Investing in multifamily properties is an excellent way to build wealth and passive income but the big question is how do you get started with investing in multifamily even if you live out of state?
In this article, we will answer this question, and provide you with a framework that you can use for investing in multifamily properties out of state.
How To Invest In Multifamily Properties Out Of State
The first thing to do before investing in multifamily properties out of state is to first learn more about the state that you plan on investing in.
Specifically, you should learn more about the economy and jobs market because it can be one of the most beautiful states in the country but if it doesn’t offer a thriving jobs market, people are not going to want to move there.
After you investigate the jobs market and economy, the next thing to review is what the state has to offer in terms of natural attractions and things to do.
Finally, after learning more about the state as a whole, the final step to determining if it would be a good state for investing in multifamily properties or not is to learn more about the major cities that the state has to offer and if those cities are currently attracting renters.
One thing you don’t want to do is choose a city like Austin Texas, that everyone is talking about right now because If it’s already highly talked about and invested in the city, chances are that it’s going to be difficult to find good multifamily deals there.
Are Prices Affordable There?
Let’s say that you find a great city to invest in, the next thing that you want to do is determine the price for multifamily properties there are relatively affordable because the numbers have to make sense or you could jeopardize your cash flow potential.
Even if the market looks affordable on the surface, if you find a multifamily property that you’re interested in investing in, you still want to have that property inspected because it’s essential to invest in a multifamily property that will offer awesome long-term ROI for your portfolio.
Is The Rental Market Stable?
Finding a great city to invest in is one thing but confirming the stability of the rental market is the other thing.
It’s best to search for a rental market where more people are staying in place, rather than moving out, because this is what’s going to enable you to earn consistent ROI from your multifamily investment, especially if you plan on keeping that property in your portfolio for 5-10 years, or longer.
Many rental markets have changed over the last 12 months and are not as stable as they once were. Your goal should always be to find the latest up-to-date information about an area before investing there because there’s nothing worse than making an investment decision using outdated information.
As I mentioned earlier, there are a variety of factors that should influence your decision to invest in a state including the following:
Job Growth – Pay close attention to the statewide and local unemployment rate plus median salaries because if the area doesn’t pay good enough salaries or hourly wages, people are not going to want to move to that area if they can’t afford to live there.
A good example of this is San Diego, CA where most people work in jobs that pay hourly but the average rent for an 873 square foot rental property is over $2,000 per month. This means that someone has to hold at least 2-3 jobs, or have roommates, to survive living in “America’s Finest City”.
Industry Diversification – Make no mistake about it, a booming jobs market is great but, if most of those jobs are in one industry then you’re only asking for trouble down the road.
Houston Texas is a perfect example of this because their jobs market is heavily tied to the oil and gas industry and when this industry suffers, the rental market also suffers because people tend to move away.
Your goal should be to find an area that offers a diversified jobs market because when one industry sees a decline, you can have confidence that other industries in that area will continue to thrive economically.
Population Growth – Last of all, another important factor to review when investigating an area is the growth of the population there. This is important because if more people are moving out than moving in. this will give you a sign of where the local rental market could be in 12 months.
Are Other Investors Investing There?
Let’s say that you think you’ve found a great area for investing in multifamily properties but you can’t decide if it’s the right place for you to invest or not. One way to confirm if an area is going to be right for investing in multifamily properties is to talk with other investors about it.
Connect with other multifamily investors using websites like Biggerpockets.com to see if other investors are buying multifamily properties in the cities that you’re thinking about investing in.
If other investors are buying properties there, don’t hesitate to ask them about their thoughts on the market, especially their track record of success there. This will either encourage you to move forward with investing in your chosen market or prompt you to continue looking.
Keep in mind though that some investors may have less risk tolerance than you do if you find a great location, and the numbers on the property make sense, it may make sense for you to there as long as you don’t overpay for a multifamily property.
Contact Trier Capital
Trier Capital is a private equity firm that makes it easy for you to passively invest in lucrative apartment building syndications.
We do all the hard work to find and acquire ideal properties, and then oversee asset management after purchase, while our investors sit back, relax, and receive tax-advantaged passive cash flow.
If you’re an accredited investor, but you don’t want to go through the hassle of investing in multifamily properties yourself, learn more about the benefits that come from partnering with my company by calling (630) 229-2383 or click here.