Investing in your own backyard is an incredible strategy if you are able to find the deals that will help you achieve your investment goals.
If you happen to live in a market that doesn’t have the best returns, however, you need to look out of state. Managing long distance rentals effectively takes a bit of work, but many do it very successfully.
Here are their secrets.
1. Set Up an LLC
Creating an LLC or similar entity to purchase your rental properties is always a good idea. The last thing you want is for something to happen to your rental property and the court to come after your personal assets as collateral.
You’d be surprised at some of the situations you’ll have to deal with as a landlord, and managing it long distance makes it much more difficult.
For example, your tenant’s sister could be very clumsy and slip and fall in the garage of your rental. Because you have more money, she could sue you for damages.
Before you know it, they could wrap you up in a lawsuit that threatens to take your primary residence as collateral if you aren’t set up as an LLC.
That’s just one example of many.
You’ll want to set up a separate LLC in each state that you own rental properties in. This is relatively easy to do. You go onto your states’ website and create and register your small business there. It typically doesn’t cost very much, and it’s the best way to ensure your assets are safe.
2. Hire the Right Property Management Team
If you are planning on owning rentals out of state, you are going to need a quality property management company for each property, if they are in different areas. They’ll manage everything from screening tenants to scheduling repairs.
You might be thinking that since everything is online these days, managing your properties should be relatively easy from wherever you are in the world. But situations arise that require a person in the area to take care of, and you don’t want to hop on a plane each time that happens.
Because they’ll be essentially acting like you concerning making decisions for your rentals, you’ll want to choose your team carefully.
Choose a property management team that has good reviews from both the tenants and the landlords. You also want a team that will treat your tenants the way you would handle them—or even better. The last thing you want is an angry midnight phone call from your tenants because your property management team has been AWOL.
A trustworthy property management team will have a great tenant screening process and have an excellent track record of diffusing high-stress situations. Interview as many as it takes until you find the team that will take care of your investment the best.
3. Have a Local Service Network
Beyond having a stellar property management team, you’ll want to have a network of individuals you can call on for quality service. Some of these people include local real estate agents, plumbers, landscapers, electricians, and lawyers.
A great way to create this dream team is to go to a few local networking meetings and get to know the people there. Inquire about their services and really get to know their business.
You’ll want someone you are able to easily trust and feel comfortable around because they’ll be the ones to take care of your properties and affairs in your absence.
While it’s tempting just to Google a service provider when a problem arises, taking the time to get to know your electrician and plumber before something happens will help ease your mind while you’re away.
That alone is worth the extra few hours it will take.
4. Communicate Regularly
Keeping the lines of communication open between you and your property management team will not only give you peace of mind, but will help you be aware of any problems as they are occurring.
Because you are away, you may not find out about many issues until after they occur — or worse — when you have to go to court over them.
This is part of finding a great property management team, but it’s a good idea for you to plan on touching base with them regularly.
5. Get to Know the Local Laws
As a landlord, it is your job to know the laws and ordinances for the state your rental resides in. Knowing these laws will help you understand how you as a landlord are protected, as well as what your tenant is entitled to.
Don’t know where to begin? A good place to start is the state website.
It typically has resources for landlords and tenants specifically. Another good person to talk to is the head of your property management team. They should have a current knowledge of state laws and will be in the best place to advise and execute actions according to those laws.
On this note, it’s important to have your lawyer look over your contract to make sure it adheres to state laws. Many landlords use the same contract regardless of they’re renting out a home in New York or Houston, but you’ll want to make sure you’re protected in that state.
6. Check in on Your Property
This is the one thing many landlords don’t do—even if they live relatively close to their rental properties.
Don’t be like them.
Have your property manager and team visit your property and take a look around. Make sure they notice the state of the property and make a note of what will need to be repaired. Ask them to do regular video tours so that you can see the state, as well. You are the person who cares most about your investment, and it’s up to you to look out for it.
If possible while your team is there, have them meet with your tenants. You want your tenants to feel comfortable coming to the property management team in case of emergencies. Having a regular presence in the home also discourages your tenants from bending rules in your absence.
Protecting your real estate investment is crucial to that investment continuing to give you the rate of return you love seeing every month.
Protect and ensure the safe-keeping of that investment by setting up an LLC, hiring an excellent property management service, creating a local network of professionals to call on, have a super screening process, create a quality lease, and visit your property from time to time.
While this all requires a bit of work on your end, it will make managing your out of state rentals much more comfortable in the long term.