour away it is not that easy. Nobody wants to be pulled from what they are doing and drive thirty minutes each way. The solution for this is to build a solid team of local personal. You should have people in place that can handle everything from a leaky faucet to a broken lock. It will take some time getting people you can trust and are comfortable with, but once you do it will be invaluable. Tenants are constantly reaching out to you with issues and concerns on the property. Unless you are prepared to spend a few hours a week in your car, you need to have people near the property that can handle a task in short notice.
- Find Good Tenants: There is no such thing as the perfect tenant. However, there are several who are pretty close. It should go without saying but a good tenant will make your life so much easier. Instead of worrying about petty complaints and minor issues, you will feel comfortable knowing that your tenant has the best interest of the property in mind. Finding a good tenant starts with proper screening. Never rush the application process simply because you don’t want to drive to the property or answer emails. The decision you make on a tenant will impact the property for the duration of the lease. Once you do find a good tenant you should hang on to them with everything you have. Instead of raising the rent you should run it by your tenant first. It is worth a few dollars a month not to worry about when the rent will come or if your tenant will call in the middle of the night. Taking a little longer to find the right tenant is the best thing you can do for the sake of the property.
- Know Local Rules/Laws: Something you do in a property in your local market may not be allowed a few towns over. It is important to take some time to know and understand all the local rental laws. Some towns have strict rules if you plan on renting to students. The may need the property to have certain items to code, or they will reject your application and you will be forced to do a quick 180. This is even more the case if your property is located out of state. Every state can have a completely different set of rental laws to follow. Ignorance of the law is not an excuse to break it. Not only will you be subject to a small fine, but you will not be able to generate the cash flow you anticipated. Before exploring a property out of your primary market, you need to know the local laws.
- Accept Distance: It is important that you accept the distance to the property. There are pros and cons with every prospective rental. The distance to your home base should simply be viewed as a negative that you must get past. If you constantly dwell on how far it is, you will have a negative outlook on everything else you do. You won’t be as motivated to make minor repairs that you know you should. You will pick contractors and handy people out of convenience rather than competence. You will subconsciously look to get out of the property almost as soon as you take ownership. A rental that is a good distance away isn’t perfect but look at the upside rather than the distance.
- Periodic Updates: On the surface you would think that not hearing from your tenants for long stretches is a good thing. While this may be the case, it is not always true. Not hearing from your tenants can be a sign that they are hiding an issue in the property. It is important to make periodic checks on your tenants just to make sure everything is ok. You want an open line of communication where they will tell you if something in the property needs to be looked at. If not, you will end up turning minor issues into larger problems. Occasional text messages and even facetiming every now and then will keep you updated, but it may not tell the full story. Allocate time once a month to take a trip to the property and see it for yourself.
If you are in real estate long enough eventually you will consider a rental property outside of your primary investing market. Instead of looking at the negatives, think about the upside and how you can make it work.