The average price of a home in the Seattle area was $760,000 in 2019; in Bloomington (Indiana's most expensive city to call home), it was only around $261,000. This steep difference in value isn't the only reason why Seattle has been a desirable area to snap up rental real estate investments! Rental homes continue to experience high demand here.
However, it can often be challenging for investors in entirely different rental markets to take advantage of all that the Seattle area offers when you live in another city, another state, or even another country!
If you've been considering adding Seattle rental homes to your portfolio from abroad, you'll have probably been challenged by not being able to scout out deals and inspect them in person. Long-distance investing often forces property owners looking to add more to their portfolio to rely on the information provided by connections that may not lead to solid property leads.
With that in mind, if you're planning on growing your portfolio in another city (such as Seattle) or even another state (Washington is a great market), it helps if you consider these insights from an experienced Seattle property management company.
Advantages of Out-of-State Real Estate Investments
While most places in the United States report upward real estate market trends, there's not much movement in markets without economic growth. One of the perks of investing in out-of-state rental property is that it allows you to invest beyond local markets in your area that may not yield the kind of returns you need.
An out-of-state real estate investment is one way of diversifying your portfolio. Diversity in the real estate market means fewer risks, as you will be less predisposed to market restrictions and fluctuating markets.
Whether this is your first investment or you are adding on to your portfolio, an out-of-state rental property is a smart move. By choosing a strategically placed property in good condition, you will get a high return on investment and diversify your real estate portfolio quickly.
Top Considerations When Investing Out of State
Your Investment Strategy
The investment strategy you choose is crucial to the success of your out-of-state investment. Your choice will be determined by the amount of money you wish to spend, the property’s location, age, risk profile, and so on.
For most investors, the popular investing strategies are as follows:
- Buy and hold: This strategy involves buying real estate and holding onto it for the long haul. Properties that are in ideal locations tend to attract the best renters and appreciate the most with time. In that case, you might want to consider a long-term buy and hold strategy.
- Fix and flip: This strategy involves buying a property, renovating it to add value, and then selling it immediately to make a profit. Short-term, out-of-state acquisitions help you take advantage of property appreciation through remodeling. However, they also come with their fair share of taxes.
- Real estate wholesaling: Wholesaling in real estate involves acquiring property contracts below cost and then reselling the contract to other real estate investors at a higher price. Your margins are made in these deals by finding properties that need some work and connecting them to the right buyer.
While managing a fix-and-flip transaction and real estate wholesale hunting out-of-state sound difficult, buy-and-hold transactions are fairly easy to maneuver with the help of the right Seattle property management company.
If you decide to focus your investment efforts on long-term rental real estate, the demand for housing is directly proportional to the area’s economy.
Luckily, good employment prospects and a diversified job market continue to attract people to Seattle. This makes it one of the best places for real estate investments in the nation.
State Tax Laws
While buying an out-of-state property, you need to be fully aware of the local tax laws and their implications.
- Failing to be accountable could lead to trouble during the tax season by disrupting your property’s cash flow and creating unexpected expenses.
- If you intend to invest in rental real estate in Seattle, you can take advantage of tax deductions on property repairs and property management services.
Out-of-state investments are quite risky. For lenders, higher risks mean higher down payments and interest rates. You could also choose modern forms of financing such as crowdsourcing with other investors as part of a real estate investment group—but you'll also be sharing the profits.
Owning a rental property is never easy, but it is harder when you own an out-of-state property alone.
- Having someone on the ground to respond to maintenance requests and undertake periodic inspections will increase renter satisfaction.
- A local property manager is also likely to be well connected with local service providers and contractors who can handle rental property maintenance if they don't employ their own teams.
There are a host of Seattle property management companies, but you need to work with a reliable property manager. Check out their online reviews and ask for references from fellow investors. Keep in mind that getting the right property and getting a team in place to manage it takes time: do not be in a hurry to invest. Take your time to learn the ins and outs of your preferred location.
You can learn more useful information about how to successfully invest in real estate with our free guide! Just download your copy to get started.