Buying multifamily properties is a great way to build cash flow and wealth but the real key to success to building a great portfolio of multifamily properties is being able to buy properties that are located out of state.,
If you’re interested in buying a multifamily property that’s located out of state and you don’t know how to get started, this article will provide you with a path to follow that you can use for buying your first out of state multifamily investment property.
Step #1 – Research the Rental Market
The first thing to do before buying a multifamily investment property out of state is to research the rental market. This step is essential because you may find a property that’s a great deal but if the rental market is dead, you’re going to have a difficult time filling vacancies.
Thanks to the Internet, you can easily research the rental market from the comfort of your home or office. Just take the time to use the best websites for pulling local data. Some of the best websites to utilize for local rental market research include:
- Department of numbers
- US Census
- National Association of Realtors
- Attom Data Solutions
After researching the local rental market online, it’s best to dig deeper and find out what people who live in the state, city or town that you’re interested in buying a multifamily property have to say about it.
Use Google to search for local forums with comments from people who actually live in the area. Be sure to verify that the comments are not older than two years old because a lot can change in a city or state within a couple of years so it’s best to make sure that you find accurate and up to date information.
Step #2 – Review State and Local Laws
Once you’ve done some local research online it’s best to continue looking into the state and local laws for where the property is located. This is vital because one state is not going to be exactly the same as the next so it pays to look into things like state and local tax laws before you invest in a new state.
Besides tax laws, you should also be investigating if the state where the investment property is located may be considering stabilization or rent control. This is very important because since 2019 Oregon and California have embraced rent control while other states are not that far behind.
Step #3 – Identify the Right Neighborhoods That You Want to Invest In
Now that you’ve investigated the rental market, including state and local laws, the next step is to identify the right neighborhood where your multifamily property may be located. You can also use the Internet to do this. Keep in mind that just because you’re thinking about investing in a big city like Los Angeles, Dallas or Phoenix but just because those cities may be ideal for multifamily investment, this doesn’t mean that the entire city is the best place for investing since the surrounding areas could also be ideal for investing in multifamily properties.
Once you start pinpointing ideal areas, it’s best to continue your research and find out the demographics for the area and employment statistics. You should also find out if the area is “walkable” and is close to shops, stores and amenities. It should also have suitable public transportation as well and be close to the major highway access as well.
An ideal area for investing in a multifamily property should also be close to jobs as well since it doesn’t make sense to buy a building that’s out in the middle of nowhere. Ideally, the property that you buy will be thirty minutes to one hour away from major employment centers.
Step 4 – Time For “Boots on The Ground”
After doing your research into a multifamily property that’s located out of state, it’s time to build a team and get ready for “boots on the ground”.
You can start assembling your local team before you even visit the area personally. Your team should include a great real estate agent, great handyman, excellent contractor, home inspector, title company and of course a fantastic property management company.
Pay close attention when hiring a property management company because they literally will make the difference between success or failure with owning an out of state multifamily investment property.
The property management company that you choose should consist of a team that has plenty of verifiable experience. This is important because many people have gotten started in property management in recent years just to make money, but they have little to no verifiable experience so it’s best to pay close attention to the background of a company before you choose to hire them.
Once you have a team assembled, you can begin pursuing multifamily properties in the area that you want to buy and begin the process of purchasing a multifamily investment property there.
From this article, you can see that investing in an out of state multifamily investment property is actually a straight forward process, especially if you use the internet to help you did deep and do thorough research.
Once you find properties that interest you, make sure you move past the rush of initial excitement that comes from finding a great deal and take the time to investigate the property completely because you want to make sure that cash flows well and will be a great property for you to add to your portfolio.